Impacts and Dependencies of Business on Ecosystems and Biodiversity

Dr Richard Mattison

UN-supported Millennium Ecosystem Assessment (MA):•“15 of the 24 ecosystem services examined are being degraded”. •“If the Earth was a listed company, this would represent a loss of capital asset of 60 per cent.”

The Economics of Ecosystems and Biodiversity (TEEB) :•The economic impact of biodiversity loss and ecosystem degradation on the world economy is estimated to be $US2-4.5 trillion (Interim report)

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The State of Ecosystems and BiodiversityThe State of Ecosystems and Biodiversity

Every business, regardless of their location on the value chain, both impacts and depends on ecosystems and ecosystem services.

A company depends on an ecosystem service if that service functions as an input or if it enables, enhances, or influences environmental conditions required for business success.

A company impacts an ecosystem if the company affects the quantity or quality of the services that ecosystem provides.

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Dependency and ImpactDependency and Impact

•Value chain analysis:

•Purpose is to help management understand the relationship between their business bottom line and ecosystems.

Understanding the relationshipUnderstanding the relationship

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Natural resource use Water use Fuel/energy use

Ecosystem impact-Flooding-Drought-Habitat destruction-Resource scarcity

Pollution Climate change Waste

•During 1949 – 1997 China severely depleted its natural forests, leading to serious ecosystem degradation and biodiversity loss.

•Severe logging and deforestation contributed to drought and flooding of the Yellow River, costing $30 billion in damages in 1998.

•In 1998, the Chinese government banned logging in 17 provinces under the Natural Forest Conservation Program (NFCP).

Case Study: Deforestation in ChinaCase Study: Deforestation in China

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Market price of timber in 1950-1997 (US$/m3)

Real cost of timber, including floodingdamage and ecosystem service losses“externalized” by the Construction &Materials Sector (in 1998 US$/m3)

+178%

In 1998, supply constraints caused timber prices to increase by 20 - 30% in China.

The construction industry uses 64% of global timberproductionCenter for Natural Forest Conservation And Management, 2000

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Consequences of ecosystem service lossConsequences of ecosystem service loss

•Ecosystems and biodiversity are still largely unmonitored by business and poorly integrated into business decision making.

•Companies do not have valuation models to account for current or predict future financial impacts associated with ecosystem service decline.

•Performance indicators do not typically account for ecosystem services and instead focus on industrial inputs/outputs.

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ConclusionsConclusions

•Businesses can conduct a systematic review of their impacts and dependence on ecosystem services, covering direct operations as well as those of suppliers and customers.

•Potential benefits include cost savings, revenue generation, waste reduction, and improved brand image.

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Next stepsNext steps

Trucost Research Presentation

Discussion & Questions

Dr Richard Mattisonrichard.mattison@trucost.com

Ecosystem services — are the benefits that people and businesses obtain from ecosystems, typically grouped into four categories:

•Provisioning Services: the goods or products obtained from ecosystems, for example, food, fibre, timber, biomass fuel, freshwater, genetic resources, biochemicals, natural medicines and pharmaceuticals.•Regulating Services: the benefits obtained from an ecosystem’s control of natural processes, for example, air quality regulation, climate regulation, water regulation, erosion regulation, water purification and waste treatment, disease regulation, pest regulation, pollination, and natural hazard regulation.•Cultural Services: non-material benefits from ecosystem services, for example, recreation, spiritual values and aesthetic enjoyment.•Supporting Services: natural processes that maintain other services, e.g. nutrient cycling, primary production and water cycling.

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Ecosystem ServicesEcosystem Services

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Framework for Ecosystem ValuationFramework for Ecosystem Valuation

Source: WBCSD

• Going beyond marketed and priced commodities to which most economists have limited their analysis.

• Considers the full range of economically important goods and services provided by ecosystems.

Total Economic Value (TEV)