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Our Insights 1 Nov 2009

The Biodiversity Challenge for Business – 2010 is International Year on Biodiversity, but what might it mean for business?

By Jennifer Biringer

Biodiversity has been the Cinderella among environmental issues, with the CEOs of even some of the world’s biggest corporations comfortably confident that it has little—if anything—to do with their day-to-day preoccupations.

Except, of course, where their operations directly impact rainforests, temperate wetlands or coral reefs, as in the case of a food company using palm oil whose production has involved the clearance of virgin forest. Most business leaders assume that the protection of species and genetic diversity is a matter for governments. And they are not wrong in making that assumption. But as the evidence of biodiversity erosion mounts and the sense of government failure in many parts of the world begin to press in, the risk grows that business will be back in the spotlight.

Attention will focus both on corporations and their supply chains as agents in biodiversity destruction but also, perhaps more importantly long term, as one of the few agents of change with the capacity to come up with innovative new solutions to a challenge that has undermined so many past civilizations. So it is worth reviewing why biodiversity is both a legitimate concern for corporations and those who regulate them—and why it is unlikely to remain the Cinderella for much longer.

On the political front, late in 2009 governments took stock of their progress in meeting a target agreed by Heads of State at the 2002 Johannesburg Summit on Sustainable Development “to achieve, by 2010, a significant reduction of the current rate of biodiversity loss at the global, regional and national level, as a contribution to poverty alleviation and to the benefit of all life on Earth”. In the world of politics, this was an important session. The original target had been agreed as part of a strategic plan under the UN Convention on Biological Diversity, one of the cornerstone agreements of the 1992 Rio Earth Summit—which, in turn, marked a turning point in how countries governed the global commons amongst rapid globalization.

A world in decline

Few of the political leaders present can have been reassured by what they heard—and those that were do not deserve re-election. If there had been any remaining doubt on the importance of the biodiversity agenda, the recent UN Millennium Ecosystem Assessment had already confirmed that biodiversity is the bedrock on which all human life depends—and, strikingly, warned that about 60% of identified ecosystem services (such as provision of freshwater or pollination) are being degraded or used unsustainably.

On the value front, the perceived importance of—and valuations attached to—these ecosystem services is likely to increase as population and consumption-related pressures grow. But it is worth asking how are we doing on the biodiversity targets governments have set to date? In 2010, the Convention on Biological Diversity (CBD) experts will release their third Global Biodiversity Outlook. The last assessment, in 2006, found that while the number and size of protected areas is increasing, we still are well below the 10% representation targets needed across different ecosystem types.

So what does this mean? Well, the evidence suggests that biodiversity is declining severely across the board—forests, for example, have been declining at the rate of 6 million hectares a year since 2000, average hard coral cover in the Caribbean declined from 50% to 10% within the last three decades, and mangroves 35% within the last two. A survey of 3,000 wild species from 1970 to 2000 showed a consistent decline of 40% in average species abundance with 50% reductions of inland water species and 30% decline in inland and marine species.1

If there were such a thing, for the board of Earth, Inc. this would mean that we humans are reducing biodiversity—and the related forms of natural capital—at a rate 1,000 times greater than background rates typical of the planet’s past. Even a world that allowed the sub-prime version of capitalism to run riot ought to be more than a little concerned faced with such trends. Indeed, there is an increasingly urgent imperative to mainstream biodiversity into the policies, plans and budgets of both the public and private sectors.

The business angle

The positive aspects of the business contribution to all of this are both acknowledged and, in some cases, celebrated. Refreshingly, the 2006 Biodiversity Outlook found that while a reduction in the rate of biodiversity loss would require “unprecedented additional efforts”, it is more than possible for certain biodiversity components in certain regions; and that principles, guidelines, and tools have already been developed, often with the active support of the private sector.

The food and agriculture sector as well as the energy sector are considered to be of highest relevance—the former due to habitat change, the primary driver of biodiversity loss, as well as nitrogen and other nutrient loading—and the latter due to climate change. Hence, reducing the area of land under cultivation through “sustainable intensification” is considered the top priority. Effective land-use planning is another top priority, followed by: reducing excessive consumption especially of meat, energy, and forest products; ending overexploitation of wild resources such as fish; and the protection and restoration of ecosystems. Trade liberalization policies, implemented through the WTO‟s Doha Development agenda, will likewise cause biodiversity loss as agricultural shifts from US, Europe and Japan to Africa and Latin America and reduce forests and grasslands.

Although there have been positive private sector contributions, the response from business to these trends and calls to action over time has been decidedly mixed. Large footprint industries such as oil and gas and also mining were early movers on the biodiversity agenda, due to a visibly direct impact on landscapes and their need to secure a license to operate. As a consequence companies like Shell have invested in biodiversity assessments and more recently biodiversity offsets.

Likewise, the food production sector—biodiversity linkage came into focus in a high-profile way with early campaigns against McDonald’s for the purchase of beef raised on former rainforest land, and more recently for the soy used to feed its cattle. These and other cases helped spur development of better agricultural management practices to reduce environmental impacts. And in the lead up to the COP15 conference on climate change, we saw some government and business leaders increasingly acknowledging the ways in which the climate change agenda could drive a re-evaluation of the services that natural habitats play in regulating carbon cycles and building resilience.

