What are Corporate Ecosystem Services and why are they important?

Joe Bull & Yohan Hill

 

Posted in: Guest Writers, Reporting, Speaking Out

What are Corporate Ecosystem Services and why are they important?

October 18, 2011

When faced with risk, the Ostrich ( Struthio camelus) is famously believed to bury its head in the sand. Whilst this belief might not be strictly accurate, an ostrich may certainly try to avoid detection by lying lowin response to a possible threat, a strategy not dissimilar to that of some major companies and industrial sectors in response to the challenges posed by major ecological risks.

The sustainability challenges facing CSR and sustainability managers today are complex and wide ranging. These specifically include climate change and growing water scarcity, due to population growth, economic activities and other drivers. However, a threat that is far less understood, but perhaps poses the greatest challenge to business, has to do with the growing pressure on ecosystems and the services they provide. What exactly is this threat; why is it important to business; and how can it be managed? This article is intended to open discussion around these questions and provide a framework for addressing this challenge.

What are Corporate Ecosystem Services and why are they important?

As far as business is concerned, what we are really talking about are those services provided by ‘landscapes and living things’, also known as ecosystem services, on which businesses rely. All businesses, to some degree, use or somehow influence ecosystem services. Landscapes, and the multitude of things that inhabit them, are part of our fundamental natural resource base. All industries use these resources, whether directly or indirectly, and so it is important to understand how to optimise their management. It is, also, crucial to understand what business risks may be associated with them – these are varied depending on the particular company or industry being analysed.

‘Corporate Ecosystem Services’ can thus be thought of as referring to the specific dependencies of companies on biodiversity and ecosystem services, and the related management of specific risks and potential opportunities associated with them.

One significant aspect of the risks posed to the natural resource base comes from habitat destruction and a loss in the degree of variation of life forms; typically referred to as ‘biodiversity loss’. The greater this loss of overall variety, the harder it is for those natural resources to replicate themselves and ensure their availability for ongoing future use. Further, there are an increasing range of regulatory and reputational risks worldwide associated with the destruction of natural habitats (see our recent CCB article on theOutcomes and Implications of COP-10 CBD, Nagoya, Japan).

It is perhaps the case, for many companies, that some of the issues related to ‘Corporate Ecosystem Services’ (such as improving water quality and water provision or promoting carbon reduction) are already incorporated into existing sustainable business practices. However, few companies truly understand, much less have a comprehensive strategy for governing the wider risks and opportunities associated with the following key aspects:

Key Aspect Risks and Opportunities
1. Supply chain impacts linked to new or existing products and services, e.g.:
  • Risks associated with a reliance on raw materials such as palm oil, cocoa, tropical timber or fish
  • Risks and opportunities associated with the availability and use of genetic materials to develop new products (e.g. for the pharmaceutical industry)
2. Compliance with related legislation and international conventions on biodiversity and ecosystem services, e.g.:
  • Legislation governing the protection of natural habitats, such as the EU Habitats Directive
  • The Nagoya Protocol on Access and Benefit Sharing, and its implications for bio-prospecting
3. Managing the reputational risks associated with ongoing commercial activities that have an impact on biodiversity and ecosystem services, e.g.:
  • Activities such as logging, forest clearance for agriculture or mining affecting high conservation value forests or endangered species
  • Development of greenfield, or even brownfield, sites
4. Issues around sharing natural resources with other users, e.g.:
  • Open access resources, such as fisheries
  • Industrial activity in landscapes that have high potential for eco-tourism or are inhabited by unique wildlife
5. Optimising the efficiency and reliability of supply of natural goods and services, e.g.:
  • Managing agricultural products, like food crops, for optimal yields and minimal environmental impact
  • Sustainable forestry management techniques
6. Ensuring the reliable direct provision of important ecosystem services, e.g.:
  • Protection and enhancement of local watersheds
  • Promoting the health and resilience of natural pollinators
7. Potential investment opportunities, e.g.:
  • Risks associated with potential investments, loans and project finance deals (e.g. for financial institutions governed by the Equator Principles)
  • Opportunities to invest in species/habitat banks and biodiversity offsets, as a means of preserving biodiversity ex-situ
  • Payments for Ecosystem Services (PES), e.g. to incentivise and promote better land and crop management amongst farmers and landowners

How should companies respond?

As is the case for ‘Carbon’ and ‘Water’, ‘Corporate Ecosystem Services’ can sit comfortably as a component of an existing CSR or Sustainability Strategy, and/or under the framework of an Environmental Management System. There are perhaps five key stages in approaching the issue, which are comparable to classic project approaches (such as the ‘Plan-Do-Check-Act’ cycle used in the ISO standards) and existing ecosystem-specific approaches (most notably, the WBCSD Guide to Corporate Ecosystem Valuation):

(1) Based upon in-house/external expertise, identify the risks and opportunities presented by business impacts upon ‘land and living things’. These might include some of the examples given above or other more specific risks and opportunities related to the particular business model in question;

(2) Develop policies, procedures and initiatives relating to any significant risks and opportunities identified. For instance, a number of large extractive companies have developed “no net loss of biodiversity” policies, or even “net positive impact” policies, which are associated with industrial business activities. Once policies have been developed, businesses must also determine how progress/performance will be measured;

(3) Implement policies, procedures and initiatives either on a number of key projects, for particular high-impact business units or across the entire business;

(4) Measure and monitor progress against each risk and opportunity. For instance, management of landscapes might be measured by ‘area’ – management of living things by ‘number of species’ or ‘genetic variety’;

(5) Using these measures, communicate on policies and initiativesto regulators and other key stakeholders, both internal and external to the business.

In recent years, we have seen the metaphorical Ostrich take its head out of the sand, and begin to square up to the corporate challenges of Carbon and Water. The same needs to be achieved in the arena of Corporate Ecosystem Services. This will increasingly happen as the issues are ‘translated’ into a language that allow CSR and Sustainability managers to effectively identify, understand and address the challenges emerging in this area, and thereby manage some important strategic risks.

Joe Bull currently holds a full time research position at Imperial College, London. Joe’s main area of expertise is in business and biodiversity, and in particular, landscape-scale conservation strategies. Prior to this he worked for a number of years as an environmental consultant, advising the private sector on ecological management and climate change issues. Joe has an MSc in Environmental Technology from Imperial College, and is a qualified environmental auditor.

j.bull10@imperial.ac.uk

Yohan Hill is a Senior Consultant at Corporate Citizenship with extensive experience advising companies on corporate sustainability strategy, sustainability reporting, and wider corporate responsibility and sustainability issues. He holds an MSc in Environmental Technology from ImperialCollegeLondon, and has over 8 years experience in this sector.

yohan.hill@corporate-citizenship.com

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