Biodiversity is increasingly seen as an area of business risk, but a failure to understand its full significance coupled with poor management tools are slowing corporate responses


Biodiversity is increasingly seen as an area of business risk, but a failure to understand its full significance coupled with poor management tools are slowing corporate responsesLast year was the UN’s Year of Biodiversity. Hands up those who heard about it? Now, keep them there if you actually did anything.

Not that the last 12 months passed without incident or action. Conservationists can point to a number of landmarks.

First came publication of the long-awaited Teeb (The Economics of Ecosystems and Biodiversity) report. Then the Convention on Biological Diversity conference in Nagoya, Japan.

These events and others like them are slowly helping move the image of biodiversity from one of cuddly pandas and saving the whale to an important business-related issue.

Between 2009 and 2010, business leaders revised the potential economic loss deriving from biodiversity from below $10bn to over $25bn, according to a survey by the World Economic Forum.

Yet progress is relative. The same survey shows how biodiversity-related risks lag at the bottom of the pile. Coastal flooding, water scarcity, desertification and extreme weather all rank much higher.

Slow take up

As always there exist some enlightened companies but the majority of the business community still has “very low recognition” of biodiversity’s importance, argues Craig Bennett, policy director at the environment group Friends of the Earth.

“It is still not on the agenda of most businesses as a core business issue or a core business risk,” he says.

The reasons are multiple. One major difficulty is establishing the importance of the issue for companies without direct impacts or dependencies on biodiversity.

“To explain the impact that industrial farming or more intensive agriculture might have on some species of plants or animals is difficult,” says Gavin Neath, senior vice-president of sustainability at consumer goods company Unilever.

Unilever itself sources over 250 crops from over 60 countries. On the rare occasions where the company is also the producer, the arguments for action are easier.

Its tea plantations provide one such example. On its Kericho tea estate in Kenya, for instance, it has planted over one million indigenous trees in the surrounding Mau Forest.

“When we link right back to agriculture in that direct and immediate way, it’s high on our agenda. It’s when we are two or three steps removed, like oil palm or soya, we find it harder to get our arms around,” Neath explains.

Understandably, the sectors that have been quickest to realise the extent of the problem are those with the most obvious biodiversity-related risks.

For Iveta Cherneva, of the United National Environment Programme’s Financial Initiative (UNEP-FI), that “basically means agriculture, mining and forestry”.

In each sector, the risk profiles more or less write themselves. Agriculture, for example, which accounts for over two-thirds of global land use, has a massive dependency on soil quality and pollinating insects among other things.

Reputation risks

Extractive companies have to worry about their social licence to operate. A reputation for destroying biodiversity in one corner of the world can quickly close doors to new operations in another.

More specific are the impact and dependency that mining operations have on water resources. For the oil sector, the trend towards deeper offshore drilling and subsequent impact on marine life is one of several risks. BP’s Deepwater Horizon spill has only intensified the spotlight.

Forestry too. By definition, the health of the timber trade is inextricably linked with the health of the world’s forests, be they natural or plantation stocks.

The list could be extended. The dependency of fisheries on healthy marine ecosystems and the travel industry on areas of natural beauty make them highly vulnerable to biodiversity depletion.

Hydropower generation also features in the at-risk list. No industry is more dependent on reliable water supply. Yet almost four-fifths (79%) of planned hydro capacity is earmarked for areas that are already water scarce or stressed, according to the World Resources Institute.

Risk not opportunity

“Unlike climate change, which is all about the opportunity, the key issue [with biodiversity] is risk,” UNEP-FI’s Cherneva maintains.

When it comes to corporate risk, the Teeb report certainly packs its punches. Its list includes reduced productivity, increased cost of resources, disruption of operations, reputational loss, litigation, changing consumer choices and new purchaser requirements. And that’s just the start.

Cherneva’s point about opportunity is a fair one too. The most convincing arguments are couched in terms of sustainability of supply. Strictly speaking, that’s a risk mitigated rather than a new market opened.

Not that supply security isn’t a key driver. It is: a drop in agricultural production, for example, will inevitably lead to a rise in food prices. Given that food demand is expected to double by 2050 (with irrigation accounting for 70% of global freshwater withdrawals), the future looks bleak.

