WRI Stories Feed: Corporate Ecosystem Services Review

Fact Sheet: Stacking Payments for Ecosystem Services

Nicholas Bianco — Thu, 12 Nov 2009 09:29:42 -0500

Payments for ecosystem services are becoming an increasingly important part of the U.S. business and regulatory landscape. As programs that provide payments for ecosystem services grow, policy makers will need to determine how these various payments should interact with each other.

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(includes footnotes & references)
More WRI Climate Factsheets
More resources on Ecosystem Services

Introduction

Payments for ecosystem services are becoming an increasingly important part of the U.S. business and regulatory landscape. Used properly, these payments can efficiently mitigate greenhouse gases, filter pollution from runoff, protect wildlife habitat, and prevent soil erosion. Recognizing this, the American Clean Energy Security Act establishes a cap-and-trade program that allows firms to “offset” their greenhouse gas emissions through practices that reduce or sequester greenhouse gas emissions elsewhere. Some state governments are also expanding water quality trading programs that allow facilities that discharge water pollutants to avoid expensive facility upgrades by, for example, paying farmers to improve land management practices. There are also long-standing federal programs that pay farmers and forest landowners for providing a range of ecosystem services, such as protection of wildlife habitat and prevention of erosion.

As programs that provide payments for ecosystem services grow, policy makers will need to determine how these various payments should interact with each other. This interaction presents an opportunity to expand the suite of services for which an ecosystem is managed. However, it also creates the risk that multiple payments will be made for the same ecosystem services, possibly reducing the efficiency of payments or diminishing the environmental benefits they were intended to provide. This factsheet offers an initial review of these risks and opportunities. It is part of a larger effort by WRI to develop a comprehensive framework for stacking payments for ecosystem services.

For complete text, Download the PDF (PDF, 4 pages, 160 Kb)

Green Taxation

Mon, 09 Nov 2009 10:13:56 -0500

Ecosystem Services is playing a growing role in Brazilian environmental law.

Note: This post is a translation of the original article in Portuguese by Juliana Lopes with Ana Carolina Addario, which appeared on Ideia Socioambiental. It is posted here with permission.

The environmental legal dictionary has a new entry. The word is incentive, an economic benefit granted by the government, through taxes, to stimulate economic, social, and cultural activities. This practice is not new in traditional economic segments such as the automotive and construction industries. However, incentives to stimulate sustainable development are advancing in Brazilian environmental legislation.

Called active control, this new mechanism differs from the command and control methods traditionally adopted by governments and legislators. “Instead of discouraging certain behaviors, we seek to encourage positive attitudes. The establishment of sanctions only, adds nothing in terms of proactive behavior. It is therefore important to prioritize incentives”, says Judge Consuelo Yatsuda Moromizato, a federal judge with significant experience in environmental law.

Examples of Payments for Environmental Services (PES) in Brazil

Proambiente: Family Production Socio-environmental Development Program (Proambiente), created in 2000 by civil society and incorporated by the Ministry of Environment (MMA) in 2003, awards farmers and ranchers with up to one-third of the minimum wage when they incorporate less destructive production practices, such as not using pesticides or introducing sustainable agroforestry systems(SAF’s)
Ecological ICMS: Brazilian states give 25% of the Tax on Circulation of Goods and Services (ICMS) to cities. Some municipalities allocate 5% of these funds for environmental preservation projects
Environmental compensation: companies financially compensate for projects’ unavoidable environmental impacts (for example, testing chemicals at sea for drilling oil). States use these funds to invest in conservation projects
Reforestation: focused on timber companies, it promotes reforestation either through compliance with forest management rules (tree cutting restrictions), or paying for tree replacement, which will fund reforestation in other areas
Tax exemption for Private Reserves of Natural Heritage - RPPNs: exempts RPPN owners from paying the Rural Land Tax (ITR)
In deployment phase: some PES policies are not yet implemented, awaiting approval or regulation. This is the case, for example, of the ecological income tax (IR) scheme, which proposes a tax deduction for expenses on projects with an environmental benefit.

This new logic reflects the evolution of the guiding elements in environmental legislation. “The ‘polluter pays’ principle was initially used as a way to internalize the costs of environmental impacts, which were considered externalities,” she explains. Next, came the principle of ‘the user pays,’ which distinguishes between the polluter and the offender. “This concept envisages compensation for the use of natural resources, as occurs with the law of royalties for oil exploration,” she says.

