Can Corporations Get Ecosystem Valuation Right?

Alejandro Litovsky

October 18, 2009

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Seeking this ambitious goal is the World Business Council for Sustainable Development, identified as a Phoenix 50 pioneer by Volans earlier this year. WBCSD has just launched the report Corporate ecosystem valuation – Building the Business case.

Companies and their operations, argues the WBCSD, will be under increased scrutiny and should respond by better understanding and proactively managing their ecosystem impacts and dependence, as well as exploring and developing new business solutions to meet these challenges.

The impacts

All major companies have impacts on the world’s ecosystems, which are being rapidly depleted, in part because their services to the planet have been under-valued, i.e. taken for granted.

The impact of corporations and global supply chains on natural ecosystems is massive, and the consequences poorly understood. For example, WBCSD points out:

  • 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.

Expect New Corporate Risks

The world loses natural capital worth between €1.35 trillion and €3.10 trillion each year, found The Economics of Ecosystems and Biodiversity (TEEB). Because these loses are real, ecosystem degradation is becoming a critical sustainability issue for business and society at large. Businesses must expect changing government policies and regulatory frameworks to be developed to address these pressing ecosystem challenges – at the global, regional and local levels.

Part of what Volans will be doing over the next year is to work with leading pioneers to develop the different scenarios of what those regulatory and market environments might look like. Mindsets are beginning to change, albeit still too slowly, about the level and scope of business impacts on, and use of, ecosystems – among customers, regulators, shareholders, investors, NGOs and the media.

What to look out for

WBCSD’s Ecosystem Focus Area has launched the Ecosystem Valuation Initiative (EVI), which will be working with a number of member company “road testers” to develop a Guide to Corporate Ecosystem Valuation that makes the case for corporate ecosystem valuation as an integral part of business planning and decision-making and guides companies through the process of undertaking ecosystem valuation studies. The target date for the release of the guide is October 2010 during the next Conference of the Parties to the Convention on Biological Diversity (CBD) in Nagoya, Japan.

The key question with this and other change-driven initiatives; the international ministerial meetings; the investment capital funds; and the civil society networks all whom are trying to put ecosystems valuation on the map is: How can critical mass be accelerated? This is of central concern to Volans and the Pathways to Scale program, and where efforts like WBCSD will have a central role to play in providing bridges to corporate leaders who are either enlightened individuals, or are starting to think seriously about the changing landscape of corporate risk and reputation.