During 2010, the International Year of Biodiversity, some of the world’s larg- est companies are working with the WBCSD to take informed measures to manage natural resource consumption Making the business case or corporate action on ecosystems in a sustainable manner. Others are seeking to reduce pollution as part of environmental management systems. Many of these actions are corporate social responsibility activities as opposed to meeting legal requirements. And many yield benefits for business’ bottom line. This indicates that environmentally positive actions are part of a profitable business strategy.  

The environment is one of the three pillars of sustainability and concern for it tops the agenda of decision-makers everywhere. Without ecological balance, sustainability cannot be achieved. Moreover, sustainable businesses need healthy ecosystems, because all businesses rely on services provided by ecosystems. For instance, freshwater is a critical input for every conceivable major industrial process; the pharmaceutical industry benefits from genetic resources; agribusiness and the food sector depend on ecosystem services like pollination, and pest and erosion regulation; forest industries and the downstream construction, communications and packaging sectors rely on continued supplies of timber and wood fiber; all extractive industries cause some level of ecosystem disturbance; while tourism increasingly builds on an ecosystem’s cultural services and aesthetic values; and all building owners and plant operators benefit from the natural hazard regulation service that some ecosystems provide. In fact, it is hard to find any economic activity that does not benefit from ecosystem services or in some way alter the ecosystems around it.  

While business depends on ecosystems, it also impacts upon them. The consequences of negative impacts and ecosystem degradation are becoming increasingly clear. In 2005, the Millennium Ecosystem Assessment (MA) concluded that some two-thirds of the ecosystem services assessed were severely degraded or compromised and that ecosystem change had been greater in the last 50 years than in the previous 150. Causes of ecosystem change include overexploitation, extreme poverty, urban population growth, climate change and poor regulatory frameworks.

In 2007, the G8 Environment Ministers launched the Potsdam Initiative, setting a definite course for the conservation of biological diversity and for climate protection. As part of this, a study on The Economics of Ecosystems and Biodiversity (TEEB) is analyzing the global economic benefits of biodiversity and the costs of policy inaction. Initial results from TEEB, just based on deforestation, show that the world loses natural capital worth between euro 1.35 trillion and euro 3.10 trillion every year. Because these losses are real, ecosystem degradation is becoming a critical sustainability issue for business and society at large.

The WBCSD has been working on environmental issues for over a decade. It was one of the first business-led forums to recognize the importance of the environment to business, not just as a source of risk, but also opportunity. It was also one of the first to formally partner with a global environmental organization when it signed a Memorandum of Understanding with the International Union for Conservation of Nature (IUCN) in 2005, renewed in 2009, as part of efforts to leverage their synergies for the benefit of ecosystems and business.

Broadly speaking, ecosystem risks and opportunities can be broken down into five categories: operational, regulatory and legal, reputational, market and product, and financing. For every risk, there is an opportunity. So, for example, while coastal businesses may be affected by flood damage to coastal ecosystems, building infrastructure to protect coastal zones may provide a new business opening. Similarly, the risk of government-imposed resource user fees or penalties for ecosystem damage offers a chance for business to engage with regulatory odies to shape the operating framework. As traditional financial products and markets contract – especially in the aftermath of the 2008-2009 financial crisis – ecosystems offer a chance to open up previously unexplored income streams through the use of market mechanisms such as payments for ecosystem services.

“Ecosystem-friendly” financial products that are becoming more commonplace include wetland banking and biodiversity off- sets and credits, similar to the current market for carbon trading.  

 Balance sheet showing the status of different ecosystem services.

The challenge for companies is to account for these new opportunities and income streams in their business operations and attune their systems to these non-traditional issues. In 2007, The WBCSD teamed up with the World Resources Institute (WRI) and the Meridian Institute, to produce the Corporate Ecosystem Services Review (www.wbcsd.org/web/esr.htm). The Review helps managers proactively develop strategies to manage business risks and opportunities arising from their company’s dependence and impact on ecosystems. Relevant to all sectors and industries and available in six languages, over 300 companies have used the tool.  