These tax and fiscal mechanisms play an important role, especially in the transition to a low carbon economy, by encouraging the adoption of cleaner technologies. “It is essential that governments create policies through subsidized financing that encourage and enable the purchase of equipment. This public sector contribution will help promote a technological change by companies that will advance the transition toward a sustainable economy,” says Consuelo.

To Adriano Pires, president of the Center for Infrastructure (CBIE), incentive policies can be important tools for the development of new sources of renewable energy in Brazil. But in his analysis, the government still does not make proper use of these mechanisms. “The country needs policies that define what will be in the energy portfolio of the future. The implementation of these policies requires fiscal and tax mechanisms, which unfortunately are still underutilized. The government has not given any medium nor long-term signals to investors or consumers. Tax policy in relation to energy should be discussed because gasoline, diesel, and other fossil fuels cannot be a priority for the country due to their high environmental costs,” he says.

Other countries’ Payment for Environmental Services (PES) Initiatives

Mexico: The government rewards communities and owners of rural properties for preserving their forests and watersheds
Costa Rica: the government created a tax levied on the consumption of water and gasoline. The amount collected is given to forest owners for providing environmental services (about $80USD per hectare per year).

It is true though, that promoting the uptake of incentives will require a paradigm shift. According to Werner Grau Neto, managing partner at Pedro Pinheiro Lawyers, the best example of this transition is the Legal Amazon. Created in 1953 to be a hub of economic development, the region received a series of stimuli, such as preferential loan rates, designed to expand agribusiness. “Today, the paradigm has changed. The Legal Amazon is no longer an area focused purely on economic expansion; it has become an area of sustainable economic development. Instead of just developing, now it undertakes preservation to develop,” he said.

Environmental Services

Ongoing deforestation in the Amazon is a clear indication that the punitive mechanisms imposed by Brazilian law have not been sufficient to protect the environment. The integration of market instruments and self-regulation into national regulation is imperative, in order to balance long-term economic activity and ecosystem well-being.

This challenge becomes clear when the condition of environmental services is examined. According to the Millennium Ecosystem Assessment (MEA), a scientific inventory led by the United Nations, 15 of the 24 environmental services considered essential to human life are gradually disappearing or losing function. As a result of this trend, fisheries, for example, may be unsustainable by 2040 under current trends.

The pricing of these services has been discussed as an effective way to deter the indiscriminate use of natural resources. Thus, to be effective, it is essential that preservation be more profitable than destruction. Within this logic, the carbon market is one of the pioneering and most successful payment schemes for environmental services. But there are also projects and conservation reserves established on the principle of the non-polluter receiver. “The reasoning is simple: just as those who violate the law receive negative sanctions, those who abide by them should receive economic advantages,” says Consuelo.

Werner highlights the experience of the World Bank and the government of Amazonas state in the design of the JUMA Sustainable Development Reserve, in the city Apuí. “By creating a structure for selling forest carbon credits, the initiative provided the necessary resources for maintaining and monitoring the protected area,” he points out.

The same concept applies to farmers who maintain conservation reserves on their properties. “The conservation reserve is a cost to the farmer. However, with the pricing of environmental services and the possibility of developing projects to generate carbon credits, it becomes revenue. This is where the new concept of producer-receiver emerges. It establishes a paradigm shift in the principles that guide legal rules and future public policies,” he says.

In order to promote this practice, the National Water Agency (ANA), in partnership with The Nature Conservancy (TNC), initiated a program in 2007 called Water and Forest Producers that pays farmers for restoring and maintaining “standing” forests on their properties.

According to Fernando Veiga, Environmental Services Coordinator of TNC, the initiative seeks to enhance environmental stewardship by offering an environmentally friendly alternative to a society that is used to extraction. Paying conservation bonuses to producers is much more efficient, in economic terms, than having to remedy the problems caused by poor maintenance of services. When the forest and its services aren’t functioning well, the producer ends up having to pay to recover them”, he points out. In the context of local initiatives, some Brazilian cities have established an ecological Tax on Circulation of Goods and Services (ICMS), whereby 5% of the 25% of tax revenue that states pass to cities will be invested in environmental protection projects. Although laudable, some experts still have reservations about the mechanism.

According to Mauricio Chapinoti, from Pedro Pinheiro Advogados, even working as a promoter, the ecological ICMS has limitations in that it divides already limited amount of government revenues at the risk of being subject to disputes among municipalities. “For investors or consumers, this instrument does not change anything. But from the point of view of cities, it changes a lot because it increases their revenue. However, as the total collected amount does not grow, the other municipalities do not like this kind of decision,” he explains.

