Businesses globally are starting to make the connection between healthy ecosystems and the bottom line and to proactively develop strategies to manage business risks and opportunities linked to corporate dependence, and impacts, on ecosystems.
Many businesses are not fully aware how dependent they are on ecosystems services or what impact they have on ecosystem and the possible ramifications of changes or destruction of these ecosystems and services. Businesses impact ecosystems and the quality and quantity of the services they provide in many ways – through consumption, pollution, land conversion, and other activities.
Ecosystem degradation is highly relevant to business because companies not only impact ecosystems and the services they provide but also depend on them. Ecosystem degradation, therefore, can pose a number of risks to corporate performance as well as create new business opportunities.
Businesses depend on ecosystems in many ways for the ecosystems services they provide. Ecosystem services (sometimes referred to as “environmental services” or “ecological services”) are the benefits that people get from ecosystems, such as freshwater, timber, climate regulation, protection from natural hazards, erosion control, and recreation. Many of these benefits are received for free, which means that they can be taken for granted by businesses until the service becomes stressed or disappears.
Different companies depend on different ecosystem services that are associated with specific inputs or resources that enable, enhance, or influence environmental conditions required for successful corporate performance. A company’s priority ecosystem services are those services on which the company has a high dependence and/or impact and thereby are the most likely sources of business risk or opportunity to the company.
Many companies address only their environmental impacts on ecosystems, and not their dependence on them; and environmental management systems and environmental due diligence tools are often not fully attuned to the risks and opportunities arising from the degradation and use of ecosystem services. 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.
To address these gaps, the World Resources Institute (WRI) developed an innovative tool: the Corporate Ecosystem Services Review (ESR). First launched in 2008, with a revised edition released this year, the tool is estimated to have already been used by 300 companies. It identifies operational; regulatory and legal; reputational, market and product; and financing risks and opportunities – and provides a methodology to proactively develop strategies to manage these.
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. According to the WRI, road-test experience indicates that this tool can provide a number of business benefits such as:
- Identifying new business risks and opportunities;
- Framing and giving added urgency to risks or opportunities previously identified by management;
- Anticipating new markets and influencing government policies that will emerge in response to ecosystem degradation;
- Strengthening existing approaches to environmental management;
- Improving stakeholder relationships;
- Demonstrating leadership in corporate sustainability by proactively addressing the degradation of ecosystem services.
In the final stage of the ESR methodology, companies may find value in conducting an ecosystem valuation and the WBCSD’s Guide to Corporate Ecosystem Valuation is a useful framework to help managers make better-informed business decisions by explicitly valuing both the costs of ecosystem degradation and the benefits received from ecosystem services.
Source: World Resources Institute
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