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November 29, 2006
Ecosystem Depletion Presents Businesses with Risks and Opportunities
    by Bill Baue

Four prominent environmental and business organizations report on the business risks and opportunities associated with ecosystem crises such as climate change and water scarcity.

The potential and already-real impacts of climate change on the planet and on business have received lots of attention--and rightly so. However, climate change is only one of six interconnected ecosystem crises of particular concern to business, according to the United Nations Millennium Ecosystem Assessment, a multi-year project examining the status of 24 ecosystem services needed by humans. To help companies and stakeholders better understand the six ecosystem crises, a business membership organization and a group of non-profits released a report last week entitled Ecosystem Challenges and Business Implications.

"Business and ecosystem services are inextricably linked," states the report, sponsored by the World Business Council for Sustainable Development (WBCSD), Earthwatch Institute, the World Conservation Union (IUCN), and the World Resources Institute (WRI). "However, most companies routinely fail to recognize the link between healthy ecosystems and their business interests."

"Business simply cannot function if ecosystems and the services they deliver--like water, biodiversity, food, fibre and climate regulation--are degraded or out of balance," adds Björn Stigson, president of WBCSD, in the report. "There must be a value attached to natural resources, and businesses need to start understanding this value."

The report outlines the challenges and risks facing business from each of the six ecosystem crises: water scarcity, habitat change, biodiversity loss and invasive species, overexploitations of oceans, and nutrient overloading, in addition to climate change. Risks fall into four categories: operational, regulatory, reputational, and access to capital.

"Maintaining nature's diverse portfolio to draw from is a way of reducing business risk," the report states in the section on biodiversity loss and invasive species, which notes that up to 30 percent of mammal, bird, and amphibian species are currently threatened with extinction.

The section on overexploitation of the oceans includes a graph tracking the decline of the cod fishery in Newfoundland, with offshore bottom trawling dramatically increasing catches in the 1950s but also depleting the ocean's underlying biomass, leading to a total collapse by 1990. Each section also identifies opportunities, including new technologies, products, markets, businesses, and revenue streams. The overexploitation of oceans section notes how using eco-labels or certification such as the Marine Stewardship Council (MSC) can enhance reputation.

Another strength of the report is its inclusion of commentary from corporate voices, culled from interviews with participants in a September 2006 conference on business responses to ecosystem degradation sponsored by Earthwatch's Corporate Environmental Responsibility Group (CERG).

"Certification processes like MSC are vital for raising the standard among producers," states Jan Kees Vis of Unilever (ticker: UN), the Dutch company that helped launch MSC. "It encourages participation of all stakeholders, which is essential to make it work in practice and for transparency, but it is also very time consuming."

The corporate voices recognize the link between addressing ecosystem challenges and retaining investor interest.

"We must be able to demonstrate leadership on climate change and be attractive to the SRI community, which is increasing in size," says Priya Matzen of Novo Nordisk (NVO). "If we are not proactive, it will prove challenging to maintain the leading position we have with many investors."

The report ends by stepping back to address broader perspectives common to all six ecosystem challenges. For example, it stresses the importance of developing an "ecosystem marketplace" with widespread uptake that encompasses not only ecosystem investments but also payment for ecosystem services as a key element for getting business response to match the urgency of the task. It also stresses the importance of extensive cooperation and buy-in from the business community.

"Executives may feel more comfortable responding to ecosystem challenges when other business leaders are doing the same," the report points out.

The report is the first of three slated for publication by the four partner organizations. The second will focus on business opportunities to profit by working to solve the ecosystem crises, and the third will help business executives identify their dependence on ecosystem services and instruct them on how to preserve these vital natural resources.


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