Also according to Chapinoti, the proposal currently in Congress to create a green income tax (PL-5974/2005) is subject to similar risk, because it will be categorized as a mechanism for tax incentives, like the Rouanet Law (a tax incentives for cultural and educational investments). “This bill proposes to deduct part of the income tax allocation for environmental projects. But, as the rule puts all these tax benefits in the same box, setting an overall 6% deduction limit, the adoption of this mechanism will make environmental projects compete with cultural projects without changing anything in the state tax waiver.”

Chapinoti claims that it would be better if each type of project respected a specific limit of deduction, as happens today with the Municipal Fund for Children and Adolescent Rights (FUMCAD).

Tax versus Incentive

Across the country, there are many initiatives in favor of laws promoting environmental preservation. In the “Manifesto in Defense of Environmental Tax Reform,” some public defenders and prosecutors endorse tax benefits that reward environmentally sound processes and products, and on the other hand, higher taxation to discourage those who choose activities with high impacts on the environment.

In the same vein, three months ago Congressman Roberto Rocha (PSDB-MA) proposed an amendment to the Constitution (PEC 353/09) that would lay down general guidelines for an “environmental tax reform.” The PEC is based on an Environmental Tax Reform (ETR), a mechanism of tax reform for environmental purposes adopted by several European countries in the 90’s. According to this notion, the degree of increase or decrease of tax burden levied on a certain business activity must be proportional to the environmental benefits or losses it generates. Ultimately, however, the total tax burden should remain the same.

The proposed Brazilian tax reform brings three major changes to the existing Constitution. It

introduces the principle of environment “extrafiscality” (possibility of using taxes as a mechanism for encouraging or discouraging activities) for the entire set of taxes in the country;
establishes tax immunity in favor of goods and services considered environmentally beneficial; and
distributes tax revenues, among the entities of the Federation, using environmental criteria.

Anticipating trends

Facing an increasing pressure for cleaner processes and products, many companies have revised their production processes. Knowing how their activities impact and depend on environmental services inspires shifts in current business models.

The task is far from simple, since conventional corporate metrics ignore externalities, such as environmental and social impacts.

Considering this, the World Business Council for Sustainable Development, in partnership with the Meridian Institute and the World Resources Institute (WRI), prepared the Corporate Ecosystem Services Review. The methodology helps companies to assess impacts and dependencies on environmental services to better understand future risks and opportunities.

According to Charles Iceland, Associate at WRI, companies are entering an era of “dual flow” [interdependence with the environment] because they rely on environmental services to produce goods and services, while the health of ecosystems depends on corporations for environmental stewardship. “Knowing the risks that will arise as a result of likely changes in government regulations is important. But knowing which environmental services the company depends on is even more urgent since they can determine business success. Identifying risks and opportunities from ecosystem change should guide every company’s decisions “, says the researcher.

Ecosystem Services

Kaleigh Robinson — Tue, 04 Aug 2009 12:49:11 -0400

Note: this post is a translation of the original article in Portuguese by Ana Carolina Addario, which appeared on Ideia Socioambiental. It is posted here with permission.

Ecosystems are responsible for diverse products and services for humans, as well as the regulation of climate and water and preservation of biodiversity, among other services—whether on a local, national or global scale. Given the importance of environmental services for economic activities, businesses are beginning to develop specific strategies and tools to integrate them into management practices.

According to the Millennium Ecosystem Assessment, an evaluation that measures the state and trends of global ecosystems, environmental services have been degraded faster and more severely in the past 50 years than in any other period in human history. The evaluation predicts yet further decline in the next decades, especially in light of population growth, economic expansion and a changing global climate. Without action, this degradation could put future economic well-being at risk as well.

In order to demystify the relationship between ecosystems and business, the World Business Council for Sustainable Development, in partnership with the Meridian Institute and the World Resources Institute (WRI), has released the Corporate Ecosystems Services Review. The methodology assists businesses in examining impacts, as well as dependencies, on environmental services as a way of understanding future risks and opportunities related to changes in the ecosystem.

According to Charles Iceland, associate member of WRI and author of the publication, we are entering an interdependent era in which business depends on environmental services to materialize production, and the environment also depends on the actions, such as conservation, of companies to continue providing natural services. “Businesses should begin to concern themselves more with their impacts on the ecosystem, as many of them depend on the availability of ecosystem services to carry out internal processes,” says the researcher.

