By Sissel Waage and Kit Armstrong, Business for Social Responsibility.
As part of the Corporate Eco Forum’s Valuing Natural Capital Initiative, we are making an effort to showcase other key organizations working with business to elevate the concept of natural capital and facilitate the sharing of best practices and forward thinking. To that end, we’re excited to share an excerpt from the recently released report by BSR’s Ecosystems Working Group, “Seeing the Future Business Context: Scenarios of How Ecosystem Services Issues May Play Out and Affect the Private Sector.” Which of these scenarios ultimately plays out will very much depend on leading companies getting out in front, as the companies mentioned in this report, and those leading our Valuing Natural Capital Initiative, are already demonstrating. To learn more about how your company can get involved, please contact Amy O’Meara at email@example.com
In light of all the uncertainties surrounding ecosystem services concepts, we felt it would be valuable to develop a set of scenarios that would capture this issue’s range of possible evolutions. The scenarios are intended to help corporate decision-makers, as well as those in other sectors, consider options for positioning themselves on ecosystem services in both the short and long term.
Based on survey responses, interviews, and brainstorming discussions over the course of the two-day roundtable convened by BSR’s Ecosystem Services Working Group, we developed three scenarios. Inspired by past “transformative scenario planning” work, each scenario was given a short evocative name that was resonant with sights during a field trip to the headwaters of the Florida Everglades during BSR’s October 2012 roundtable meeting.
Scenario 1: Eagle Hunt
Action from regulators, public agency managers, pension fund managers, insurance company leaders, activists, and others drive a growing set of uncoordinated, ad hoc activity, requests, and even requirements on biodiversity and ecosystem services that ultimately permeates all aspects of corporate performance measures, reporting, accounting, and stakeholder engagement. It is driven by demands for disclosure and rapid dissemination of information through social media, among other methods. Corporate decision-makers are reactive and thus find themselves presented with a set of challenging circumstances and an approach that can be characterized as moving from one burning platform to another.
The years between 2012 and 2017 are marked by a growing number of extreme weather events, with major metropolitan areas around the world shut down for weeks at a time. Clean up and rebuilding requires considerable investment following increasingly ferocious hurricanes, cyclones, or other natural disasters. At the same time grain prices and other agricultural commodity prices rise, as yields drop globally due to various weather events.
In reaction to the emerging situation, both governments and citizens demand investment in natural (or green) infrastructure—in the form of protections afforded by coastal mangroves, large swaths of forest that can help to regulate water flows (as opposed to soil erosion which causes deluges) while also offering natural controls on crop-destroying insects (in the form of healthy bird populations), and the other benefits associated with well-functioning systems.
In response, Brazil, China, Ghana, Peru, South Africa, South Korea, Vietnam, and other jurisdictions—possibly including the EU and United States—add stringent regulations focused on restoring and maintaining ecosystem services. These regulations focus on (1) regulating services, as defined by the Millennium Ecosystem Assessment to include climate change, flood regulation, and other services as well as (2) supporting services, which includes nutrient cycling among other services. These regulations are based on specific, desired ecological states that are commonly calibrated to estimates from preindustrial periods.
In this scenario, corporate siting of, and licensing for new projects and facilities, as well as expansions of existing sites, becomes much more complex and arduous. Maintaining corporate operations and supply chains is increasingly difficult, particularly in areas deemed by governments (or other influential stakeholders) as critical to ensuring the flows of important ecosystem services in particular geographies. Companies increasingly have to gather a significant amount of new information to respond to inquiries from regulatory agencies in the United States and Europe, as well as by activist NGOs in developing nations.
Globally, pension funds and insurance companies demand more corporate disclosure related to biodiversity and ecosystem services impacts and dependencies, particularly requesting:
» full carbon accounting, including the effects of construction on soil carbon (as well as water filtration and recharge rates);
» water use, water sources, and availability over time, based on both historic and climate-change-calibrated projections of future above- and underground sources;
» biodiversity presence and impacts over time, in terms of genetic diversity, habitat, and species, as well as
» site disturbance and effect on water filtration, flood control, and erosion, among other variables.
Stakeholders are increasingly assembling all of these variables within spatially explicit computer models that can factor in climate change projections over time to assess full risk profiles and prompt discussions about how to mitigate risks. New players begin to engage to refine analyses, such as Sustainalytics through MSCI, PwC, Global Footprint Network, Harvest Mark, Historic Futures’ STRING software, and ARAVO. This work is increasingly covered by Bloomberg and leverages “cloud computing” thereby allowing multiple users around the world to access information easily and flexibly.
Investors and insurance companies hire geographic information systems (GIS) experts. Businesses partner with Microsoft’s Bing and Google Earth to offer online maps of select ecosystem services around the world, such as areas with significant carbon sequestration, key areas of water filtration, underground aquifers, among others. These maps are based on credible sources of coarse-grain information. Online maps are linked to data sets that have been put together using National Aeronautics and Space Administration (NASA) and European Space Agency (ESA) satellite data and remote sensing, as well as by a range of academic institutions that can offer more fine-grained analysis that has been ground-truthed. This work has been made possible by significant donations of funds from information technology industry billionaires’ philanthropic foundations, which begin investing in cloud computing for biodiversity and ecosystem services monitoring and rapid response.