Biodiversity-related opportunities are harder to come by. The use of plant life in the development of new medicines is one of the most concrete and often cited examples. Between a quarter and a half of the world’s $640bn pharmaceutical industry is currently derived from genetic resources. Next on the horizon is the emerging science of biomimicry (ie the use of nature’s attributes and systems as inspiration for man-made solutions).

Arguably, the rise in green consumerism also gives legs to new biodiversity-friendly products. A good example is HSBC bank in Brazil, which has developed a green insurance product that enables consumers to conserve an area of native forest proportional to their car-related carbon emissions.

“Historically these [opportunities] haven’t been seen not as valid reasons, the only concern in the past is around reputation risk associated with damaged biodiversity,” warns Friends of the Earth’s Bennett.

Ecosystem services

That won’t change until the notion of biodiversity expands, conservationists argue. Linking biodiversity to the notion of ecosystem services has given a strong push in that direction.

Services such as regional climate regulation or erosion control have a tangible value in a way that wildlife, however cute, does not. As the pricing of such services becomes more sophisticated, so conversations in the boardroom will ease.

Such sophistication will take time, but it is happening. Under the umbrella of the cross-sector millennium ecosystem assessment initiative, a network of academics, NGOs and public sector research entities are pushing ahead with new methodologies. Teeb provides just a taste of what is round the corner.

Ecosystem services provide business with a tangible concept, argues Pippa Howard, director of the business and biodiversity programme at Fauna & Flora International.

She says: “When companies can relate ecosystem functions to intact biodiverse systems then they can more clearly see the relationship between good biodiversity management and operational performance.”

The concept also helps broaden understandings of dependency. All companies of whatever size and type rely on public goods such as clean water, fresh air, sufficient food and a stable climate. They have ecosystem services to thank for these. Seen in this light, biodiversity suddenly becomes a critical asset.

Dax Lovegrove, head of business and industry relations at conservation group WWF, says: “When we understand the complexity of nature and ecosystems, then actually any business is seen to rely on biodiversity, albeit some more than others.”

Assessment tools

In practice, that argument remains to be made. For the moment, it is Lovegrove’s “others” that are making the serious moves.

Management approaches differ from sector to sector. However, the first step is the same for all companies; mapping their impacts and dependencies. Only from that starting point can management strategies be reasonably developed.

As pioneers, those earliest into the field had to devise their own assessment methodologies. British American Tobacco’s Biodiversity Risk and Opportunity Assessment system provides an illustrative example.

Mining company Lafarge boasts another. Around five years ago, the French extractive firm linked up with WWF to develop an assessment index of its quarries and other operational sites.

The index provides quarry managers with a tailored questionnaire to monitor and track biodiversity changes. Sites are then rated on a scale of one to seven according to priority indicators such as the rarity of identified species and the surface area of the natural environment.

“We then come up with a biodiversity management plan that takes account of vegetation and fauna that used to be common in the region [of the quarry],” says Jim Rushworth, vice-president for environment and public affairs at Lafarge.

It is no longer necessary for every company to reinvent the wheel. Generic management tools are gradually emerging to facilitate biodiversity assessment.

A study by US membership group Business for Social Responsibility identifies over half-a-dozen relatively robust analytical assessment tools focusing on both biodiversity and ecosystem services. Of these, the ecosystem services review probably has the widest take-up among companies.

The multi-collaborative methodology provides companies with a “footprint” of their biodiversity impacts and dependencies, according to James Griffiths, director of ecosystems, water and sustainable forest products industry at the World Business Council for Sustainable Development (WBCSD).

“There really wasn’t any type of analysis that could take companies out from environmental impacts, which tend to be end-of-pipe emissions, and actually link them to systems of natural capital,” Griffiths says.

If the will is there, the raft of emerging methodologies should help most companies get a handle on the biodiversity-related issues in their own immediate operations. Down the supply chain things remain murky.

That’s a problem, argues Sheila Bonini, senior expert consultant for sustainability and resource productivity practice at advisory firm McKinsey.

“Some companies have biodiversity risks in their own operations … but in most cases the significant risks and opportunities are back in the supply chains,” she argues.