Regarding Brazil, Iceland asserts that the principal measure the country should take would be reducing deforestation on behalf of its water reserves and the ability of its trees to neutralize carbon. “This is something that the global community is encouraging Brazil to address, which could bring in new revenue to the country through foreign investment for reforestation. Thus, forests could sequester carbon and mitigate the problem of climate change,” he says. However, Iceland points to possible obstacles to managing natural resources as a market strategy, such as changes in regulatory mechanisms as well as the lack of regulation in such sectors.

In legal terms, Werner Grau Neto of the Sub-Commission of Climate Change of the Environmental Commission of Brazil’s Order of Lawyers, Sao Paulo branch, and a partner of Pinheiro Neto Advogados law firm, notes that the judicial system is making important transformations in the areas of development, conservation and ecosystem management. According to the specialist, two important vectors are guiding these changes: businesses, now considering how, and not if, they should take sustainable actions; and the public, responsible for expanding the dialogue between economic production and environmental production. “We should stop putting anthropocentrism ahead of environmental issues, in that if the damage is to the environment, the repair is made for the individual. We’re entering a moment in which repairs are beginning to be made to correct damaging effects to and for the environment,” states Werner Grau Neto in an event held by Fundio in partnership with Alcoa to discuss strategies in relation to environmental services.

Other Strategies

Because of the necessity to protect the environment and operate strategically, businesses have perceived that conserving resources can create new opportunities to improve performance and generate profits, as well as strengthening a company’s reputation. As such, initiatives that reward companies or even agribusinesses that promote environmental conservation can be seen as effective incentives. As least that is what many companies find.

In the public sector, one such initiative was that of the Agência Nacional das Águas, or National Water Agency, and The Nature Conservancy (TNC). In 2007 these organizations established the Water and Forest Products program, with the idea of incentivizing rural producers to restore and maintain the forest on and near their properties. The program paid the producers for looking after environmental services, such as protecting water systems and resources used by farmers in the region. “The idea of this concept is to recognize that environmental services have a value to society, and from there, we can begin to reward those who protect, maintain or restore these environmental services” says Fernando Veiga, Environmental Services Coordinator at TNC.

To participate in the program, the proprietors must meet the following conditions: an intention to conserve or restore; a specified quantity of areas prioritized for water production on one’s property; conserved forests on one’s property; and residence within the limits of the project. The initiative aims to establish a dialogue between ecology and the economy, finding ways to value the care of nature and provide ecologically correct alternatives to a society accustomed to excess. “From an economic point of view, paying a premium to the producer is much more efficient than having to pay later to remediate problems arising from poor system maintenance. When the forest and its services don’t function well, the producer stops having to spend money to restore it,” adds Veiga.

Another very successful example in the realm of conservation and environmental services, but in the private sector, is Coca-Cola Brazil’s strategy to reduce the amount of water used in its beverage production. According to Marco Simões, Vice President of Communication and Sustainability for Coca-Cola Brazil, the plan to promote sustainable development for the company follows the 4 R system. The plan consists of reducing, recycling and reusing all of the water utilized in the beverage production process with the aim of not only guaranteeing the a water supply for the production plant, but for the local community that depends on the same resources for survival.

Global Environmental Crisis Changes How Banks Do Business

Suzanne Ozment — Tue, 03 Feb 2009 09:45:55 -0500

Amidst the financial crisis, banks are continuing their push for improved corporate environmental performance.

If you thought the current financial downturn would reduce private sector interest in environmental issues, think again. With severity rivaling that of the economic crisis, the global environmental crisis is also changing the way banks operate.

Last year, some in the media predicted that the financial crisis would cause companies to lose interest in environmental issues because environmental stewardship would no longer be affordable. However, the global environmental crisis is increasing supply chain costs, tightening legislation, and providing new market opportunities. To protect themselves, investors are increasingly factoring environmental concerns into their lending requirements. It is therefore critical that companies understand and address their dependence and impacts on ecosystem change.

This past December, for example, Bank of America and HSBC announced more stringent environmental lending requirements to reduce their risks from ecological degradation. Bank of America will phase out loans to companies that practice mountaintop removal mining. HSBC will cut lending to several palm oil, soy and timber companies in Malaysia and Indonesia where there are suspicions that these companies contribute to illegal or unsustainable logging. While the two banks fared better than most through the economic downturn, they are nonetheless taking measures to ensure their future financial security.

There is growing evidence that investing in companies that threaten the health of ecosystems can be bad business, and not just because of reputational risks. Companies both impact and depend upon healthy ecosystems and the services they provide. Insurance companies, for example, benefit from wetlands’ capacity to protect coastal areas from storm surges while agribusiness depends on nature’s pollination and erosion regulation. Ecosystem change, therefore, can pose a number of material risks to corporate performance and investors.