Investors begin to divest from companies that they perceive will be unable to manage risks presented by ecosystem services impacts and dependencies. The identification of specific companies draws on years of work within the socially responsible investing (SRI) domain, as well as recent industry-specific analyses, such as the Natural Value Initiative (NVI).
Activist networks (such as 350.org) increasingly link their work on specific issues to the broader set of ecosystem services and dynamic ecological systems. They leverage social media to form small, flexible, relatively flat organizations with global reach and the ability to mobilize quickly around focused actions. Online consumer information sources, such as GoodGuide.com, are partners in campaigns that ask consumers to stop buying from some companies that activists, and sometimes investors, identify as too risky for society to continue to support. Overall, activists increasingly focus on dynamics among multiple issues, rather than single issues, particularly the relationships among climate, water availability, and food. Several NGOs collaborate with technologists to create their own maps to creatively display implications of today’s corporate action on the expected flows of key ecosystem services in particular geographies over time. These visual displays of information drive large-scale consumer action buy-cotts, which translate into plummeting sales and market share for targeted companies.
In response, corporate actors must spend increasing amounts of time and money to assess their impacts and comply with new regulations and stakeholders’ requests, while staying ahead of potential impacts on sales and brand. In some areas operations are shut down, leaving a wake of stranded assets. Corporate managers find it increasingly challenging to get out in front of the issue and proactively manage ecosystem services impacts and dependencies, as well as effects on the business.
Scenario 2: Raccoon Crawl
Activity on ecosystem services continues to occur in all sectors, but there is no critical mass for large-scale, meaningful change in private sector behaviors related to ecosystem services.
Academics and NGOs continue to advocate for an expanded frame for measuring and assessing corporate impacts and dependencies on natural systems. However, there is no clear case that an ecosystem services approach offers added value or new insights. In addition, there is no consensus on the most credible and effective ways to implement such ecosystem services measurement and assessment approaches within companies. Public sector agencies continue to fund research related to the concepts, but there is no clear pathway to the uptake of research through policy or regulations.
Therefore, the cost-benefit analysis of adopting significantly expanded ecosystem services parameters and analytical approaches is not persuasive to corporate decision makers. Corporate managers make slight adjustments to their environmental and social impact assessment (ESIA) processes and life-cycle assessments (LCAs), but these changes are relatively minor in terms of time, cost, and the insights delivered.
Overall, ecosystem services concepts fade from discussion, as conceptual and institutional complexity combine with inertia and thought leaders’ inability to galvanize attention around on ecosystem services issues. The end result is that companies are not required to make any real changes.
Scenario 3: Egret Flight
Industry perceives that there is growing support for systems-focused ecosystem services assessments. In an effort to shape pathways to uptake, a critical mass of private sector firms proactively engages with public sector, NGO, and academic players—through a focused NGO- or multilateral mediated approach—to define and implement demonstrations that explore proof of the ecosystem services concept in both: (1) a data-rich site (such as in the U.S. or Europe) and (2) a site with relatively little data (such as an African, Latin American, and/or Asian site). This application of an ideal ecosystem services assessment generates discussion around the best practices, as well as an understanding of the distinction between corporate business as usual and an ecosystem services approach. It becomes clear that a systems-based approach is distinct from business as usual, but this approach requires significant supporting infrastructure, particularly in terms of data availability and spatially explicit modeling to assess and discuss trade-offs. Support for the new data and infrastructure is forged in the process as a true collaboration of multiple public, private, NGO, and academic players. Overall, the process results in pathways forward to identify and increasingly address risks as well as effectively achieve objectives important to the public, private, multilateral, and NGO sectors.
A relatively small set of corporate environmental managers across industries have been tracking ecosystem services issues for almost ten years and perceive that momentum is building in key investor, financial services, and NGO domains. The issue is moving from an emerging one to a full-fledged concept with increasingly well-defined application domains.
Over the past few years, these individuals have also been quietly spearheading small-scale pilot testing of ecosystem services concepts in their own companies. They have been trying to identify and understand the significance of any difference between current approaches to measuring, analyzing, and reporting on environmental parameters and what they may need to undertake if the most expansive approaches to ecosystems services were widely embraced.
These efforts have pointed to existing corporate environmental and social practices as the best entry point for large-scale applications of ecosystem services concepts in a company. For example, a company’s preexisting environmental or biodiversity strategy, environmental and social risk assessment processes, or continual performance improvement commitments have been used to catalyze discussion around ecosystem services. Corporate managers are, therefore, open to fine-tuning such processes and protocols to include ecosystem services parameters.
