TEEB Report Released: The Economics of Ecosystems and Biodiversity for Water and Wetlands

Recently, The Economics of Ecosystems and Biodiversity (TEEB), a "a global initiative focused on drawing attention to the economic benefits of biodiversity" released its report The Economics of Ecosystems and Biodiversity for Water and Wetlands (2013). According to the executive summary, this 84-page report available here, released for the U.N.'s International Day for Biodiversity, discusses the following:

[t]he “nexus” between water, food and energy has been recognised as one of the most fundamental relationships and challenges for society. Wetlands are a fundamental part of local and global water cycles and are at the heart of this nexus, providing numerous ecosystem services to humankind. Nonetheless, wetlands continue to be degraded or lost and, in many cases, policies and decisions do not sufficiently take into account these interconnections and interdependencies. However, the full value of water and wetlands needs to be recognized and integrated into decision-making in order to meet our future social, economic and environmental needs. Using the maintenance and enhancement of the benefits of water and wetlands is, therefore, a key element in a transition to a sustainable economy.

TEEB Report Released: Natural Capital at Risk: The Top 100 Externalities of Business

This month, The Economics of Ecosystems and Biodiversity (TEEB), a "a global initiative focused on drawing attention to the economic benefits of biodiversity" released its report Natural Capital at Risk: The Top 100 Externalities of Business(2013). According to the executive summary, this 43-page report available here, discusses the following:

Natural capital assets fall into two categories: those which are non-renewable and traded, such as fossil fuel and mineral “commodities”; and those which provide finite renewable goods and services for which no price typically exists, such as clean air, groundwater and biodiversity. During the past decade commodity prices erased a century-long decline in real terms, and risks are growing from over-exploitation of increasingly scarce, unpriced natural capital. Depletion of ecosystem goods and services, such as damages from climate change or land conversion, generates economic, social and environmental externalities. Growing business demand for natural capital, and falling supply due to environmental degradation and events such as drought, are contributing to natural resource constraints, including water scarcity. Government policies to address the challenge include environmental regulations and market-based instruments which may internalize natural capital costs and lower the profitability of polluting activities. In the absence of regulation, these costs usually remain externalized unless an event such as drought causes rapid internalization along supply-chains through commodity price volatility (although the costs arising from a drought will not necessarily be in proportion to the externality from any irrigation). Companies in many sectors are exposed to natural capital risks through their supply chains, especially where margins and pricing power are low. For example, Trucost’s analysis found that the profits of apparel retailers were impacted by up to 50% through cotton price volatility in recent years. Economy-wide, these risks are sufficiently large that the World Economic Forum cites ‘water supply crises’ and ‘failure of climate change adaptation’ along with several other environmental impacts among the most material risks facing the global economy.

This study monetizes the value of unpriced natural capital consumed by primary production (agriculture, forestry, fisheries, mining, oil and gas exploration, utilities) and some primary processing (cement, steel, pulp and paper, petrochemicals) (see Appendix 3) in the global economy through standard operating practices, excluding catastrophic events. For each sector in each region (region-sector), it estimates the natural capital cost broken down by six environmental key performance indicators (EKPIs), and a ranking of the top 100 costs is developed from this. It also estimates the 20 region-sectors with the highest combined impacts across all EKPIs to provide a platform for companies to begin to assess exposure to unpriced natural capital, both directly and through supply chains. In doing so it allows investors to consider how their assets may be exposed. It also highlights sector-level variation in regional exposure to impacts to identify opportunities to enhance competitive advantage. It does not attempt to assess the rate at which these costs may be internalized, and whether sectors are able to adapt, but attempts to give a high-level view of where natural capital risk lies, and what this could mean for business profitability in a more sustainable regulatory environment.

TEEB Report Released: Organizational Change for Natural Capital Management: Strategy and Implementation

This month, The Economics of Ecosystems and Biodiversity (TEEB), a "a global initiative focused on drawing attention to the economic benefits of biodiversity" released its report Organizational Change for Natural Capital Management: Strategy and Implementation (2013). The 47-page document available here, discusses the following:

Organisational Change for Natural Capital Management: Strategy and Implementation is based on data from 26 businesses across nine industrial sectors (60 per cent of them with revenues of over US$10 billion), which are implementing behavioural and organisational changes to promote natural capital management.

The main findings of the study include:

• A small group of pioneering companies, who recognise the growing business case for NCM, are moving NCM forward and expect to build it deeply into their business within the next 3 years.

• Their rationale is that they will be much better positioned than other companies to manage and thrive in a resource-constrained world that could have serious implications for business in 3-5 years.  

• Delaying the measurement and management of natural capital carries a significant business risk for companies regarding the availability of key raw materials and maintaining competitive advantage.  

• In particular, the availability of freshwater, renewable energy, climate regulation, fibre and food were identified as the most important natural capital risks in the next 3 -5 years.  

• Current barriers to change for business on NCM are at the macro-level (e.g. lack of government regulation and customer demand) and organisationally. In particular challenges at the organisational level include establishing the relevance of NCM to the business, and a lack of harmonised methods to measure, prioritise and integrate natural capital into business decision-making.

• NCM is a business innovation that changes business processes, practices, systems and strategies. It is therefore a major driver of organisational change.