Bank of America’s new lending requirement will help shield them from companies vulnerable to lawsuits, fines, and challenges to their social “license to operate.” In 2008, Bank of America’s client Massey Energy paid $20 million in fines for continued water pollution from their strip mines—the largest fine ever imposed for violating the Clean Water Act. This lawsuit followed years of community campaigns against Massey and other mining companies for damage to approximately 1,200 miles of streams and 300 square miles of deforestation, which disrupted drinking water supplies, contributed to flooding, and destroyed wildlife habitats. These negative impacts to community health prompted years of litigation and disruptions to business operations.

HSBC likely considered the recently amended U.S. Lacey Act when tightening its lending requirements to forestry companies. The Act makes it illegal to import into the United States products made from trees that were harvested illegally in the country of origin. When Lacey Act enforcement efforts step up, there will be increasingly strong incentives throughout the entire global forest product supply chain to avoid illegally derived forest products. Wood purchasers will ask more detailed questions about wood sourcing, challenging companies to ensure that their products are not linked to illegal deforestation. Companies that fail to meet these demands will lose access to customers.

Investors are demanding better information and tools to assess the financial impact of emerging environmental risks and opportunities. WRI’s Envest project works with the investment community to help develop methods to quantify the materiality of environmental trends in order to steer capital flows towards ecologically preferable projects and companies.

With banks paying closer attention to corporate environmental performance and fewer funds to go around, some leading companies have competitively positioned themselves to adapt to changing investor preferences, as well as to ecological constraints. These companies will benefit from solidified relationships with investors in addition to an array of other benefits including improved community relations, lower cost of inputs, and new revenue streams.

For example, Syngenta, a global crop protection company, recently conducted WRI’s Corporate Ecosystem Services Review to address risks and opportunities related to ecosystems. Their review highlighted that reduced freshwater availability, loss of topsoil, and other ecosystem services are affecting the viability of Syngenta’s customer base in Southern India. In response, Syngenta expanded research on global water availability and is developing ways to provide farmers with better information to manage ecosystem services on their land. These efforts help ensure the viability of Syngenta’s customers.

An intensive consultant training course will be held at WRI offices on February 10-11 to explore proven methodologies to help companies successfully incorporate ecosystem service considerations into their business strategies.

To learn more on WRI’s efforts to help companies grapple with ecosystem service-related risks and opportunities, visit the Corporate Ecosystem Services Review website.

EPA Partners With WRI to Heighten Awareness of Ecosystem Services

Paul Mackie — Wed, 29 Oct 2008 11:13:15 -0400

The World Resources Institute (WRI) and the U.S. Environmental Protection Agency (EPA) today announced a collaboration to deliver improved science and practical tools to help companies and governments protect ecosystems and address climate change.

“This is an important collaboration in bringing research on ecosystem services into the mainstream of science, business and public policy,” said Rick Linthurst, national program director of the EPA’s Ecological Research Program.

WRI’s ecosystem services brochureEcosystem services are the benefits people obtain from forests, wetlands, and other ecosystems. A forest, for example, not only provides wood for timber and paper but also controls erosion, purifies water, stores carbon dioxide, and offers recreation.

The partnership will bring a greater recognition and understanding of the importance of ecosystems to economic development and human well-being. It will also help planners better determine development options that allow affected natural resources to continue to produce services that meet the needs of current and future generations.

Craig Hanson, acting director of WRI’s People and Ecosystems Program, added, “This collaboration will link EPA’s quality scientific research on ecosystem services with WRI’s work to help private- and public-sector leaders make the connection between healthy ecosystems and the attainment of their economic goals. This partnership will make our Corporate Ecosystem Services Review, mapping of ecosystem services, and economic valuation efforts even more powerful.”

Businesses, local and state governments, researchers, and international organizations - which are increasingly retooling their environmental-management systems to address ecosystem services - will benefit from the partnership.

As part of the collaboration, Dr. Suzanne Marcy, lead for outreach and education in the Ecological Research Program of the EPA’s Office of Research and Development, will be based at WRI’s headquarters. She will focus on linking emerging scientific data about the health and economic value of ecosystem services with WRI’s various projects on water quality, biofuels, coral reefs, and business sustainability, among others.

In addition, WRI’s research will inform the EPA Ecological Research Program’s initiatives in the Coastal Carolinas, the Willamette Valley in Oregon, Tampa Bay, the upper-Midwest, and the Southwest.