But are there meaningful statistics on where business thinking is on all of this? Yes, we believe so. While sustainability experts agree that biodiversity conservation is a top priority, as seen most recently in SustainAbility and Globescan’s 2009 Sustainability Survey of nearly 1,700 experts across multiple sectors, with 82% agreeing that it is very or somewhat urgent,2 generally business does not appear on the whole to rank it as a significant concern.

More specifically, of the 50 leading sustainability reporters from 2006, SustainAbility found that only three made an explicit mention of biodiversity as a “material“—that is, financially significant—concern. Johnson & Johnson is a notable exception, having committed to enhancing biodiversity conservation across 100% of its facilities by 2010, and having also worked with Harvard University to make the case for human health’s dependence on biodiversity.

Will climate swamp biodiversity?

In general though, we see lack of interest. Some of this may be due to the fact that biodiversity as an overarching concept has already been translated into tangible sub-categories such as sound agricultural practices, water conservation or reduction of waste. Any such integration, however, has likely come at a cost in many respects, where the bulk of attention is on efficiency of resource use—where the quantifiable business case can easily be made.

There seems to be a growing danger that environmental priorities such as climate change, which have increasingly strong quantitative targets and regulatory dimensions, are drowning out other crucial, qualitative elements of the sustainability agenda. So is biodiversity, which was higher on the agenda at the time of the 1992 Rio Earth Summit, now losing out? We believe that this is now a real risk.

The question is an important one, given that biodiverse systems are a crucial underpinning for addressing climate change—and for creating wider resilience to its impacts. Indeed there are “co-solutions” that can mitigate climate change and value biodiversity, as has been shown for example in studies by Dr. Borivoj Sarapatka that more biodiverse pastures contain more soil carbon—species-rich grasslands had roughly double the carbon of their species-poor counterparts. Likewise, Dr. G. Phil Robertson’s work at the W.K. Kellogg Biological Station in Michigan found alignment between the greatest biomass, biodiversity, carbon sequestration, and lifecycle greenhouse gas balance when comparing prairie systems.

More significantly still, in terms of long term business opportunities, biodiversity can serve as a “solution pool” from which new genotypes better adapted to new environments can arise. Very recently, on the downside, the International Institute for Environment and Development (IIED) found that developing country farmers are losing traditional varieties due to corporate control of the seeds they plant, and that this loss is taking away crucial climate change resilient traits that would help them better adapt to droughts and pest infestations.

Thinking positive

On the upside, we see some cause for optimism in initiatives like that launched in 2008 by the World Business Council on Sustainable Development (WBCSD) and World Resources Institute (WRI), in the form of the Corporate Ecosystem Services Review—which provides business managers with a means of identifying and managing risks and opportunities arising from dependence and impact on ecosystems.

A variety of tools has also been developed in recent years, the most recent by WBCSD with its Ecosystem Valuation Initiative to enable quantification of ecosystem risks and opportunities in order to further embed biodiversity values into existing financial and business planning tools. This tool is being road-tested by 10-15 WBCSD member companies, with results due to be reported at the 2010 CBD COP in Nagoya, Japan.

We expect more to be made of the value of biodiversity as part of the Green New Deal work being pushed by the United Nations Environment Programme (UNEP), whose executive director Achim Steiner has argued that carbon sequestration is only one component of a forest’s worth, referring to a UN-backed study indicating that tropical forests provide services worth an estimated $6,120 per hectare (2.47 acres) a year such as food, building materials, water purification or opportunities for tourism. “Don’t just look at a forest as a watershed, or a carbon sink, or as helping biodiversity, or a tourism attraction” he encouraged. “Put them all together and then make a cost-benefit analysis.”

Longer term, however, we are hopeful that a new breed of scientists, innovators, entrepreneurs and investors will emerge to drive forward new technologies, new business models and, most fundamentally, a new market paradigm. Consider, for example, Craig Venter’s trawling of the oceans for new genes for such applications as hydrogen production and synthetic biology, made even more interesting by his $600m deal with Exxon on algal biofuels. And then there is Janine Benyus’s work on biomimicry, which is worth a chapter in its own right as a source of novel, potentially breakthrough ideas on materials, products, processes and management systems.

So while the biodiversity glass may seem half empty to some—and in danger of draining at an even faster rate as the world’s population pushes towards 9 billion people by mid-century—we choose to see it as still more or less half full. And with the potential to recharge substantially if we can encourage a much more entrepreneurial mindset among biodiversity champions.3 With our optimistic hats on, we see it as at least a possibility that we stand on the threshold of the equivalent of the Cambrian explosion, though this time it will be new, climate-friendly and biodiversity-restorative mindsets, technologies and business models that will explode across the face of what is still in very great danger of becoming a genetically impoverished planet.

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The Art Of Alignment

Sustainability & Financial Transparency

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