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Nature is talking — are you listening and re-calibrating strategy as needed?

Misreading climatic, water, or ecological signals could translate become a significant misstep for many companies.

Business success depends on identifying signals amidst noise. Key signals come from customers, suppliers and employees. However, business leaders also need to be attuned to signals from the broader context within which a company operates — including expectations of local communities and societal, as well as current situations and trends within climatic, hydrological and ecological systems.

Assessing these natural systems for business-relevant signals is worthy of attention today, this week and this month. The reason is simple: Misreading the climatic, water or ecological situation increasingly will be a significant misstep for many companies.

Like the proverbial frog in a slowly boiling pot of water that fails to perceive the rising heat quickly enough to save itself, it is easy to miss small shifts that over time accumulate into significant (in the amphibian’s case, lethal) changes in context.

It is clear that as context changes, so too should strategy. Yet far too many companies have remained silent as significant changes take place in the natural systems within which their operations occur — notably climate change, biodiversity loss, deforestation, water stress and the many other natural capital and ecosystem services (PDF)-related issues unfolding in today’s world. Myriad business-related tracking tools exist for all of these issues. Business people no longer plausibly can say, "I didn’t know."

Misreading the climatic, water or ecological situation increasingly will be a significant misstep for many companies.

For more than a decade, BSR has been highlighting the business relevance and implications of trends in natural, or ecological, systems through its Value Creation through Natural Capital Working Group. BSR has collaborated with a cross-industry group of corporate decision-makers to track, assess and identify pathways forward amidst the growing set of signals related to changes in natural systems.

Since the Millennium Ecosystem Assessment, published 12 years ago, this working group has discussed and researched a range of business-relevant issues which have resulted in business intelligence reports on topics including:

  • Public sector action — What governments are engaging with ecosystem services and natural capital issues — through task forces convened as well as legislation passed — which could affect business regulatory requirements? (2013, 2014 and 2015)
  • Private sector engagement — What companies are taking actions on natural capital and ecosystem services issues that could set new international precedents for business practice? (2012, 2013, 2014, 2015 and 2016)
  • Decision-aids — What analytical tools exist for measuring and managing corporate impacts, as well as dependencies, on natural and ecological systems? (2008 [PDF], 2011, 2013, 2014 and 2015)
  • Corporate implementation  — How can companies apply ecosystem services concepts and approaches, specifically within environmental, social and health impact assessments (ESHIAs)? (2014) What is natural capital accounting and how can it be implemented in companies? (2016)
  • Scenarios for future uptake — What are scenarios for when and how companies significantly will begin to engage with natural capital and ecosystem services issues? (2013)

Ongoing research is informed by roundtable discussions that have included thought and practice leaders from companies (Dow, Kering, Holcim [PDF] and many others), governments (Canada, the European Union, the Netherlands, South Africa, the U.K., USA, Vietnam and others), as well as NGOs, academic institutions and specialist consultancies (the Basque Center for Climate Change, Commonland, the Ecosystem Marketplace, E&Y’s Accounting for Natural Capital team, Forest Trends, the Natural Capital Coalition [NCC], the Natural Capital Project, PwC’s Total Impact Measurement & Management team, the Nature Conservancy, TruCost, among many others).

It is easy to miss small shifts that over time accumulate into significant changes in context.

Over the past decade, a suite of tools have emerged with which business leaders can measure not just corporate impacts, but also positive upside in the form of distinct types of return on investment (ROI) — including shared value, blended value, social return on investment (SROI), enhancements to natural capital value and maintenance of ecosystem services.

Yet none of these focused approaches provides guidance on how to assess whether a company’s investments in environmental benefits, for example, also may offer local community or social benefits. For corporate decision-makers, the question is: by failing to consider how corporate investments could reap multiple types of returns, is your company leaving value on the table?

Given this open question, BSR’s Value Creation through Natural Capital efforts seek to catalyze work on how to measure environmental improvements in terms of local community, human health, economic and other societal benefits.

Since we all breathe air, drink water and eat food, it is patently clear that linkages between a better natural environment and healthier local communities exist. It is high time to have equally clear pathways forward on how to measure positive corporate environmental contributions that also offer local community dividends.

This work is underway amidst a fulcrum moment of change and information flow. Sorting legitimate signals from noise can be difficult. Societal expectations of companies are shifting, with differences across countries and regions. But, like gravity, some dynamics are non-negotiable — particularly the changes underway within climatic, hydrological and ecological systems.

The question is not whether businesses will have to take seriously climate change, water, biodiversity and other natural capital-related issues.

As corporate decision-makers begin to see climate, water, biodiversity and other ecological issues as present-day concerns rather than a future issues, these leaders will get in the habit of considering a range of new questions in their ongoing management strategy, such as: What are our company’s impacts and dependencies on the climate, as well as water, biodiversity, natural capital and ecosystem services? Is our current approach to business risk due diligence only assessing the tip of the iceberg by neglecting climate change and natural capital issues? Would our company benefit from applying natural capital accounting? And how do we assess the business case for investing in nature?

Isn’t it better to be at the helm in asking these questions now, rather than having them asked by others in the coming days, weeks and months?

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