Developing Corporate Capacity to Respond to Ecosystem Degradation

John Finisdore — Mon, 18 Aug 2008 11:27:03 -0400

Many companies lack the capacity to deal with natural resource constraints, according to a survey by the consultancy McKinsey & Company. This September, WRI will help fill that gap through its first-ever training sessions on the ecosystem services review.

Environmental trends will be critically important to businesses over the next five years, according to McKinsey’s global survey of corporate executives. Among fourteen global trends, “increasing constraints on supply or usage of natural resources” jumped from seventh to second place in the annual survey. Thirty-four percent of respondents now believe natural resource constraints are likely to have “a negative impact on profits over the next five years.”

Despite the recognized salience of environmental issues on the bottom line, the survey found that barely one-third of companies have taken actions to address this and other critical trends. Moreover, only seventeen percent report significant benefits from the actions they take. McKinsey believes that companies are not making the right strategic moves, as respondents noted “a lack of skills and resources.”

The World Resources Institute has shown that this can be improved with more appropriate tools and corporate systems.

Until recently, companies had no systematic way of understanding the threats and opportunities stemming from one part of this growing natural resource supply constraint – the degradation of ecosystems and the benefits or “ecosystem services” they provide. Ecosystems—like forests—supply wood, purify water, protect against natural disasters, and provide other ecosystem services. Over sixty percent of them are degraded. Left unchecked, this degradation threatens corporate performance.

But many companies are not fully aware of the extent and ramifications of their dependence and impact on ecosystems. Environmental management systems and due diligence tools are often not fully attuned to the risks and opportunities arising from the degradation and use of ecosystem services. For instance, many tools are more suited to handle “traditional” issues of pollution and natural resource consumption. Most focus on environmental impacts, not dependence. Furthermore, they typically focus on risks, not business opportunities.

The Corporate Ecosystem Services Review (ESR) is designed to address these gaps. It consists of a structured methodology that helps managers proactively develop strategies to manage business risks and opportunities arising from their company’s dependence and impact on ecosystems. It is a tool for strategy development, not just for environmental assessment. Businesses can either conduct an Ecosystem Services Review as a stand-alone process or integrate it into their existing environmental management systems. In both cases, the methodology can complement and augment the environmental due diligence tools companies already use.

Since the ESR’s launch in March, over thirty companies have used the methodology to do some of the following: identify new risks that their existing processes missed, develop strategies related to their dependence on natural resources and reduce their supply chain risk. A few examples:

Mondi: Europe’s largest producer of office paper used the ESR to develop several new strategies for dealing with the ecosystem service challenges to their FSC certified South African plantations. Mondi is improving water efficiency by more aggressively clearing invasive species. They are also developing efforts to better match tree species to site conditions, utilize more water-efficient tree strains as they become available, and conduct prescribed burns more often.
Syngenta: The global agribusiness company chose one of its growing customer segments, farmers in southern India, as the scope for its road test. The company identified a number of possible opportunities to help farmers either reduce their impacts on ecosystems or adapt to ecosystem change. Examples include: increasing pollinators in the region by selling natural seed mixes, selling bees, or offering assistance through extension services; using the company’s in-depth knowledge of plants to offer farmers an improved integrated pest management system; and engaging the company’s foundation and external research institutions to fill gaps in information about the status and trends of ecosystem services critical to agriculture.

Scores of other companies are gearing-up to conduct ESRs, integrate the ESR into their product development and environmental management systems, and use the ESR as a corporate-level benchmarking tool.

In response, a number of consulting firms are weaving the ESR into their products and services. Det Norske Veritas (DNV), for one, has immersed itself in the methodology and is working with clients to find effective ways to deliver the Review. ERM Group is preparing to launch a multiyear effort to integrate the ESR into its environmental impact assessments. In addition, numerous small consulting companies are conducting ESRs with their clients.

In order to speed the adoption of these ecosystem service-based strategies and spur innovation, WRI is encouraging more environmental consultants, auditors, assessors and certifiers to respond to this rising demand.

As part of this push, WRI is holding a consultant training event in early 2009 at its office in Washington, DC. The training will provide attendees with a deep understanding of the methodology, how it is being applied, and where innovation is currently occurring.

For more information, please call Suzanne Ozment (+1 202-729-7835, sozment@wri.org) or learn more at the Ecosystems Services Review site.