Simultaneously, the WBCSD has stepped up its work on water. Water bodie (e.g. wetlands/rivers/lakes) are ecosystems in their own right, while provision of freshwater and water cycling are fundamental services provided by ecosystems. All businesses need water, whether in the food and beverages industry, which relies on water as a primary input, the en- ergy industry, which needs water for cooling and generating electricity, or public health sectors, which rely on clean water for the health and wellbeing of their customers. Planning for water-related risks allows a company to anticipate problems and stay ahead of competitors. In 2007, the WBCSD under the leadership of member company CH2M HILL developed the Global Water Tool, an interactive tool to help companies map their water use and assess their water-related risks (www.wbcsd.org/web/watertool.htm). Updated in 2009, it has been downloaded more than 10,000 times.  

These tools are both valuable because they help business understand ecosystem challenges. The next step is to demonstrate the explicit economic benefits of ecosystem services. This is no easy task given the seeming lack of monetary value associated with many ecosystem services. Yet, lack of market price does not mean something has no value. If ecosystems are to be conserved and continue to yield their bounty, it is crucial to realize their true value.  

In order to fill this gap, in 2008 the WBCSD launched the Ecosystem Valuation Initiative, an effort to have nature’s services recognized as an integral part of corporate planning and decision-making. Among its objectives are to demonstrate the existing economic value of ecosystems and ecosystem services, and to show how new sources of income can be created from these same resources. While the economic value of some ecosystem services is obvious, the value of other services is less so and more difficult to quantify. For example, pollination, a service provided by bees, is seemingly free. However, some estimates put its value at US$ 4 billion for the US agricultural sector alone. Similarly, putting a value on trees cut down and marketed for timber is a relatively straightforward exercise, yet this may not be the only or even the greatest source of income from the forest, such as providing key services of watershed protection, erosion control and climate regulation through carbon sequestration.  

Watershed protection could, for instance, prevent silting up of the reservoirs held behind hydro-electric generator dams, thereby reducing risks for energy companies and saving them money. The challenge lies in capturing these potential values, and until now there has been no system specifically tailored to the private sector.  

The Ecosystems Valuation Initiative ofers corporate ecosystem valuation in an attempt to assist companies in integrating environmental information into their operations. In doing so, it links with TEEB. The Initiative is based on mechanisms for calculating total economic value, the agreed standard for categorizing economic values, and borrows from a whole range of existing economic tools and methods, especially those developed specifically to value ecosystem services. The next step is to create a Guide to Corporate Ecosystem Valuation. Currrently in preparation, the Guide will be launched at the 10th Conference of the Parties (COP 10) to the Convention on Biological Diversity (CBD) in Nagoya, Japan in October 2010.  

In addition to the Guide, the WBCSD also plans to produce and launch a report on the business responses to the Convention’s objectives, presenting case studies detailing where and how they have leveraged their business experience and expertise to contribute to ecosystem protection while improving business’ bottom line. Although business is not formally part of this international agreement, WBCSD members would like to play a larger role in the solution to ecosystem degradation rather than only being considered part of the problem.  

The WBCSD will also maintain a focus on business policy recommendations on ecosystem management, helping to shape future frameworks by defining “smart” public policies to frame ecosystem use and management and to help shape policies that would sit well with business. Business must anticipate changing government policies and regulatory frameworks to address pressing ecosystem challenges at all levels. New regulatory frameworks need to be designed to “level the playing field” for all ecosystem users and leverage market forces and the capacity of business to be a solution provider. Changing frameworks should clearly define property and tenure rights as the basis for effective stewardship and recognize business as a significant ecosystems manager in its own right.  

Finally, the WBCSD’s work throughout 2010 will culminate in an International Business and Ecosystems day on 26 October, co-hosted with IUCN, Nippon Keidanren and the COP 10 of the CBD. This event will be an official part of the Convention’s agenda in Nagoya.  

The WBCSD is dedicated to supporting its members to deliver economic growth that is based on ecological balance and social progress. Business needs to become a bigger part of the ecosystem balance “solution” than it is part of the “problem”. Business and biodiversity can both benefit from corporations ramping up their efforts on ecosystem measurement, management and mitigation.    

James Griffiths.
Managing  Director responsible for the Council’s Ecosystems, Water and Forestry programs at the World Business Council for Sustainable Development (WBCSD).

Reference: Forum CSR International’s special edition "The business case for biodiversity”