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Global drive to value nature headed for Asia

A new global coalition of businesses seeking to lead on protecting biodiversity and natural resources will set up shop in Singapore early next month.

The TEEB Business Coalition - kicked off last year  as part of a major international initiative called The Economics of Eco-systems and Biodiversity (TEEB) – aims to put the value of natural resources squarely into the realm of the mainstream economy to better manage and protect them.

Special advisor to the United Nation’s Environment Programme’s “Green Economy Initiative” Pavan Sukhdev, who headed the original TEEB study in 2008 after 14 years as an investment banker for Deutche Bank, discusses the new initiative in an exclusive interview with Eco-Business.

Eco-Business: What is the purpose of the TEEB Business Coalition?

Pavan Sukhdev: The TEEB Business Coalition is one platform for businesses across the globe to come together and transform how they themselves, the policymakers and the public perceive their activities and gauge their contribution to the economy, to ecosystems and for human well-being. The overriding goal of the Coalition is to change the way business is done and to be part of forging the new corporation of the future.

EB: What do you consider a reasonable time frame to accomplish such a transformation?

PS: The Coalition has a three-year overview of enabling corporations to develop a shared understanding of the importance of ecosystems and biodiversity; creating robust and credible valuation methodologies that have the support of a number of groups and bodies such as the accountancy profession, economists and scientists; be recognised on a national and international scale and bring about visible and tangible change in corporate behaviours.

EB: Why choose Singapore as the headquarters for the new coalition?

PS: The geographic location of Singapore and its unique position in global markets provides the Coalition a strong presence and connection with emerging Asian economies – the future centres of corporate and economic growth.

EB: Why and how should businesses seek to integrate environmental values and services into their business models?

PS: The economic invisibility of nature in our dominant economic model is both a symptom and a root cause of human society’s disconnect from nature. We value what we price, but nature’s services - providing clean air, fresh water, soil fertility, flood prevention, drought control, climate stability, etc - are, mostly, not traded in any markets and not priced. These so-called “ecosystem services” are all “public goods” provided free. When was the last time trees sent us an invoice for their services of providing clean air, sequestering carbon and in regulating climate change?

Unless businesses recognise their negative and positive externalities, they cannot realise their footprints on biodiversity, on forest, on fresh water and their carbon footprints as well. Therefore, we need to first measure the values of the externalities of ecosystem services and biodiversity; so that they can be managed. Doing so may reveal the true nature of the trade-offs being made: between different ecosystem services (food provision or carbon storage), between different beneficiaries (private gain by some, public loss to many), at different scales (local costs, global benefits) and across different time horizons; enabling us to make better decisions.

Apart from the overwhelming evidence of the several risks faced by businesses due to loss in biodiversity and ecosystem services (BES), there are several opportunities too for businesses that need to be explored and expanded further. There is an increased need for new technologies and products to serve as substitutes, reduce degradation, restore ecosystems or increase the efficiency of ecosystem services. Also, new markets such as water-quality trading, certified sustainable products, wetland banking and threatened species banking provide opportunities for new business models such as ecosystem restoration and environmental asset finance. Moreover, there are new revenue streams for currently unrealised assets such as wetlands and forests for which new markets and payments for ecosystem services are emerging.

EB: Experts have said that society is operating at a “nature deficit”. What does this mean?

PS: Presently we are consuming the world’s biodiversity and ecosystems at an unsustainable rate (according to the ecological footprint indicator we have exceeded the planetary boundary by over 50 per cent). Intensifying urbanisation, land-use changes and continuing high rates of economic growth in some of the large developing economies have resulted in demand outstripping supply of several commodities; placing extreme stress on the ability of planetary sources and sinks to regenerate. This is leading to depletion in the store of the planet’s natural capital and causing a “nature deficit”.

According to estimates, over 30 per cent of the world’s coral reefs have been seriously damaged through fishing, pollution, disease and coral bleaching; since 1900, the world has lost 50 per cent of its wetlands; and the human-caused (anthropogenic) rate of species extinction is estimated to be 1,000 times more rapid than the “natural” rate of extinction typical of Earth’s long-term history.

EB: How will this nature deficit impact society going forward?

