Make Money by … Saving the World: The Biosphere Economy

The TakeAway: We can flip the equation of economic growth through environmental damage, to global prosperity through ecological healing.

Evidence of human assault on our fragile biosphere abounds this year: Pakistani floods and Russian drought and wildfire (all related to climate change); the BP oil spill; and on and on.  On top of the immediate damage, these disasters create long-term threats to the ability of our world’s ecosystems and biodiversity to support life and abundance.  To counteract them, a number of initiatives have sprouted to prove that natural limits can spur innovation and growth—and profitability.

The “Biosphere Economy” proposes to infuse natural capital considerations into economic activity, drawing upon insights that flow from ecosystems and biodiversity science.  Some consider the Biosphere Economy a paradigm shift on par with the Industrial Revolution—with profound implications for business leadership, strategy, and operations. According to John Elkington, one of the Biosphere Economy’s chief proponents, “Now we see growing interest in pricing the services ecosystems deliver, such as flood control and rainfall regulation—and in creating the mechanisms whereby related payments can be made.”

The Biosphere Economy transcends the traditional divide between the “public” and “private” sector because it focuses on resources from the Commons that affect everybody, across professional, industrial, and geographic borders.  “This time the economy will be working with the grain of the biosphere, rather than against it,” Elkington says.  “The business opportunities created by the shift will be almost unimaginably huge.”

Elkington’s not alone:  A recent McKinsey study declared biodiversity “the next environmental issue for business”, on par with climate change.  McKinsey’s online survey of 1,576 business executives found that “a majority of executives, 59 percent, see biodiversity as more of an opportunity than a risk for their companies.”  Beyond bolstering corporate reputations, respondents pointed to the value of preserving biodiversity and developing new ideas and products from renewable energy sources.

Although climate change and sustainability issues still rank much higher on the list of corporate concerns, a majority of executives see increasing threats to biodiversity and link corporate actions to the overall threat.  Those working at food and beverage, pharmaceutical, and energy companies, as well as hospitals, were more likely to view water scarcity, infectious disease, and food security as major risks to both biodiversity and business.  Conversely, awareness of these risks can be transformative, stimulating “collaborative, industry-wide approaches” to understanding the problem and “exploring potential solutions”.

The UN declared 2010 the International Year of Biodiversity, which kicked off a number of initiatives to raise awareness and promote action.  Last month, a group of investors, asset managers, and NGOs gathered in London for the First Global Business of Biodiversity Symposium.  Jointly organized by Volans and UNEP Finance Initiative and hosted by F&C Asset Management, participants explored ways of advancing the Biosphere Economy agenda for financial institutions and investors.  A centerpiece of the event: The Economics of Ecosystems and Biodiversity (TEEB) for Business Study, led by Pavan Sukhdev, a senior executive on leave from Deutsche Bank to head the UNEP Green Economy Initiative.  TEEB’s efforts, along with groups such as Trucost, calculate the financial costs of environmental impacts associated with business operations, investments, and supply chains.

“It’s not just about economics, it’s very much about equity,” said Sukhdev.

In addition, the meeting involved three breakout workshop sessions devoted to business education, corporate valuation and transparency, and new risk models.  A follow-up report summarizes the results of these discussions, and organizers intend to convene another meeting in early 2011 to help participants refine and further the action agenda while involving “other actors and platforms”.

Albert Einstein famously cautioned: “We can’t solve problems by using the same kind of thinking we used when we created them.”  Yet this is exactly what TEEB and the Biosphere Economy propose to do: flip the traditional equation of economic growth through ecological destruction into a new calculus of ecological healing to fuel prosperity.

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2 Responses to Make Money by … Saving the World: The Biosphere Economy

  1. Cheryl Eaton says:

    Nice post, and nice to hear that the threat to biodiversity is gaining some mindshare. Can you shed some light on why this is rising as a top concern for executives? A simple sense of corporate responsibility? Opportunity loss? Fear of a larger system breakdown? PR opportunity? All of the above?

  2. Bill Baue says:

    Cheryl,

    Thanks for your comment — and for reading The Murninghan Post.

    My own sense is that corporate executives are starting to look at biodiversity and ecosystem health through a traditional risk / opportunity lens. Clearly, the risk cuts straight to the beginning of supply chains — the raw materials and natural conditions necessary for business to continue operating — which are under threat from environmental degradation (caused to a large degree by business operations.) The flip side, opportunity, is the promise of an entire economy sprouting to support ecosystem health and biodiversity. But we need to remain vigilantly aware of the unintended consequences — such as happened with Ben & Jerry’s Rainforest Crunch, which sought to support livelihoods in the rainforest from nuts there — but the flavor got so popular so quick that they couldn’t be harvested sustainably.

    So while I welcome the Biosphere Economy, I also continue to cast a critical eye lest it apply the same rapacious capitalistic tendencies that created the ecological problems to begin with.

    Best,
    Bill

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