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Fauna & Flora International’s (FFI’s) Business & Biodiversity Director Pippa Howard explains why she feels strongly that companies can and must play a fundamental role as agents of sustainable development.
Business as usual is no longer possible. Actually, it is not longer feasible. Though the environmental impacts of certain business activities have long been known, the world is now waking up to the dependence of business on biodiversity and ecosystem services (known as BES).
Ecosystem services are the benefits that people receive from ecosystems such as soil provisioning, climate regulation, flood attenuation and spiritual value. Biodiversity underpins healthy ecosystem services
The Economics of Ecosystems and Biodiversity (TEEB) for Business, released last year, had much to do with this realisation. But there have been countless other moves from governments, think tanks, research bodies, non-governmental organisations and business-led initiatives, all pointing to one main concept:
Businesses needs to respond to biodiversity loss and the degradation of ecosystem services.
Who takes responsibility?
The rate of species loss in recent decades is orders of magnitude faster than the natural rate and sixty percent of the ecosystem services on which we as a society rely are degraded or in decline. Global development, enterprise and the private sector have a lot to account for when it comes to these figures. Habitat loss, over-extraction of water, resource use and many other consumer-driven business impacts have directly contributed to the global crisis we all now face.
As increasingly dominant agents of development, companies are in a position of influence and power: this can be (and certainly is in some cases) harnessed to bring about a reversal of these trends.
And this can be done to the benefit of the company and sustainable development as well, since it is increasingly easy to see that the degradation of BES poses serious risks for the bottom line.
For instance, if your profit margin depends on the stable, affordable supply of water for crop irrigation, and water scarcity is driving up the price of water, you face some serious risks to your future business viability. How do you manage this? You manage the watershed and ecosystems from which your water is sourced!
Business professionals have recently shifted their views on biodiversity accordingly, as you can see from the graph below.
Is BES a material issue for investors?
The answer has increasingly been a resounding YES. According to Karina Litvack, Head of Governance and Sustainable Investment at F&C Investments:
“Companies and their investors have long taken ecosystems services for granted, as if they came for free. Yet recent pressures on natural resources suggest that in future such services will start to command a premium, or, worse, become unavailable. This could have a profound impact on the strategies and valuations of companies in high-risk sectors.”
Investment banks, fund and asset managers, pension funds and development agencies are all placing increasing emphasis on the need to account for best practice performance when it comes to managing impacts and dependencies on biodiversity and ecosystems.
This is reflected through global reporting initiatives, assurance schemes and lender requirements. Companies must respond to this pressure in order to continue receiving investments.
What steps are needed to address these issues?
Business needs to better understand and manage the relationships between operational and management performance and the natural contexts that bind commercial interests. This is truer today than ever before.
One way to address this is through a risk and opportunity based approach, both at a global level and local business unit level. This requires technical competencies, management approaches, tools and methodologies and – fundamentally – strategic planning skills.
I like to think of it as a journey, with several steps, each one necessary for the next:
The further along this trajectory a company goes, the more they are creating rather than destroying value.
The successful transition through all six stages requires a company to acknowledge the true value of biodiversity together with implementing sound governance, policies and procedures for biodiversity management.
Funding biodiversity conservation
The private sector represents a critical source of funding for conservation projects. Partnerships between business and conservation organisations provide crucial long-term support for biodiversity protection. In the end, securing the health of ecosystems benefits a huge range of stakeholders, including businesses.
Sustainable financing mechanisms are also a key component of successful conservation; the relationship with business can foster and enhance livelihoods, entrepreneurship and sustainable development.
Emerging environmental markets are drawing growing interest and investment from a broad and respected quarter. They represent huge opportunities not only for business growth but for establishing long-term financing solutions for biodiversity and ecosystem service protection. Some prescient companies are already deeply involved in developing these markets.
Development of skills to interface with BES, and with the organisations and institutions that are conserving biodiversity and ecosystems, will better prepare businesses to address both risks and opportunities, and future-proof towards sustainable development.
In the rapidly changing world that we face today, being proactive with risk management is critical for competitive edge. For corporations, the greenest possible practices ensure a safer and more secure business environment as well.
Fauna & Flora International has been working with businesses for over 15 years. Our Business & Biodiversity team works directly with top multinational companies across the extractive, oil & gas and agribusiness sectors to better integrate biodiversity and ecosystem services into their businesses.