January 24, 2011
The Dow Chemical Company and The Nature Conservancy announced today a unique, collaboration that aims to produce practical tools for assessing the value of nature to businesses. The five-year, $10 million deal will involve side-by-side collaboration in applying scientific knowledge to better understand how Dow’s operations impact nature, while also incorporating the value of natural systems in the company’s business. Dow and TNC aim to share all of the new knowledge, tools and methodologies developed during the project to promote their use in other companies worldwide.
“This collaboration is designed to help us innovate new approaches to critical world challenges while demonstrating that environmental conservation is not just good for nature – it is good for business,” said Andrew Liveris, chairman and chief executive officer of Dow in the announcement. “Companies that value and integrate biodiversity and ecosystem services into their strategic plans are best positioned for the future by operationalizing sustainability. At Dow, we see sustainability as an adjective and one that we apply to almost everything we do: sustainable manufacturing, sustainable solutions and sustainable opportunities to constantly add to the quality of life for our communities and fellow citizens. Today, tomorrow, always.”
The EcoInnovator spoke with CEF member, Neil C. Hawkins, Sc.D., Vice President of Sustainability & EH&S at Dow and Glenn Prickett, The Nature Conservancy’s Chief External Affairs Officer, to understand the drivers and the unique business-driven aspects of the collaboration.
The EcoInnovator: What is the mission of this new collaboration between Dow and The Nature Conservancy?
Neil C. Hawkins: Dow has been around for more than 100 years and we have a longstanding commitment to working with the environment around our plant facilities. Over time, we’ve had a lot of interaction with the environment and we are large landholders. And virtually all of our major sites have engaged in conservation efforts, including working with the Nature Conservancy here in Michigan.
But as a large, multi-country entity with 50,000 people working in facilities in about 100 countries, we recognize we need a more cohesive, thoughtful overarching strategy around how to manage all our ecosystem resources—the air, land, water, and biodiversity where we operate. As we looked at evolving trends, the Millennium Ecosystem Assessment findings, our efforts to help manage ecosystems and protect biodiversity in regions we operate—and our work on global climate change—our need for an overarching approach became clear.
Most of the current models to calculate the economic value of ecosystem services and biodiversity focus on regions and are geared towards governments. Our strategic collaboration with the Nature Conservancy will enable us to take a solid economic look from the corporate perspective of how to value nature in and around our particular resources or holdings. We want to bring the economics of ecosystem services and biodiversity into how we work—and be very thoughtful and strategic in how we manage our resources.
Glenn Prickett: This collaboration is exciting because it is about helping a major multinational company create systems to internalize the environmental costs and benefits as a regular part of doing business. It’s about recognizing that nature has economic value, and figuring out what that value is from a business standpoint—in operations, in the supply chain, and ultimately, we hope, in the kinds of products and services Dow offers to its customers. Then we want to come up with strategies for optimizing that value.
At The Nature Conservancy, we hypothesize that this process will create a stronger business case for Dow to invest in conserving and restoring nature. These investments won’t just be made because they’re good for society—but also because they’re good for the health of the company in both the short and the long term.
If a company sees business value in being a good conservationist, the behavior will go to scale much faster than if it is seen as something good for corporate responsibility. If conservation is seen as the profitable thing to do, I think those efforts will scale much faster.
The EcoI: Your collaboration is reportedly valued at $10 million. How will these funds be invested?
NH: Our collaboration involves a $10 million investment over five years. We will conduct at least three significant validation projects looking at the ecosystem services and biodiversity of our facilities within regions. Then we’ll move towards validating these models. We have a joint commitment to publish and share this information so that we can help other companies begin to look at these issues from an economic point of view and not just an ethics or environmental viewpoint.
This isn’t a corporate conservation agreement in the classic sense. We could have given a check to The Nature Conservancy for $10 million and said, “Go off and buy land or easements.” Our collaboration is about developing, validating, proving and demonstrating the methods that can advance business efforts to safeguard valuable ecological systems through economic valuation of nature – by building it into business thinking and business decision making.
