Biodiversity – why should business care?

Every business is in some way reliant on natural resources, including biodiversity. The diagram below shows the major risk areas, identified in the EMAS Biodiversity Guidelines 2016.

Biodiversity Risk Spider Diagram

All businesses should assess how they can impact on biodiversity and how biodiversity loss can impact upon their business. This blog will briefly outline each of the risk areas identified above and provide examples to consider.

1) Operational Risks

In the simplest terms, businesses that are reliant on plant and animal-based resources will suffer as a result of decreases in biodiversity and the supportive environments (air, water, etc.) that they rely on. These shortages will in turn lead to price increases as businesses compete for limited resources or opt for more expensive alternatives. This winter saw a simple example of this with the lettuce price increase resulting from poor weather conditions in Spain. Flooding, storms and frosts seriously impacted harvests of lettuce and other salad crops resulting in rationing in some supermarkets and price increases.

Plants and animals can also inspire innovation either as a result of their structure, for example in inspiring man’s quest for flight or possible chemical properties of the species itself, with penicillin perhaps one of the most iconic examples of this. Loss of biodiversity deprives businesses and individuals of the inspiration for great products and ideas of the future.

For businesses in the tourism industry, they must balance the short-term desire to boost visitor numbers with the potential environmental impacts of doing so. The growing demand for the limited tourist season in Antarctic is one area of concern. Quite likely one of the least visited places on Earth, it’s frozen conditions mean that any impact from tourists including litter, trampling and any discharges from the ships transporting them there can have a significant and lasting impact.

2) Reputation Loss

Having a negative impact on biodiversity is increasingly bad for business, particularly the large international brands. Deforestation of the Amazon rainforest for cattle and the soy that feeds them has increasingly become a liability and has led to large businesses increasingly having to take an interest in their supply chains. McDonald’s reaction to Green Peace campaigning has led to reports that the business is now saving more rainforest than the Brazilian government through its work checking the feeding practices of its cattle and its participation in the Soy Moratorium.

3) Markets

As consumers and clients become more interested in different environmental initiatives this can lead to changes in buying behaviour that can leave businesses in the lurch. The rise of diesel cars in Europe following the Kyoto Protocol would have seriously affected companies slow to respond to this change in buying preferences. Similarly the Fairtrade movement, which originated in the 1980s increasingly upsets traditional markets. In 2013-14 over 100 million euros were paid in premiums to small scale farmers.

A lack of appreciation for consumer appetites can also act as a barrier to businesses entering new markets. The US has struggled to import some of its vehicle models into the EU due to the differences in environmental regulations and generally higher vehicle emissions.

As biodiversity increasingly becomes an area of interest for consumers and clients, businesses could find themselves under pressure to adapt or risk losing market share.

4) Regulation

Regulation can come in the form of restrictions on the use of natural resources or taxes to incentivise better decisions from an environmental perspective. The Climate Change Levy, imposed by the UK government on electricity consumption, is one simple way to incentivise better behaviour, in this case driving down energy consumption, at least in theory.

In terms of biodiversity the Nagoya Protocol, a supplementary agreement to the Convention on Biological Diversity, now ratified by over 90 countries, has introduced into law the concept of access and benefit sharing, whereby the benefits of using genetic resources are shared with the countries or origin. In theory this should support the preservation of biodiversity in historically poorer nations struggling to enhance the wealth and wellbeing of their populations. This is currently being transposed into UK law and will require all businesses to assess its impact on their operations.

Companies operating environmental management systems (EMS) must also consider biodiversity. Those certified to EMAS must consider as a mandatory aspect. Whilst it is not mandatory for ISO 14001, the 2015 revision does mention biodiversity more than the previous 2004 version. Therefore, businesses will need to increasingly consider biodiversity, its monitoring and improvement in the day to day operation of their business systems.

5) Liability

A pretty simple item for businesses to consider, but with big impacts. Increasingly, companies may face larger fines for damage caused to the environment, and its impact on biodiversity. The biggest legal settlement in history for the BP Horizon oil disaster in 2010 measured nearly $20 billion. In the UK very recently Thames Water have been hit by a £20 million fine for allowing sewerage water to negatively impact miles of river.

Governments are increasingly making businesses pay for the damage they cause to the environment and changes to sentencing guidelines make these fines likely to be larger moving forward.

6) Financial markets

The environmental and biodiversity track record of businesses, and their preparation for possible losses in the future is expected to play an increasing influence in how financial institutions grant credit or make investment decisions. A quick search on the internet revealed an example from RBS’s Environment Statement suggesting they will withhold banking services in cases where environmental risks are too high. Sure, there are lots of reasons to doubt many financial institutions at present, but over time these policies will turn into more concrete action as investors and consumers push for responsible practices.

Summary

So there are 6 reasons for businesses to care about biodiversity. If you can think of any I’ve missed then let me know in the comments.

Further reading:

EMAS Biodiversity Guidelines 2016

PwC (2010): Biodiversity and Business Risk: A Global Risks Network briefing

The Economics of Ecosystems & Biodiversity (2012)

Natural Capital Coalition Protocol (2016)

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