How will ecosystem services affect corporate decision-making?
How will ecosystem services affect corporate decision-making?
In January 2012, a potentially significant shift occurred for corporate decision-makers: Companies seeking financing from the World Bank’s International Finance Corporation, as well as from 76 global banks that signed on to the Equator Principles, became subject to due diligence processes that examine corporate impacts and dependencies on ecosystem services. This occurred even as more than 16 national and regional governments continued to focus on ways to integrate ecosystem services into public policy. With small-scale exploratory work underway for several years, corporate applications covered the spectrum -- from integration of ecosystem services into accounting to consideration of the issues as an element in risk-management and impact-assessment protocols.
Though few corporate decision-makers have heard of ecosystem services, the decades-old concept is now drawing significant attention to the natural infrastructure from which all natural resource-based goods and services flow and upon which all business and society relies.
But what’s next in terms of new corporate performance requirements related to ecosystem services? And what are the implications for companies?
To explore that question, BSR’s Ecosystem Services Working Group convened a small roundtable with working group members and thought leaders from the public, NGO and academic arenas. After two days of brainstorming and discussion, along with a field trip to the Florida Everglades headwaters, the group brainstormed a set of scenarios that were deemed feasible. Inspired by our field trip and previous transformative scenario-planning exercises, each scenario was given a name meant to evoke a sense of the dynamics that could play out. This article summarizes a few of the scenarios, which will be presented along with other possible futures in a longer report that BSR will issue in 2013.
Next page: Increased scrutiny of corporations
Scenario 1: Eagle Hunt
This scenario is fundamentally about a paradigm shift, with ecosystem services writ large, following on significant action from regulators, activists, civil society and business.
In this scenario, weather extremes around the world quickly ratchet up awareness of natural infrastructure and ecosystem services. Between 2012 and 2017, a growing number of extreme weather events cause major metropolitan areas to shutter for weeks for clean-up and rebuilding. At the same time, agricultural yields drop in key production sites, driving commodity prices up.
All of these events increase government and citizen awareness of our natural infrastructure. In response, the United States, Europe, China, Brazil, South Africa and other countries add stringent regulations focused on restoring and maintaining ecosystem services based on specific ecological states calibrated to estimates from pre-industrial periods.
Meanwhile, corporate siting, licensing and expansion become increasingly complex, as does maintaining current operations in areas where national interests are seen as tightly intertwined with reliable flows of ecosystem services. Globally, pension funds and insurance companies demand more corporate disclosure related to biodiversity and ecosystem services. In particular, this disclosure addresses carbon accounting, water use and sources, biodiversity presence and impacts over time, as well as the effect of development on water filtration, flood control, erosion and pollination, among other variables.
In analyzing this new corporate information, investors, insurance companies and even some regulators plug new data into computer models that assess full risk profiles. Fund and insurance company employees now include geographic information systems (GIS) experts who partner with information technology (IT) firms to develop spatially explicit maps that visually show projected positive or negative flows of ecosystem services over time. These maps are based on easily accessible data on a range of ecosystem services that is collected by satellite monitoring and available online with linked maps (akin to those in Google Earth or Bing).
In civil society, activist initiatives such as 350.org’s Global Power Shift campaign pick up these data and maps on ecosystem flows, with a focus on destruction of key carbon sequestration sites that contribute to climate change dynamics. These organizers coordinate with other social media to create divestment campaigns against companies whose operations are contributing to climate change dynamics and undercutting critical ecosystem services. Online consumer information sources such as GoodGuide encourage consumers to join “buy-cotts” of the same companies. These savvy activists now focus on dynamics between issues, rather than on single issues, particularly the interrelationships among climate, water availability and food.
The adverse effects on profits, market share and brand can be easily quantified, and corporate leaders are increasingly under scrutiny by investors and shareholders for not having been more proactive on understanding, mitigating and changing practices in order to decrease impacts on ecosystem services.
Next page: The future is only now being written
Scenario 2: Raccoon Crawl
All sectors continue activity on ecosystem services, but there’s no critical mass for large-scale, meaningful change.
While academics and NGOs advocate for an expanded frame to measure and assess corporate impacts and dependencies on natural systems, there is no clear case for the added value that an ecosystem services approach offers. Public agencies continue to fund research, but that research does not clear the way for new regulation.
Likewise, corporate decision-makers do not see the case for more action and therefore make only minor changes in their existing approach to environmental and social impact assessments and life-cycle analyses.
Overall, ecosystem services concepts fade from discussion, as institutional complexity as well as inertia combines with the inability of thought leaders to both agree among themselves and galvanize attention to the issues.
Scenario 3: Egret Flight
This scenario is marked by significant action by a critical mass of players from the private sector, in collaboration with the public sector, NGO community and academia, to pilot a systemwide approach to ecosystem services.
Based on the work of a small set of corporate environmental managers across industries, a body of knowledge has been built on when, how and where these concepts can be fruitfully applied within corporate decision-making processes. Companies believe they have discovered a feasible way to integrate ecosystem services.
Perceiving that ecosystem services concepts could drive a growing set of demands on companies, a group of private-sector pioneers works with trusted NGO and industry association partners to convene leaders from the public and academia to craft a “learning lab” that explores applications of ecosystem services. The focus is on two distinct contexts: one in Europe or the United States, with verified, long-term data, and the second in Latin America, Asia or Africa, with little available (and no verified) data. These pilots -- which are designed to be highly adaptive and based on sound science -- are implemented and provide a forum that engages a wide range of stakeholders.
By 2025, there is capacity to perform valuable ecosystem services assessments in both the private and public sectors. A range of methods, models and databases are now in place to allow the measurement, monitoring and analysis of the stocks and flows of key ecosystem services. University programs are delivering trained professionals for all sectors. Coherent government policies and supporting regulations have evolved to include ecosystem services in way that is actionable for all sectors. Governments also now recognize the value of ecosystem services in their GDP calculations, which mesh with new parameters developed for corporate accounts in the learning labs that were seeded in 2013. The results are promising, as restoration and maintenance of ecosystem services is increasingly being documented around the world.
What happens with ecosystem services is very much being decided now -- potentially through action and advocacy, or even through inaction and lack of investment. The question is, whose action and whose investment, and to what end?
The future is only now being written. And it remains to be seen whether the “eagle” will fly and pluck hapless prey, the “raccoon” will crawl forward, with business as usual, or a large numbers of egrets will lift off and fly together.