By Bryan Walsh TIME magazine
How much are the birds of heaven worth? How about the lilies of the field? Or clean air and water, verdant forests and untouched grassland, healthy coral reefs and lush mangroves? By the environmentalist's accounting, they're invaluable because nature has a worth all its own. But to business, untouched nature typically hasn't had a value--at least not one that could be put in a ledger.
Until now. Many greens--and a growing chorus of corporate suits--are arguing that nature in its own right provides economically valuable services that underpin business. A virgin forest is pleasant to look at, of course, but it also prevents soil erosion and improves water quality at no cost--valuable if you happen to own a beverage plant downstream that depends on clean water. That same forest might provide a habitat for bees, which can pollinate plants in surrounding cropland--a vital function if you run a coffee plantation nearby. By this reckoning, nature provides "ecosystem services"--from clean water to carbon sequestration--whose benefits for business are increasingly measurable in hard, cold dollar figures. "All the things that nature does for us fuel our prosperity," says Peter Kareiva, chief scientist for the Nature Conservancy (TNC), a Washington-based environmental group.
Until recently, the concept of ecosystem services was mentioned only in obscure scientific journals, the province of a few ecologists trying to figure out the dollar value of the atmosphere. But the threat of government action on carbon emissions (which now have a price of about $20 a ton on the European market), insistent shareholder pressure on green issues and growing concern over limited natural resources have prompted an increasing number of companies, including giants like Coca-Cola, to examine their ecological numbers just as closely as they would any other part of their balance sheets. Last month, Dow Chemical took the trend to a new level, announcing a five-year, $10 million collaboration with TNC to eventually tally up the ecosystem costs and benefits of every business decision. The Michigan-headquartered company will look to make environmental factors part of its profit-and-loss statements--a move that could signal to other companies that nature can no longer be ignored. "Our planet's natural resources are more and more under threat," says Dow CEO Andrew Liveris. "But protecting nature can be a profitable corporate priority and a smart global business strategy."
Historically, conservationists and corporations were usually on opposite sides of the environmental debate, and few greens wanted to see the nature they loved tainted by consideration of dollar figures. Yet as climate change emerged as a concern in the 1990s--and, with it, the accounting of carbon dioxide emissions--even the deepest green began to understand that nature's value would really be understood only once it was quantified. A 1997 study in the journal Nature attempted to estimate the value of the planet's ecosystem services: forests and oceans, air and climate regulation, even cultural and recreational benefits. The researchers came up with a very rough figure of $33 trillion--nearly twice the global gross national product at the time. (The authors came to that calculation in part by estimating the public's willingness to pay for certain ecosystem services like waste treatment and pollution cleanup.)
The Flowers of the Forest
More recently, scientists working for the U.N.'s Millennium Ecosystem Assessment and a just published study, "The Economics of Ecosystems and Biodiversity," have drilled down to find hard numbers on specific natural services. Scientists from the World Wildlife Fund (WWF) looked at a coffee plantation in Costa Rica and found that flowers near forests received twice as many bee visits and twice as much pollen as flowers far from trees--meaning that extra bee pollination was worth an additional $62,000 a year, or 7% of the farm's income. Razing those trees to allow cattle grazing--a common way to monetize forests in the developing world--would earn only $24,000 a year. "There's a library of similar case studies that show the economic impact of nature conservation," says Taylor Ricketts, WWF's director of conservation science. "We only value something when we measure it."
Dow and TNC have already been involved in a smaller ecosystem-services project in São Paulo, which helped lay the groundwork for their new partnership. Some 9 million people in the city get their drinking water from the nearby Cantareira system in Brazil's Atlantic Forest. The forest has been under pressure from logging, agriculture and ranching for decades, and the resulting deforestation harms both water quality and the wildlife that depends on the forest. (Deforestation can lead to soil erosion, creating turbid water that requires more intensive and expensive treatment downstream.) Conserving the upstream land is a cheaper way of protecting downstream water quality than building costly treatment plants. New York City did this in the 1990s, purchasing or protecting over 70,000 acres (28,000 hectares) of its watershed upstate to avoid the need for a $6 billion treatment plant. So Dow donated $1.5 million through its charitable foundation to support a joint effort with TNC and São Paulo water utilities to restore 865 acres (350 hectares) of forest surrounding the Cachoeira reservoir. Not only will that money protect biodiversity, generate carbon credits and create green jobs for locals living near Cachoeira, but it should also cut the amount of sediment flowing into the water system by over 60%. That will benefit people and businesses in São Paulo--including Dow.
The details of the larger collaboration between TNC and Dow are still being worked out, but Dow will donate $10 million to TNC over the next five years. In exchange, TNC scientists will apply scientific models, biodiversity analysis and ecosystem-services estimates to assess Dow's business decisions. If Dow decides to build or expand a plant, TNC will be able to advise the company about the economic value of the ecosystem impacts of those plans, positive and negative. The partnership will begin with pilot programs at three Dow manufacturing plants--at least one of which will be in the U.S.--but the ultimate aim is to make ecosystem services an essential part of Dow's entire business model. Numbers are hard to come by, in part because the collaboration is meant to generate fresh data on ecosystem services, but Liveris sees that $10 million as an investment in Dow's future--one he expects will pay off by preparing the company for the prospect of tighter environmental regulations and scarcer natural resources. "I think that in 10 years we'll look back and wonder why we didn't do this earlier," he says.
Both Dow and TNC expect water to be the initial focus of the collaboration. As ecosystem services go, water is the closest to actually being part of a market--although its low price rarely reflects its true value. And Dow's chemical plants are unusually dependent on water--a fact the company's leadership has begun to recognize. Since 2007, the Dow production plant in Terneuzen, a city in the southwestern Netherlands, has recycled 2.6 million gal. (9.8 million L) of municipal wastewater a day for its operations--cheaper and greener than tapping river water. "If you have insufficient water, it can stress the ecosystem, and it can cause production problems," says Neil Hawkins, Dow's vice president of sustainability and environment. "Understanding those impacts can help us make better decisions."
The Dow-TNC collaboration is just the latest piece of business news to suggest that environmental responsibility and corporate success aren't always opposed. In 2007, Goldman Sachs released a landmark report showing that companies that were considered leaders in environmental, social and governance policies tended to outperform the general stock market and their peers. Other major international companies have begun experimenting with ecosystem services. Coca-Cola has invested nearly $30 million in watershed programs around the world, replenishing for communities and nature the equivalent of 31% of the water used in its finished beverages in 2010. SABMiller is working with TNC in Bogotá to protect the basin that provides the Colombian capital with much of its drinking water. SABMiller's Colombian subsidiary, along with several other Bogotá businesses, has begun paying to protect the watershed and ensure a supply of clean water. So far they've spent about $700,000, and estimates are that the investment will pay off--through reduced water-treatment costs--in four to five years. "In the past, the big concern for companies on the environment was just to avoid risk," says Glenn Prickett, TNC's chief external-affairs officer and the point person for the Dow deal. "The difference is now they can look at nature as a source of business values."
If it all sounds too good to be true--or too fuzzy--it's because ecosystem services are just being defined as a concept. Services beyond water--like biodiversity--are harder to price, and corporations will not stop pushing back Against Government Environmental Regulations Consider They onerous. But in a world with a growing population and demand for resources, smart companies will learn to value ecosystem services, not just exploit Them. "It's not a choice to play a zero-sum game anymore," says Liveris. "The economy and the environment are interdependence." And they're united by one color: green.
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