PS: To illustrate this deficit, in 2008, TEEB estimated that the annual economic loss of the earth’s natural capital was between US$2 trillion and US$4.5 trillion. Also, as suggested by recent evidence of climate change on much faster and deeper impacts, including the risk of human conflict caused by competition for biodiversity resources and ecosystem services; such losses are a threat to the functioning of our planet, our economy and human society.

All businesses, regardless of sector and region, both impact and depend on biodiversity and ecosystem services. The global marine fishing industry, for example, not only provides livelihoods to around 45 million fishermen involved in primary production and sustains 180 million jobs linked indirectly to the fishing industry; it also provides over 20 per cent of the average per capital intake of animal protein for over 1.5 billion people – mostly the poor – across the world. Hence, overexploitation of ocean fish stocks is directly linked to an exacerbation of negative economic (yield, employment, income, etc.) and social (poverty, nutrition, etc.) consequences.

Also, resource constraints due to decreasing natural capital represents significant business risk not only from the potential inability to (find materials), but also from various operational, regulatory, reputational, market and financial risks – which are often overlooked and underestimated by businesses.

EB: What sorts of solutions become possible by putting economic values on nature?

PS: There are several successful case studies demonstrating the benefits of incorporating legislation-based, policy-based and community-based conservation practices such as protected-areas, land-use management schemes, payments for ecosystem services (PES) and REDD+, both at a welfare and economic level.

In Costa Rica, payments to farmers who conserve forests on their land rather than destroy them for low-earning pasture have become almost a national environment programme. In New York, the administration thought it fit to pay land-owners of the adjoining Catskills Mountains over US$ 1 billion to improve farm and water management techniques. It was much cheaper than building a new water treatment facility for the city, which would have cost US$ 6 billion and over US$ 300 million in annual operating costs.

EB: To the layperson, putting a value on nature seems an immense task that could never be entirely accurate. How do you go about getting authoritative figures?

PS: We need to ensure that people understand the problems caused by the economic invisibility of nature; which must be addressed by recognizing, demonstrating and capturing the values of ecosystem services. Unless we do that, what we are actually doing is valuing ecosystem services (like the ability of rainforests to feed the rainfall and support the agricultural economies of Latin America) at “zero” price. How is that accurate?

Also, valuation does not mean commodification. There are several ways of valuing: you can value as a society, as a policy-maker or by paying money. It is for the society to decide which form of valuation to adhere to in each particular case. For instance, in the case of sacred forests worshipped by the local community – i.e., having infinite value – you have to respect that. End of story. You cannot take away from people what is sacred to them.

A great deal of work has already been done on measuring and valuing the impact of business activity on the natural environment in addition to and as a result of the TEEB initiative. However, these voices are highly fragmented, with a lack of consistency across methodologies and limited engagement between government, civil society and business. There is now a need for collaboration among them in order to scale current solutions, maximise the value of these activities, avoid duplication of effort, focus activity where it is needed most and to innovate around what are the market and policy drivers as well as the new business models that will minimise negative impacts and maximise the positive.

EB: Some companies – such as clothing manufacturer Puma – have experimented with environmental accounting on a voluntary basis, but numbers are isolated from the general balance sheet. Do you think environmental impacts will ever be integrated into corporate financial statements?  Should they be?

PS: What Puma has done is exhibit leadership to demonstrate that accounting for externalities at the company and supply chain level is very much possible. That’s an example in transparency, measurement and disclosure, for us to look at and draw comfort from. If more companies did this, and if more sectors engaged in the same; you could have policymakers and analysts and consumers and NGOs actually look and compare the social performance of companies. Although we still don’t have environmental externalities integrated into corporate financial statements, the path is laid out.

Also, it makes good business sense for companies to integrate the values of their externalities into their value chains. For instance, as public awareness on BES loss increases, this in turn increases pressure on business to continuously review their value chains to ensure security of supply of resources, continued access to the market and protect against reputational risk.

Kicked off last year by the Institute of Chartered Accountants in England and Wales (ICAEW) - along with UNEP, the World Business Council for Sustainable Development (WBCSD), WWF International, the International Union for Conservation of Nature (IUCN) and the Global Reporting Initiative (GRI) - the TEEB Business Coalition will launch its global headquarters in Singapore at the 6 November Responsible Business Forum at Singapore Management University. The event will mark the start of a new Singapore chapter of the WBCSD.

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