Companies are starting to see the business sense of incorporating ecosystem service values into their operations.
All businesses have an impact on ecosystems and depend on their services in some way. Securing a license to operate will increasingly require companies to develop ways of measuring, managing and mitigating their ecological impacts, and a number of them are showing the way.
Aggregate Industries UK, a subsidiary of Holcim, restores ecosystems as part of its quarrying operations. In support of a request to extend an existing quarry in North Yorkshire, the company proposed creating a mix of wetlands for wildlife habitat as well as an artificial lake for recreation, following the extraction of sand and gravel from land currently used for agriculture. Ecosystem valuation was undertaken to assess the types and scale of economic benefits associated with wetland restoration. The study showed that the value of biodiversity benefits that would be generated by the proposed wetlands (£1.4 million), the recreational benefits of the lake (£350,000) and increased flood storage capacity of the overall area (£224,000) would deliver net benefits to the local community of about £1.1 million. The value of carbon sequestration in these wetlands was found to be relatively small, while the marginal benefits associated with wetlands far exceeded the current benefits derived from agricultural production. The study also showed that the costs of ecosystem restoration and aftercare are small compared to the economic benefits of wetland restoration and the financial returns from sand and gravel extraction. This shows that compensation for adverse environmental impacts is not only an important means for companies to maintain their license to operate, but can deliver overall improvements in ecosystem services at modest expense.
Rio Tinto has a policy goal of Net Positive Impact (NPI) on biodiversity in its operations. The company aims to achieve NPI by combining state-of-the-art avoidance, mitigation and ecosystem restoration with biodiversity offsets and other conservation actions. In Madagascar, the company is considering as part of its offset strategy supporting the conservation of approximately 60,000 hectares of lowland rainforest, to compensate in part for the unavoidable residual impacts of its mining operations in the region. In this case, the area to be conserved and the resulting biodiversity benefits are thought to contribute to a strategy for biodiversity offsets that will meet and possibly exceed the conservation gains required to compensate for the residual impact of the mining operation. A study was commissioned to estimate the monetary value of these biodiversity benefits. The study examined the costs of conservation, including both up-front investment as well as maintenance costs of protected areas, together with the opportunity costs that local people bear when they lose access to land that had historically provided food and cash income in lean periods as well as a resource for agricultural expansion. The ecosystem benefits considered included wildlife habitat, hydrological regulation and carbon storage, as well as potential eco-tourism and bioprospecting. The preliminary findings suggest that there are significant economic benefits associated with conservation. However, while many of these benefits accrue globally (such as wildlife habitat or carbon storage), the costs of conservation are mainly borne by local communities whose access to forest resources is restricted. The study underscored the need for, and the potential scale of, compensation of local populations, for example through Payments for Ecosystem Services. More generally, the analysis showed how the economic value of natural assets can be included in business and environmental decision making.
Aggregate Industries and Rio Tinto are two of 15 companies which are pioneering the use of ecosystem valuation in the corporate sector. The success these companies have in using information about the value of the ecosystem services will illustrate to other companies the advantages of properly accounting for all costs and benefits for improved and more sustainable decision making. “Consumers are demanding the greening of production, and companies who are able to show how they invest in natural capital will reap significant advantages in the market place,” says Nathalie Olsen of IUCN’s Economics and Environment Programme.
Building on an Ecosystem Services Review that was launched by the World Resources Institute and the World Business Council for Sustainable Development (WBCSD) in 2008, the WBCSD is launching the Ecosystem Valuation Initiative (EVI) in which IUCN is playing a key role, to guide companies on how to account for ecosystem costs and benefits.