At an operational level, case studies that illustrate how integrating ecosystem services into ESHIAs can lead to new insights are assembled and published. Investor due diligence processes that include ecosystem services are particularly helpful in indicating how best practice is evolving. At the same time, case studies of applying an ecosystem services lens to site remediation highlight considerable risks and opportunities.
New in-house private sector experiments are launched, particularly where carbon sequestration, water availability, and/or biodiversity concerns exist and where stakeholders are already focused on some subset of ecosystem services issues. In these cases, ecosystem services concepts are shown to be effective in defining how a company’s practices can help the business to identify issues and assess options in productive interactions with stakeholders. Metrics and reporting measures are relevant and locally calibrated to particular ecosystems and socioeconomic settings, rather than driving toward a uniform set developed by national or global organizations.
Overall, persuasive case studies and a body of practice emerges, rather than a standardized set of metrics. A number of the pilot tests reveal a feasible pathway forward in corporate applications of key ecosystem concepts. Case studies document that such applications generate new insights on risks and opportunities and are not too costly if they are well meshed with existing corporate environmental and social processes. However, it is clear that public sector, academic, and NGO advocates of ecosystem services approaches do not have the in-depth knowledge of corporate processes to be able to identify the most appropriate and cost-effective points at which to mesh current businesses practices and potential future ecosystem services approaches.
In response, a group of these companies works with NGOs, multilateral organizations, or other entities to convene a larger set of businesses to effectively engage with public sector players, NGOs, and academics. The objective is to jointly craft an ambitious learning-laboratory initiative focused on exploration of how an ecosystem services approach could feasibly be applied in two illustrative landscapes. One would be in Europe or the United States, with access to verified, long-term data, and the second in Latin America, Asia, or Africa, with little available (and no verified) data. The pilot tests are designed to be a highly adaptive processes based on sound science. As industry steps forward to proactively gain experience with applying ecosystem services concepts in private sector settings, a set of best practices emerge.
This ecosystem services learning-laboratory process, which actively engages the private sector, is widely accepted by governments, NGOs, and the scientific community, as well as by the industry players involved. It seeds a collaborative process to encourage investment in natural or green infrastructure as well as the restoration and maintenance of ecosystem services. For example, companies that depend on reliable flows of water, or public utilities that rely upon forested watersheds for drinking water increasingly become interested in investing in land management practices that benefit their bottom line or help them meet environmental objectives. Public-private partnerships are forged and implemented.
The results are a series of demonstrations that investments in ecosystem services maintenance and restoration can make sound economic sense for companies under the right conditions. These demonstrations inform the development of well-accepted (i.e., peer-reviewed and broadly adopted in the scientific and regulatory communities) procedures to (a) identify, (b) characterize, (c) quantify or measure, (d) value (including both monetary and nonmonetary measures), and (e) assess the relative status (status quo, improving, or declining) and effects of proposed activities related to ecosystem services that had heretofore been nonexistent or incompletely developed. Overall, this work validates the importance of both bottom-up interest in using this new understanding of ecosystem services and a top-down commitment to a more holistic management approach within organizations engaging on ecosystem services.
By 2025, there is substantial capacity to perform ecosystem services assessments in the private and public sectors. A wide range of methods, models, and databases are in place to allow the measurement and monitoring of ecosystem services that provide support and detailed analysis. University programs are delivering trained professionals. Coherent government policies and supporting regulations have evolved to include or allow ecosystem services as a compliance or performance target, and supporting criteria to measure and assess ecosystem services performance are in place.
Many governments around the world have come to recognize the value of ecosystem services in their economies and integrate natural capital into their GDP calculations. The majority of the multinational companies have adopted methods to incorporate the value of ecosystem services into corporate financial accounting.
Looking back, it is evident that, in many ways, that this pathway was carved through collaborative public, private, NGO, and academic pilot testing of feasible approaches. The net result is that an approach has been developed and applied that informs landscape-scale planning to address biodiversity, water, carbon, and other relevant services; helps prioritize conservation investments; steers development away from sensitive areas; and supports companies’ efforts to improve their environmental and social decision making and outcomes.
This article originally appeared in “Seeing the Future Business Context: Scenarios of How Ecosystem Services Issues May Play Out and Affect the Private Sector,” a report by BSR.
 In the wake of Hurricane Sandy, the opportunity to use natural protective infrastructure is already emerging in the conversation. For example, as described in an Environmental Leader article: “The NYS 2100 commission, one of four panels appointed by New York Governor Andrew Cuomo in the aftermath of Sandy, issued a draft report last week proposing a number of changes to protect the area from future super storms that could impact utilities, railways, wastewater treatment, and the state’s shoreline. The commission proposed adding storm-surge barriers to protect New York Harbor and recommended adding green-infrastructure features, such as dunes, wetlands, and oyster beds, to the state’s industrial shoreline to help infiltrate, evaporate, retain, or reuse storm water.” “Developers Rethink Buildings Post-Sandy,” Environmental Leader, January 14, 2013, www.environmentalleader.com/2013/01/14/developers-rethink-buildings-post-sandy.