9 ways companies can start to repay their natural debt
9 ways companies can start to repay their natural debt
If you think the global debt crisis is sobering, what would happen if businesses were asked to pay for the estimated $72 trillion in natural resources that the United Nations figures they use for free?
A group of 24 powerful companies that collectively generate more than $500 billion in annual revenue isn't waiting around for the answer. Building on a challenge issued last October at the Clinton Global Initiative, they are taking proactive steps to repay their debt to the planet.
These actions are part of an overall business strategy. One example of this mindset comes from General Motors, which disclosed Tuesday that 100 of its facilities are now landfill-free. In 2011, the company recycled or reused about 2.6 million metric tons, or about 38 million trash bags full of garbage.
"Our landfill-free program continues to strengthen our business by creating efficiencies, generating revenues and inspiring innovation with products made from recycled content," said Mike Robinson, GM's vice president of Sustainability and Global regulatory affairs.
Another illustration comes from paper goods company Kimberly-Clark, which Monday pledged to reduce the amount of wood fiber it sources from natural forests by 50 percent by 2025. Kimberly-Clark points to two big reasons for its commitment: to address the issue of deforestation and to mitigate pricing risks.
"This broad, new initiative will help protect biodiversity and reduce the impacts of fiber that the company uses while ensuring the fiber is sourced in an environmentally and socially responsible way," the company said in a statement. "Equally importantly, the initiative will also help insulate the company from continuing volatile price fluctuations in the world fiber market."
Kimberly-Clark and General Motors are among the two dozen companies pushing for more visibility into the true cost of natural resources -- from water to forests to soil to minerals – that are vital to the creation of their goods and services. By acting collectively to bring additional leverage to individual actions, they hope to galvanize other companies to value nature in a similar way.
The effort, organized by the Corporate Eco Forum and The Nature Conservancy, was highlighted at the United Nations Conference on Sustainable Development this week in Rio de Janeiro. The details of the companies' commitments are published in a report titled "The New Business Imperative: Valuing Natural Capital."
"The companies featured in our report are united in the view that immediate leadership to safeguard well-functioning ecosystems is a business imperative, not a matter of philanthropy," said M.R. Rangaswami, founder of the Corporate Eco Forum, during the press conference in Rio.
The joint publication issued by the Corporate Eco Forum and The Nature Conservancy echoes another report out this week from sustainability advocacy group Ceres. That analysis, "Clearing the Waters: A Review of Corporate Water Risk Disclosure in SEC Filings," found that 90 percent of the 82 public companies studied were concerned about physical water risks such as scarcity or flooding. That's up from 76 percent just two years ago.
Although the Ceres analysis is focused more on the need for businesses to mitigate risks, both reports come to the same conclusion: there should be a more explicit business case for corporate environmental philanthropy.
The "New Business Imperative" publication suggests nine ways companies can take on the task of repaying their natural debt:
1. Do the math. That means you'll need to map, monitor and measure the specific impact of resource availability on products and services. For example, if your facility can't get enough fresh water locally, include the cost of piping it in.
2. Place a monetary value on natural resources. How would shortages or higher prices for certain natural resources affect pricing and availability for your company's products and services? Would margins suffer?
3. Reduce environmental dependence. Are there ways your company can change business processes in order to minimize the impact on environmental resources?
4. Invest strategically in conservation and restoration. Most businesses have come sort of environmental or corporate social responsibility initiative. Put that money where it really matters. "Companies increasingly see investments in 'natural infrastructure' as important, sometimes mandatory, to advancing key business initiatives," the report's authors note.
5. Engage your value chain. By getting supply chain partners involved, a company can multiply its positive impact -- or not. This won't be easy.
6. Innovate in materials, processes and products. That may mean systems that have worked well in the past but that the impact on natural resources weren't factored into the development process.
7. Build natural instead of manmade infrastructure. Examples include rebuilding coral reefs or mangroves to protect coastal operations against flooding or storm surges; or investing in forests that could help maintain freshwater resources.
8. Leverage new natural capital markets and investment tools. The report discusses four primary mechanisms: Direct payments to landowners that help encourage healthy ecosystems; regulatory-driven markets of ecosystem credits, notably those related to maintaining clean water resources; private trading of ecosystem credits; and purchases of products that are certified for their positive or neutral impact on the ecosystem, such as certified wood.
9. Join forces. Increasingly, non-governmental organizations such as The Nature Conservancy, Conservation International and many others are seeing to ally with corporations. Theses sorts of alliances, once frowned upon by many environmentalists, are now seen as critical for helping fund solutions that will scale across entire industries.