Companies Respond to Ecosystem Degradation

Climate change may dominate headlines today. Ecosystem degradation will do so tomorrow. Why should business care? Because ecosystem health goes straight to the bottom line.

Just ask the beverage industry, which depends on nature’s ability to filter and provide fresh water.

Ask agribusiness, which relies on grasslands for insect pollinators, nutrient cycling, and erosion control.

Ask the insurance industry, which benefits from the fact that coastal marshes reduce the damage caused by hurricanes and that wetlands absorb water from floods.

If you’re still not convinced then ask a host of other industries that rely on forests for benefits ranging from wood to genetic resources, carbon sequestration, and tourism.

In short, healthy ecosystems and the services they provide underpin corporate performance.

The findings of the Millennium Ecosystem Assessment–the largest audit ever conducted of the condition and trends in the world’s ecosystems–is thus a cause of concern. The Assessment found that ecosystems have declined more rapidly and extensively over the past 50 years than at any other comparable time in human history. In fact, 15 of the 24 ecosystem services it evaluated had degraded over the past half century. These trends portend new winners and losers in the world of business.

Today in Montreux, Switzerland, WRI and its partners launched a set of guidelines to help companies prepare for this new landscape. The guidelines, called the Corporate Ecosystem Services Review (ESR), consist of a structured methodology that helps managers develop strategies to manage business risks and opportunities arising from their company’s dependence and impact on ecosystems. WRI developed the ESR with support from the Meridian Institute and the World Business Council for Sustainable Development, and with feedback from “road tests” by five WBCSD companies—Akzo Nobel, BC Hydro, Mondi, Rio Tinto, and Syngenta.

The road-tests helped companies identify new business risks and opportunities. For instance, Mondi, Europe’s largest producer of office paper, developed strategies that will increase the company’s efficiency in using freshwater—a scarce ecosystem service—and will lead to new markets for the company’s byproducts. BC Hydro factored ecosystem services into its water-use planning processes, resulting in greater regulatory certainty, fewer lawsuits, and improved stakeholder relationships. Other companies used the guidelines to anticipate new markets and government policies that may emerge in response to ecosystem degradation.

In addition, the guidelines augment existing business strategy development and environmental management. For example, environmental impact assessments are often not fully attuned to the risks and opportunities arising from the use and decline of ecosystem services. Many “traditional” tools are better suited to handle conventional issues of pollution and natural resource consumption. Most focus on environmental impacts, not dependence. Furthermore, they typically focus on risks, not business opportunities. As a result, companies may be caught unprepared or miss new sources of revenue associated with ecosystem change.

By filling these gaps, the guidelines help make the connection between ecosystem health and the bottom line. They also offer a promising approach for companies to manage emerging risks—and opportunities—while at the same time becoming better stewards of the environment.

Climate change concerns are rising to the top of the corporate agenda; those about ecosystem services won’t be far behind.