Why Dow is Putting Nature on the Balance Sheet

For example, Hawkins explained, consider water. Dow uses a lot of water in the production of its materials and chemicals. "Most places in the world don't have a mechanism for understanding the value of the water from the point of view of pricing. But there are implications to Dow if we don't have the supply of water we need at the right time and the right place." If a plant is in a water-challenged region, finding ways to improve the water availability for everyone, including Dow's plant, can be a valuable opportunity. "There might be value in Dow's making investments far away from our plant in order to secure more reliable supplies of water," he said.

"Water supplies don't just come from rivers on site. They're also impacted by the ecosystems upstream, like forests," explained Michelle Lapinski, Director, Corporate Practices at TNC. "Forest cover in a watershed significantly influences water quality and quantity. Trees naturally hold back water during rain events and release it slowly, preventing flooding and providing water during dry periods – and regulating the supply and quality of water better than many facilities can. By evaluating ecosystem services, a company like Dow may decide to invest in forest restoration to ensure continued water flow for their business, and others who rely on it."

Of course, some of these decisions go beyond a single company's -- or even a group of companies' -- ability to control. It's a societal matter, not a corporate one. That's where a group like The Nature Conservancy comes in. "We work in a number of cities in water supply," Glenn Prickett, TNC's Chief External Affairs Officer, told me. "In Bogotá, Quito, and São Paulo, we've worked with combinations of bottling plants, hydroelectric facilities and local water utilities to help each of them understand the value of the water they're getting from the watershed in terms of what it would cost to install their own reservoir or filtration plant if they didn't have the water they need in the quantity and quality they're currently getting it. That becomes the benchmark. Then there's an economic case for them to provide some amount of money up to that value toward a common effort to protect and restore that watershed. So, we've set up water funds in those cities where different entities pay into the fund to work with upstream landowners to protect and restore forests in the riparian areas. That's an example of how a company can do a very clear valuation and be part of a larger societal effort to maintain the resources."

These are complex calculations, the stuff of doctoral dissertations, being applied to the down-and-dirty world of business activity in faraway places. As such, the Dow-TNC partnership will likely make only a small dent in understanding how to integrate the value of nature into business decisions, and in only a limited number of scenarios, let alone have the valuations appear on corporate balance sheets. But there's significant potential here to bring the scientists together with the bean counters -- and have them translate all of this complexity into a language meaningful to those who set corporate strategy. As Lapinski put it: "Businesses talk in dollars and numbers and scientists and conservationists talk about beetles and birds. We're trying to take beetles and birds and put them into dollar numbers so that companies can value nature just as any other asset."