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Salmon take advantage of a fishway funded by hydroelectric company BC Hydro as part of its effort to promote environmental sustainability. (Photo: Stephen Watson/BC HYDRO)
WASHINGTON – Industry groups from manufacturing to mining have been outspoken critics of climate legislation in Congress, saying proposed measures to cap carbon emissions are bad for business. But environmental experts are quick to point out that if companies accounted for the cheap benefits afforded by Mother Nature, they would be in serious debt.
In order to appeal to the corporate sensibility, players in the environmental field have started to reach out to business managers in their own terms – dollars and cents – to illustrate why protecting the environment makes economic sense.
Three natural resource experts talk business, and explain what concepts like “ecosystem services” mean for the economy and the environment:
Money talks,
nature calls
How environmental problem solving
and economics are co-evolving
The awarding of this year’s Nobel Prize in economics to Elinor Ostrom for her work on managing common resources is a nod to the growing need to look at environmental problems from an economic perspective – and vice versa.
While the interests of nature and business have long seemed at odds, more research has focused on how to address environmental protection in monetary terms.
Valerie Luzadis, a professor at the SUNY College of Environmental Science and Forestry, said the concept of “ecosystem services” – which refers to benefits derived from healthy natural systems – provides a new lens for examining issues of sustainability.
“It is a different way of framing the question: How do we bring together business and the environment?”
Luzadis explained that a more traditional approach to environmental economics is rooted in theories like marginal utility, which compares costs and benefits based on their worth in dollars. “Simply using supply and demand narrows the focus and overlooks complex ecological problems.”
She said the “ecosystem services” framework provides an inroad for those who recognize that the value of natural resources is “not just profit.” The challenge, added Luzadis, is that many companies have yet to make that leap.
“One of the things I’ve seen is a trend for businesses to focus on how sustainability has opened the door to launch new products and services that have less impact on the environment.”
While redesigning products was a first step, Luzadis said, “I think we may have gone as far as we can go in that direction. Now it is just business as usual, consumption as usual, it does not take into account the bigger picture, a purpose for organizing ourselves in order to sustain life.”
The developing carbon market is an example of how an ecosystem service – the ability of plants to absorb carbon – can translate to business practice. A provision within the climate bill introduced by Sen. John Kerry, D-Mass., and Sen. Barbara Boxer, D-Calif., on Oct. 1, proposed a cap-and-trade system that would allow industries to buy or sell pollution permits, and an offset program that would compensate farmers and landowners for using responsible agricultural practices and planting trees.
If implemented, the system will test how successfully the free market appraises resources that have value beyond net worth. “The hope is that as a decision-making framework, this new idea provides ways of moving forwards,” said Luzadis.
The Nature Conservancy
Bottom line: Scientist Robert McDonald said companies in every sector depend upon natural functions, from water purification to photosynthesis, but these services are often invisible to business managers. “Most companies start getting motivated when they do the math and realize that there is a threat to the bottom line,” said McDonald.
He said organizations like the Nature Conservancy have been reaching out to businesses, particularly in the agricultural sector, to help them make the connection between land stewardship and sustainable growth.
Strategy: While the Nature Conservancy has employed the principle of “ecosystem services” in its land protection efforts, McDonald said the organization prefers not to use such dry terminology. “We talk about human well-being. I think that resonates a lot more with folks.”
He added that while economic justifications can add heft to an argument for protecting land, the approach could inadvertently narrow the focus to a particular facet of an ecosystem, rather than looking at the whole.
Outlook: New terminology often reflects a new way of thinking about the world, said McDonald. “It sounds like hype, but it’s kind of true: The business-interests of companies can encourage them to do the right thing.” He noted that Coca-Cola Co. has gotten involved in water issues in China because the company needs a clean source to bottle its product.
But because services like water are relatively inexpensive, responsible use is usually an afterthought. The polluters upstream from Coke had little incentive to reform until a global corporation stepped in.
“That is why the human element is important,” said McDonald, explaining that when left to its own devices, the market favors services that maximize productivity. “Companies tend to facilitate certain processes, domesticating nature, selecting for a certain ecosystem services and letting others go by the wayside,” he said.
The World Resource Institute
Bottom line: As human actions rapidly change natural systems around the globe, ecosystem-program director Craig Hanson said business managers need to ask: “What does it mean for the bottom line, and what do we do about it?”
President Jonathan Lash said understanding ecosystem services helps companies quantify their inputs from and outputs to the environment, providing perspective on the long-term effects of resource management. Addressing a group of business representatives, Lash said, “If you are interested in green washing, just write up a biodiversity policy.”
Strategy: To encourage businesses to recognize their ecological impacts, Hanson helped develop the “Corporate Ecosystems Service Review”, a set of guidelines for managers who want to negotiate better terms with Mother Nature.
The program, which Hanson said has been downloaded more than 20,000 times, addresses all aspects of business, from spending decisions, to operating procedures, to product development.
Outlook: Lash explained that corporate leadership is essential given the implications of climate change. In 2001, United Nations Secretary General Kofi Annan called for a global consortium of experts to evaluate the health of the planet. The Millennium Assessment of Global Ecosystems, released in 2005, stated that two-thirds of the natural resources and processes that humans depend upon are at risk.
“It’s simply not a sustainable trend,” said Lash, pointing out that if the Federal Reserve released a similar report, showing that the majority of economic indicators were down, there would be panic.
The Bureau of Land Management
Bottom line: Social scientist Robert Winthrop explained that his agency manages nearly one-quarter of the landmass in the western United States, and serves as the government’s landlord in leasing public land to mining interests. In order to ensure that the nation’s resources are used responsibly, Winthrop said, “all efforts to help business become better informed about the environmental costs and benefits of their actions are positive.”
Strategy: Winthrop said the term “ecosystem services” suggests that the material value derived from a natural resource is more important than the health of an ecosystem in its own right, and that agency does not try to assign dollar values to natural processes.
“The effort to translate ecosystem conditions into human benefits that can then be weighed against other human benefits,” said Winthrop, “is pretty new.”
But he said this fall, the agency is beginning a project in the San Pedro watershed in southeast Arizona to examine whether calculating ecosystem values and using them in a decision-making capacity makes sense.
Outlook: Compared to the relatively simple calculation for estimating the economic output from drilling in a certain place, Winthrop said global warming has introduced complex variables to the process of assessing natural resources: “How do you express a dollar value for effective climate mitigation?”
But Winthrop said as the concept of “ecosystem services” takes root, federal agencies will become more involved to make sure climate change is factored into natural resource management. “If we cannot even figure out good ways of weighing each of our actions, we’re never going to solve the overarching problem,” he said.