We fully expect that there will be a lot of conservation activity out of Dow during the five-year period. It’s part of our agreement and we will report on all our conservation activities related to the agreement. But I think what is very unique about this is that it’s focused on capacity building, model validation and economic model validation grounded in good science.
We believe that the world will make faster progress if economic models and training systems are built around preserving nature’s value while also facilitating economic development.
GP: As Neil said, we could have simply raised this money from a corporate partner. But our hypothesis is that if we get this right, much more investment will flow from other companies and government budgets into conservation as we explain the economic value of nature more clearly. It will require much more business discipline to get that right. And it will also help make what we learn and talk about to the world that much more interesting and relevant—not only to other businesses, but also to policy makers—than if it were just The Nature Conservancy standing up on our own and talking about it.
The EcoI: Can you describe some of the work that’s been done to date in this area and how you’ll try to build on it?
GP: One important project has been the collaboration between the World Business Council for Sustainable Development (WBCSD) and the World Resources Institute (WRI) that came out of the Millennium Ecosystem Assessment. About four years ago, there was a small group that aimed to write a special summary of the Millennium Ecosystem Assessment for business and industry. And in the course of that conversation, James Griffiths at WBCSD took the lead and said, “You know what? We shouldn’t just talk about this in theory. We should actually go out and work with some of member companies on it.” So WRI created a methodology to help businesses with ecosystem valuation. Then they recruited 5-10 member companies and did some initial pilots. Each company picked one particular business or field operation and tried to pilot the methodology in their business. This was the first sort of systematic work that I had seen. It has been my understanding that the efforts stopped at that pilot stage.
What we are hoping to do in collaboration with WRI is build on findings from those pilots and create a company-wide strategy or framework. The challenge before us is to figure out how you apply this learning to the variety of decisions that a company like Dow has to make—on how they use land, how they make conservation investments beyond their property boundaries, how this can influence their work to secure their supply chains, and so on.
The Nature Conservancy works closely right now with Pepsi, Coca-Cola, Ocean Spray and now the Tang division of Kraft to develop methodology and testing around ecosystem services from water and a watershed footprint approach. We are also a founding partner in The Natural Capital project, which aims to develop the methodologies to find ways to pilot a test methodologies and a variety of both organizational, landscape and political boundaries.
NH: This experience is exactly why we wanted to partner with The Nature Conservancy. They are leaders in this space. They are on the front lines. They are part of developing the models that are the best available. They are part of validating new models. They can help us develop the tools to drive business decision-making.
As part of this agreement, we will work together to understand the methodologies and see which ones work. Some of the studies that have been mentioned, in my experience, are more valuable as public policy tools and less valuable for company decision-making. I believe there is a step needed here to build on existing work to create more useful tools for company decision making.
And we expect this work going to position us to be able to set a goal a few years out that is highly meaningful and highly impactful to help lead to very positive conservation measures and good economic outcomes for the company as well. And when Dow builds a program around goals and methodologies that are accepted within the company, we get highly accelerated implementation that delivers big results. When you look at our 2005 goals and our 2015 goals, you’ll see that we deliver big because when we decide to do something, because we do it in a highly coordinated fashion across the whole enterprise.
Editor’s Note: For readers that want to learn more about work to date on economic valuation of ecosystem services, CEF recommends:
- 2010 “TEEB” report on “The Economics of Ecosystems and Biodiversity Report for Business”
- The Millennium Ecosystem Assessment’s “Ecosystems and Human Well-Being: Oportunities and Challenges for Business and Industry”
- WRI/WBCSD Corporate Ecosystem Services Review: Guidelines for Identifying Business Risks & Opportunities Arising from Ecosystem Change
- WBCSD’s publications on Corporate Ecosystem Valuation
- Business for Social Responsibility’s “Measuring Corporate Impact on Ecosystems: A Comprehensive Review of New Tools&rdquo
- CEF’s Show Me the Money: Demonstrating Green Business Value to Skeptics