Beyond Puma, Coke, Dow: Why more firms value ecosystem services

Beyond Puma, Coke, Dow: Why more firms value ecosystem services

Forest image by Pakhnyushcha via Shutterstock.

Forty-seven companies from around the world now mention natural capital and ecosystem services in publicly available materials, based on findings in a new BSR working paper. This figure is a dozen more than we documented in 2013.

As more companies explore and engage with ecosystem services issues, the business case for corporate action on biodiversity and ecosystem services, which are the key metrics for measuring natural capital, continues to strengthen.

The foundation of the internal business case rests on continual improvement of how companies identify risks and opportunities, particularly associated with costly project delays and supply chain challenges, as well as reputation and privilege-to-operate issues. In addition, many companies use ecosystem services approaches as a strategic part of maintaining long-term access to key natural resource-based inputs, particularly water. Specifically, an ecosystem services analytical approach highlights system dynamics and provides a framework for considering trade-offs in decision-making.

Illustrative work across these 47 companies engaged in ecosystem services initiatives can be synthesized into a few areas of activity.

Activity area 1: Setting corporate policies, standards and targets

Companies across industries now have either corporate policies or standards related to ecosystem services, including business in the mining, oil and gas, beverage, electronics, financial services, entertainment and tourism industries.

• Barrick Gold: "Barrick's Biodiversity Standard ... requires us to integrate biodiversity into project planning and decision-making to assess the direct and indirect impacts of new projects (and expansion of existing projects) on ecosystem services, to design projects that avoid potentially significant impacts on biodiversity, to exploit opportunities to protect and enhance biodiversity, to consult with stakeholders, and to engage in partnerships that address scientific and practical challenges relating to biodiversity protection or enhancement."

• Coca-Cola's Sustainable Agricultural Guiding Principles (PDF): "Promote and protect natural habitats and biodiversity through the conservation of natural flora and fauna and the maintenance of important ecosystem services, such as natural pest and disease controls, pollination, and freshwater flows."

• "Rabobank Group believes it is important that clients know which ecosystem services constitute an opportunity or a business risk, and which factors can have an adverse impact on these services, including factors resulting from changes to, or dependence on, biodiversity and ecosystem services. To this end, Rabobank formulated a new draft policy on biodiversity and ecosystem services ..."

Looking forward, as awareness of the IFC's and Equator Banks' requirements to include biodiversity and ecosystem services into due diligence processes grows, we expect that more companies will craft policies on these issues.

Activity area 2: Assessing monetary values of ecosystem services

Currently a few companies explore monetary valuation of environmental factors that relate to ecosystem services and, in some cases, are even integrating these financial values into corporate accounting. While this activity is quite limited, it has received considerable media attention, as well as a few prominent supporters, as listed below. Therefore, it is worth noting and tracking in the years ahead.

• The Dow Chemical Company, in collaboration with the Nature Conservancy, is undertaking work on "validating tools and models that can assign a value to these services [from nature] in order to support Dow's decision-making when it comes to designing, constructing, and operating its manufacturing sites."

• Novo Nordisk: "The E P&L [Environmental Profit & Loss] takes this [corporate sustainability strategy] to the next level by putting a financial value on these impacts so that their significance can be easily understood and managed alongside other business issues."

• Puma and parent company Kering: Puma has developed an "Environmental Profit and Loss Account (EP&L) with "environmental impact for greenhouse gas emission, water use, land use, air pollution and waste generated through the operations and supply chain." The EP&L is now being applied across all Kering brands.

• Rio Tinto: "We are designing and implementing a number of ecosystem service valuation projects to investigate the business case and methodologies around designing and implementing ecosystem service offsets, and invetments in nonoperational, land-based assets."

• Sumitomo Mitsui Trust Bank: "Since 2010 Sumitomo Mitsui Trust Bank has provided 'Environmental Rating Loans,' which evaluate [the] environmental friendliness of companies and give preferential interest rates to companies with outstanding environmental ratings. The rating is based on independently developed standards where the evaluation items include environmentally friendly properties and initiatives related to natural capital, such as water resources and biodiversity, in addition to general items, such as environmental management and climate change countermeasures."

• Webcor Builders can now "measure and manage natural capital costs of a construction project within the supply chain…This includes insights into the natural capital costs that are triggered from the use of different materials and building designs."

Overall, this work on monetary valuation of various environmental factors is very much still in development and worth watching as it further evolves in the coming years as it develops a set of linked financial measures of environmental impacts.

Activity area 3: Exploring and embedding biodiversity and ecosystem services into corporate management systems

A few companies are drawing upon natural capital and/or ecosystem services analytical approaches within corporate environmental management.

• Unilever: "The Natural Capital Project is forming a partnership with Unilever to determine how land-use changes will affect their commodity targets, other ecosystem services, and biodiversity. For example, as Unilever explores switching from using petroleum products to those made with biofuels, our approach can help them understand [that] the impact changes in land use resulting from their consumption decisions would ultimately impact biodiversity and the provision of ecosystem services. They are particularly interested in this information on ecosystem services so that they can incorporate it into lifecycle analysis for their products."

• Weyerhaeuser: "As part of our 2020 Sustainability Roadmap, we committed to recognizing the ecosystem services provided by our timberlands. To help us and our stakeholders understand the full range of values our timberlands offer, we developed a plan to measure and report against a comprehensive set of 18 ecosystem services our forests provide. We are measuring these services and reporting on them annually ..."

Ultimately, the key to integrating ecosystem services into environmental management will be to demonstrate how this work contributes to project managers' goals of managing companies, and projects well, with as little risk as possible.

What is the takeaway? It seems that now, after years of laying the groundwork, ecosystem services and the related domain of natural capital may be slowly entering the corporate world.

Forest image by Pakhnyushcha via Shutterstock.