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Business and Ecosystems - The Issue at a Glance



 

Over the past 50 years human activity has altered ecosystems faster and more extensively than ever before in human history: the main finding of the Millennium Ecosystem Assessment1 (MA), a four-year, international, scientific appraisal of the condition and trends in the Earth’s ecosystems.

The MA classified ecosystem services, the benefits people and businesses obtain from ecosystems, into four categories:

- Provisioning – goods such as food, water and fiber;

- Regulating – biophysical processes controlling natural processes;

- Cultural – providing recreational, aesthetic or spiritual values;

- Supporting – underlying processes such as soil formation, photosynthesis and nutrient cycling.

The MA assessed 24 ecosystem services and found the majority to be degraded (see balance sheet).

The MA also identified six interconnected challenges that are of particular concern for business as these further affect the integrity of ecosystems and their capacity to provide services:

- Water scarcity

- Climate change

- Habitat change

- Biodiversity loss and invasive species

- Overexploitation of oceans

- Nutrient overloading.

This Issue Brief explores the six challenges, discusses their implications for businesses and provides examples of corporate responses.

The business case

Business and ecosystem services are inextricably linked. Corporations not only affect ecosystem services but also rely upon them. For instance, the pharmaceutical industry benefits from nature’s providing genetic resources; agribusiness depends on nature’s pollination, pest control and erosion regulation services; while tourism builds on cultural services.

Because of these inter-relationships, the trends and six challenges identified by the MA pose significant risks to companies (as well as to their suppliers, customers and investors) including:

- Operational – increased scarcity and cost of raw materials such as freshwater, disruptions to business operations caused by natural hazards, and higher insurance costs for disasters such as flooding;

- Regulatory – emergence of new government policies such as taxes and moratoria on extractive activities;

- Reputational – damage to corporate reputation from media and nongovernmental
organization (NGO) campaigns, shareholder resolutions and changing customer preferences;

- Access to capital – restrictions as the financial community adopts more rigorous investment and lending policies.

At the same time, these trends and challenges can create new business opportunities including:

- New technologies and products – that will serve as substitutes, reduce degradation, restore ecosystems or increase efficiency of ecosystem service use;

- New markets – such as water quality trading, certified sustainable products, wetland banking and threatened species banking;

- New businesses – such as ecosystem restoration and environmental asset finance or brokerage;

New revenue streams – for assets currently unrealized, such as wetlands and forests, but for which new markets or payments for ecosystem services could emerge.

However, most companies routinely fail to recognize the link between healthy ecosystems.

^  Back to Top


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