Food or Fuel? The Bioenergy Dilemma

Karen Bennett — Tue, 05 Aug 2008 11:04:21 -0400

The cost of grain-based staples–such as tortillas in Mexico, beef noodles in western China, and bread in the United States–has increased around the world. There are several reasons why prices have jumped, but there’s one getting a lot of attention: the global rush for bioenergy.

Crops can be used as a food or fuel; both are important [ecosystem services](node/9222) that nature provides to people. But as countries set aside more corn and other agricultural products for use as fuel, fewer crops are available to produce food and world-wide prices increase.

Over the past few years, industrialized countries have set increasingly higher mandates for the use of bioenergy, which has been touted as a clean, sustainable alternative to fossil fuels and a way to combat global climate change.

Europe has mandated that biofuels make up 10 percent of its transport power by 2020. Similarly, in 2005, the United States federal government passed legislation requiring that the corn-based ethanol supply increase from 2.3 billion to [7.5 billion gallons](node/5025) per year by 2012. This year alone, the US will dedicate [30 million more tons of corn](http://www.economist.com/opinion/displaystory.cfm?story_id=1...)– half of the global grain stock–to ethanol production.

Meanwhile, global food prices are up [nearly 50 percent](http://www.imf.org/external/np/exr/faq/ffpfaqs.htm) in the past year. The price of basic staples, such as corn, oilseed, wheat, and cassava, is predicted to [increase 26 to 135 percent](http://www.iht.com/articles/2007/07/10/opinion/edholt.php) by 2020.

Rising food prices deeply affect the world’s poor, who spend up to 80 percent of their household income on food. The impact can be especially acute in urban areas. According to the United Nations Food and Agriculture Organization ([FAO](http://www.fao.org/)), [37 countries](http://www.fao.org/docrep/010/ai465e/ai465e02.htm) are now facing a food security crisis. [Food riots have erupted](http://www.cnn.com/2008/WORLD/americas/04/14/world.food.cris...) in many developing countries, including Bangladesh, Haiti, and Egypt.

While the benefits of bioenergy range from reduced greenhouse gas emissions to renewability and energy independence, increased biofuel production can lead to tradeoffs across other ecosystem services. Besides decreased food supply, other tradeoffs include poor water quality associated with increases in aggregate fertilizer use, nutrient runoff and erosion. Further research is needed to assess the [tradeoffs among ecosystem services](http://www.wri.org/publication/beyond-rfs-environmental-and-...) related to biofuels and other emerging sources of bioenergy, such as cellulosic technology.

Even though many of the economic, social and environmental effects of the recent biofuel push are not yet fully understood, many countries continue to dedicate more of their agriculture output to biofuels.

Given that globally many ecosystem services are [already degraded](http://www.maweb.org/), it is important to reduce demand for energy through energy efficiency measures, while managing land in ways that do not impinge on nature’s ability to provide ecosystem services–including food, an already scarce commodity in a majority of the world.

Companies Respond to Ecosystem Degradation

Craig Hanson — Tue, 11 Mar 2008 00:00:00 -0400

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.

Leading Companies Responding to Ecosystem Degradation

Paul Mackie — Mon, 10 Mar 2008 15:35:37 -0400

Corporate Ecosystem Services Review road-tested by Akzo Nobel,

BC Hydro, Mondi, Rio Tinto, and Syngenta

Global warming may dominate headlines today. Ecosystem degradation will do so tomorrow.

To prepare businesses for this new landscape, three organizations today launched a set of guidelines designed to help companies proactively develop strategies to manage risks and opportunities arising from ecosystem degradation.

The guidelines, called the “Corporate Ecosystem Services Review,” were developed by the World Resources Institute (WRI) in collaboration with the Meridian Institute and World Business Council for Sustainable Development (WBCSD). Five WBCSD members - Akzo Nobel, BC Hydro, Mondi, Rio Tinto, and Syngenta - “road-tested” the methodology and provided input to its design.

“The world’s forests, wetlands, and other ecosystems are under tremendous pressure due to climate change, land conversion, and many other factors,” said Jonathan Lash, president, WRI. “As ecosystems degrade, companies will face operational, regulatory, and reputational risks while those that offer solutions may find new business opportunities and new sources of revenue.”

Ecosystems provide companies with a wide variety of benefits or services including freshwater, wood, pollination, climate regulation, and protection from natural hazards, to name a few.

“Ecosystem services are often unacknowledged, yet they underpin many corporate activities,” said John Ehrmann, managing partner of the Meridian Institute. “I am pleased with the feedback from company managers who are finding the guidelines helpful for developing strategies that improve both corporate performance and ecosystem stewardship.”

