“Biological diversity”, or “Biodiversity”, defines life as we know it. What we call "nature" is actually in large part "biodiversity". From the food that we eat, the air that we breathe and the water that we drink, to protection from floods and droughts, to more “economically” relevant issues such as the provision of raw materials (for agriculture, medicine, cosmetics, etc.) or pollination and pest control services, biodiversity encompasses and affects virtually all the natural day-to-day processes that we take for granted. The resilience of the natural systems (called ecosystems) upon which we, and every other living organism, depend is directly related to the health of their biodiversity. When the biodiversity is healthy, meaning that there are many different types of species and classes of life within a given environment, the ability of that environment to cope with problems is great. Beyond being able to keep food chains and other processes stable, environments with healthy biodiversity are far better at resisting natural disasters such as extreme weather or floods. Because of this resistance, healthy biodiversity can actually help to reduce the negative effects of climate change! The current problem is that, all across the world, dramatic losses of biodiversity are being reported.
Businesses are both affected by, and rely upon, these biodiversity and ecosystem services, regardless of organization size, location and sector (see side box). This is more obvious for some, less so for others. There are some industries whose profitability depends directly on the health of ecosystems, for example forestry, fishing, agriculture and ecotourism. Other sectors have a direct impact on ecosystems and biodiversity through their operations, such as mining, construction and energy. For companies in these areas, a good track record on sustainability management is crucial for them to be able to obtain operating licenses and to maintain good relationships with stakeholders (i.e. local communities and NGOs). Other industries, such as cosmetics and pharmaceuticals, also depend on biological material and genetic resources in the creation and manufacture of their products. Many firms find inspiration in biological systems when they are designing new products, and all companies, in all sectors, rely upon the various ecosystem services provided free of charge by natural systems around the world. Even the financial sector is exposed to risks caused by biodiversity loss. This is due to insurance claims and poor (or negative) returns on investments caused by natural and man-made disasters, made worse through environmental degradation. The financial sector can also have a major impact through project financing and the creation of new environmental markets, such as payment for ecosystem services, biodiversity offsets and REDD+
Because of this reliance, disruptions or degradation of biodiversity and ecosystems can have severe impacts upon supply chains, and consequently on your business model, even if it seems to be unrelated to your direct area of concern. Short-term disruptions can be expensive, long-term degradation leading to permanent damage of supply can be catastrophic, resulting in significant long-term economic dislocation, loss of market share and even complete failure of the business model.
The Economics of Ecosystems and Biodiversity (TEEB)
noted that the “ecosystem services”, resulting from natural environmental processes, represents tens of trillions of dollars per annum worth of benefits that are currently utilized for free. By the same token, the loss of these services due to environmental degradation is on the order of $5-7 trillion per year, roughly comparable to the GDP of China. Companies or governments must either forgo the services that this represents, or find costly alternatives. When we consider the vast efforts that global corporations and governments put into accessing the newly emerging mega-economies, we have to wonder why we are so willing to simply allow this type of economic value slip through our fingers.