The business rationale for investing in nature
Climate risk is likely to threaten your bottom line.
The business rationale for investing in ecological restoration and nature-inspired biomimicry solutions is coming into sharper focus. The business case is simply built on effectively and efficiently addressing core business issues. It is that straightforward.
Consider, for example, four primary business issues being addressed through investments in nature-based solutions, as laid out in a new BSR-REF Business Brief "The Benefit Multiplier of Investing in Nature," summarized in the table below:
These cases, as well as others in the BSR-REF Business Brief and Annexes (PDF), show that a business case clearly emerges when companies consider business imperatives — sourcing of inputs, operational or supply chain challenges, real estate portfolio management — and risks or challenges.
Taking this business-imperatives view leads directly to questions about what elements of the context in which a company operates adversely could affect the firm. With this analytical frame, a range of environmental and community issues emerge as highly relevant to business — which enables decision makers to explore a greater range of risks as well as options for solving business problems or sparking innovation with associated cost savings and other benefits.
An analogy highlights the importance of the broader context that can affect business imperatives: No investor would make a decision based on only one number, such as profits. Questions would be asked about costs, revenues, margins, market share and other figures. Context, and contextualizing data, is key. Any business decision maker wants multiple figures.
When corporate decision-makers added in-depth consideration of the environmental context both new business-relevant possibilities, as well as new business imperatives, came into focus — in many cases from corporate investment in maintaining natural systems.
In some companies, such as Dow and Shell, the let’s-work-with-nature approach is simply more cost- and operationally effective. End of case. In other cases — such as that which numerous beverage and food companies face — the fundamental drivers of investments in ecological restoration are simple dynamics associated with raw material demand and supply.
The key takeaway is that when business problems are encountered, corporate decision makers are wise to consider nature’s systems and processes with capital investment in mind. These investments should be viewed as long-range and infrastructure-related, not short-term profit-driving measures — and therefore are best understood using the lens of capital investment.
The cases show that investing in nature’s systems and processes has offered cost-effective solutions to businesses’ needs — from facility operation through decreasing impacts, better managing real estate portfolios, and even increasing ROI — in terms of financial as well as environmental and social returns. In this sense, all of these cases are manifestations of, to use Harvard Business School’s Michael Porter’s term, shared value creation.
This corporate value, and returns on investment, can be documented at multiple levels through selecting the best approach for a particular company.
For example, some companies build on pre-existing internal frameworks. Other businesses adapt social return on investment (SROI) models, blended value approaches, Environmental Profit and Loss (EP&L) spreadsheets or Environmental Balance Sheets (EBS). More recently, the Restore the Earth Foundation has developed a custom-made approach to integrating across financial, environmental (across a landscape scale) and social impacts in the form of the Social Impact Model (SIM), which also can be used for restoration projects seeking to delineate multiple returns on investment.
In addition, the four returns model documents landscape restoration ROI — including inspiration as a return — which Commonland is applying now with investors, companies and local ventures in South Africa, Australia and Spain.
The bottom line is clear. Investing in nature-based solutions can offer numerous, measurable returns.