The road-testers found that the guidelines can provide a number of other benefits as well. They can help companies anticipate new markets and government policies that may emerge in response to ecosystem degradation. They can strengthen corporate environmental impact assessments by adding considerations traditional methods may overlook. They also can help companies better manage conflicts over resources, identifying options for better trade-offs between ecosystem services.

“The methodology helped us identify and rank emerging problems, and provided us with a framework for turning risks into opportunities,” said Peter Gardiner, natural resources manager at Mondi, a leading international paper and packaging manufacturer.

Mondi’s newfound strategies include a number of operational changes that will increase the company’s efficiency in using freshwater, a scarce ecosystem service, and lead to new markets for the company’s byproducts.

“The Corporate Ecosystem Review helped us to better understand how a number of emerging environmental changes are likely to affect our business and how our company might best position itself to respond to these changes,” said Steve Hunt, senior vice president, Asia-Pacific, Eka Chemicals, a division of chemical giant Akzo Nobel.

Some road-testers, such as Mondi and BC Hydro, used the guidelines to gain insight into the direct implications that ecosystem trends pose for them. Other road-testers, such as Akzo Nobel and Syngenta, applied the methodology to understand the risks faced by a segment of their customers due to ecosystem degradation and, in turn, discovered opportunities for new products or services that address these risks. The guidelines profile these and other road-test experiences.

“We’re going to be hearing a lot about the Corporate Ecosystem Services Review. A couple dozen more WBCSD members are already taking it up this year,” said Björn Stigson, president of the WBCSD. “Leading companies realize that they need to be prepared for the business challenges posed by ecosystem decline.”

The guidelines were launched at WBCSD’s annual conference of delegates in Switzerland. For a copy of The Corporate Ecosystem Services Review, visit www.wri.org/ecosystems/esr.

Ironically, Flood Control is Flooding New Orleans

Karen Bennett — Wed, 05 Mar 2008 10:17:12 -0500

Man-made flood-control systems—such as levees, upstream dams, and canals—continue to be responsible for widespread damage to the New Orleans and Louisiana landscapes.

Katrina floodwaters. Photo courtesy of ABC NewsThe levees and canals on the Mississippi River provide infrastructure for oil excavation, shipping, and land development, yet they are the primary culprits in the degradation of natural wetlands. Many other ecosystems changes, such as deforestation, species invasion, and land cultivation, have also contributed to wetland loss in the region.

Wetlands act as natural speed bumps for severe weather. Storm waters lose energy as they pass over swamps, marshes, or mangrove forests, which helps reduce flooding. One study found that two to four miles of wetlands lessen a storm surge height by up to 12 inches.

Unfortunately, the coastal wetlands that provide this protection are disappearing rapidly. Louisiana has been losing up to 40 square miles of marsh per year for several decades. In other words, a football-field-sized segment of wetland disappears into open water every 30 minutes. The open sea has advanced some 20 miles inland due to wetland degeneration.

In its natural state, the Mississippi River periodically changed course within a 200-mile wide arc known as the Mississippi Delta. The delta forms as the river deposits silt over time, creating land mass and wetlands. Historically, this counteracted the natural subsidence that occurred in the region by flooding low lying areas and replacing the soil that was lost. In contrast, l evees confine the Mississippi River to one path. As a result, the Mississippi is depositing its silt deep into the Gulf of Mexico and the Delta is sinking. Additional sinking results from underground oil, gas, and water extraction.

The impact of human activity in southern Louisiana became painfully clear when Hurricane Katrina hit in August 2005. Ecosystem degradation, and in particular the loss of wetlands and the shoreline protection ecosystem services they provide, contributed to the devastating scale of the disaster. Eighty percent of New Orleans flooded, power was out across four states for several weeks, over 1,000 people drowned, and levels of pollution were extreme. The economic damage of Katrina has been estimated to be in the range of $200 billion.

To quote Albert Einstein, “the significant problems we face cannot be solved with the same level of thinking used when we created them.” The State of Louisiana has estimated that economic losses from public-use and infrastructure would be $137 billion over 50 years if wetland loss were to continue unchecked. It is expensive to recreate the storm and flood protection services of wetlands once they are lost, yet maintaining and protecting them continues to be ignored. To date, the U.S. Army Corps of Engineers has used most of its allocated $7 billion reconstruction budget for traditional engineering projects.

WRI has a new report, Ecosystem Services: A Guide for Decision Makers, which will help people avoid the inadvertent loss of ecosystem services and connect nature’s health to the achievement of social and economic goals.