Biodiversity databases such as the Integrated Biodiversity Assessment Tool (IBAT) are helping by providing information on high priority conservation sites. IBAT draws on Proteus 2012, a public-private initiative that integrates biodiversity data from the World Database on Protected Areas and similar sources.

One of the few companies to have attempted a full value-chain assessment is beverage company SABMiller. As part of its commitment to protect critical watersheds, it set out to map critical areas of water availability.

As part of the process, the brewer analysed water usage profiles for all major commodities that go into making beer as well as issues of long-term water stress in barley growing regions.

Company actions

Again, when it comes to taking action, efforts to conserve biodiversity (and deliver ecosystem services) differ from company to company depending on their impacts and risks.

Minimising or mitigating direct impacts is an obvious first step. If the initial assessment process is thorough, the priority areas should be readily apparent.

In many cases, a commitment to no net impact is leading companies to modify their existing operations and obtain business efficiencies as a result.

A case in point comes from chemical company BASF. Its conservation innovations include a GPS system in the US that optimises aerial herbicide spraying. In Latin America, meanwhile, it has rolled out a computerised mapping system to track agricultural diseases and thereby curtail their spread.

“In our opinion, the best way to protect biodiversity is to improve farm productivity, which in turn drives us to achieve more yield per acre,” says Elise Kissling, from BASF’s crop protection division.

Whatever biodiversity action plan a company decides on, it cannot be run in isolation from the corporate sector. Biodiversity is an interlinked, localised phenomenon. Strategies to conserve it must be likewise.

“There’s an absolute need to work with others … The issues are complex and need different areas of problem solving,” says McKinsey’s Bonini.

Engaging employees on the ground is clearly critical. Management guidelines can help. Beverage company Fosters, for example, provides all its vineyard managers with a conservation guide, which includes, among other actions, training staff to undertake biodiversity-related activities.

Internal communication is also a must. UK utility Anglian Water, for instance, operates a dedicated biodiversity intranet site to inform and engage staff on the subject.

Reaching out

Working with external stakeholders is critical too. Local environment groups, for instance, can bring credibility and much needed expertise to site-based biodiversity initiatives.

A good example is Lafarge’s partnership with the Wildlife Habitat Council in the US. To date, the mining company has worked with the nationwide environment group to develop site assessments and conservation plans for 72 of its sites.

Corporate partnerships developed by the Earthwatch Institute provide an innovative model for employee engagement too. The international environmental organisation works with oil company Shell, for example, in an alliance that sees the company’s managers mentor and train managers at Unesco natural world heritage sites in south-east Asia.

Such hands-on schemes in biodiversity-rich regions can help raise awareness, especially among individuals in developed countries where the impacts of biodiversity depletion are not as yet as evident, argues Earthwatch international director of partnerships David Hillyard.

“Trying to get people in wealthier societies more connected with biodiversity is still quite a big challenge,” he adds.

Cooperation that works

At a broader level, cross-sector collaboration and partnership are required. To date, roundtables and certification schemes are behind much of the progress seen in the biodiversity field.

Notable examples include the Marine Stewardship Council and the Forest Stewardship Council, along with roundtables on issues such as sugar cane, cotton, soya and palm oil.

Such collaboration gives rise to certain core principles and practices, says Unilever’s Gavin Neath: “That takes you quite a long way down the track, if not the whole way.”

Exactly how to get the whole way remains unclear. Better metrics and management tools are certainly part of the story. Broader and better partnership approaches feature too.

Another major piece of the puzzle is a progressive public policy framework. Actively engaging in the public policy debate is, as Friends of the Earth’s Bennett puts it, “a real test of a company’s seriousness”.

Leading companies are out there making their voice heard. The recent call of Carrefour, B&Q and other European retailers to ban illegal timber into the EU is one such example. The fact more than 100 financial institutions were present at the COP 10 in Nagoya represents another positive sign.

“Obviously business as usual policy and regulation isn’t working otherwise we wouldn’t be losing biodiversity,” says WBCSD’s Griffiths, who predicts more national, sub-national and regional rules around the corner.

Companies can remain passive and wait for new regulation to hit them. Or they can actively engage and help frame future policies. What they can’t do is what most did for the Year of Biodiversity: close their eyes and wait for it to go away.

Multi-ecosystem service assessment tools

  • ARIES: Artificial Intelligence for Ecosystem Services
    Developed by the University of Vermont’s Ecoinformatics “Collaboratory”, Conservation International, Earth Economics and Wageningen University. 
  • ESR: Ecosystem Services Review
    Developed by the World Resources Institute, the Meridian Institute and the World Business Council for Sustainable Development. 
  • InVEST: Integrated Valuation of Ecosystem Services and Tradeoffs
    Developed by the Natural Capital Project, the Nature Conservancy and WWF. 
  • MIMES: Multi-scale Integrated Models of Ecosystem Services
    Developed by the University of Vermont’s Gund Institute for Ecological Economics. 
  • NVI: Natural Value Initiative
    Developed by Fauna & Flora International, Brazilian business school FGV, and the United Nations Environment Programme Finance Initiative.

Source: Measuring Corporate Impact on Ecosystems: A Comprehensive Review of New Tools, BSR, December 2008

Biodiversity-focused tools linked to ecosystem services

  • BBOP: Business and Biodiversity Offsets Programme
    Toolkit by Forest Trends, Conservation International and the Wildlife Conservation Society. 
  • IBAT: Integrated Biodiversity Assessment Tool
    Methodology by Conservation International, BirdLife International and the UN Environment Programme’s World Conservation Monitoring Centre.

Source: Measuring Corporate Impact on Ecosystems: A Comprehensive Review of New Tools, BSR, December 2008

Case study – Anglian Water: communicating biodiversity internally

Anglian Water has a lot of land. It also has a lot of employees. The UK water utility realised that combining the two represented the most effective solution to biodiversity conservation.

To do so required a tailored internal communications and awareness raising campaign. Anchoring that campaign is the company’s specially designed biodiversity field guide.

Kicking off in 2009, the guide has so far been distributed to the company’s 1,600 field staff as well as contractors.

Operational employees use the guide to identify which priority species and habitats are currently to be found on the company’s 4,000 landholdings. The company’s property portfolio includes 47 sites of special scientific interest (known as SSSIs) and 30 special protection areas.

The guide is designed so that each priority species has a double-page spread in a consistent format, ensuring key information is easily accessible.

The back of the guide contains a survey sheet. After completing their assessment, employees send the scanned or photocopied survey to the company’s biodiversity team.

“The guide helps them become more engaged and to better understand how important our sites can be for wildlife, but also it gives us a better reach for gathering information,” says Andrew Brown, biodiversity manager at Anglian Water.

If employees are unable to identify particular wildlife examples, they are invited to photograph it and email it to Brown and his colleagues. A special advice line is also provided for biodiversity-related questions.

Among other results, the initiative has led to sightings of protected species including otters, birds of prey, badgers, water voles, bats and orchids.

As a related one-off, Anglian Water ran a one-week campaign in 2010. The Snapshot event encouraged all 3,700 employees to take 30 minutes out over their lunch break to report on examples of biodiversity at their work site.

The survey, which was timed to coincide with other Year of Biodiversity activities in the UK, yielded 234 records of 127 different species. Anglian Water has also obtained a more accurate understanding of the invasive species in its sites.

Alongside the field guide, Anglian Water operates a specialised biodiversity page on its intranet. Bright and uncluttered, the online resource went live in late 2008 as a way of flagging up the new guide.

The site includes a regular blog from one of the company’s biodiversity officers as well as information on how to get involved in surveying work.

To increase employee interest, the company uses the site to post employee photographs, special surveys and competitions. The site also contains information on current legislation governing biodiversity. Details of Anglian Water’s internal biodiversity action plan, which has been in place since 1999, are provided as well.

Anglian Water is currently considering revamping its field guide for an external audience. The new-look guide will focus particularly on primary and secondary schoolchildren, 35,000 of whom visit the company’s education centres each year.

The company is also weighing up another edition for its five million customers. The guide will be accompanied by a sophisticated online database where customers can log their findings.

For a podcast with Oliver Balch on this Briefing, click here

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