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Risks and Opportunities

There are solid economic reasons for companies to look at incorporating biodiversity into their business decisions. These can be broken down into two broad categories, risks and opportunities. Often these can be seen as flipsides of the same coin, a potential risk can be turned into a profit-enhancing opportunity.


There is no “silver bullet” that will make a business sustainable overnight and at zero cost. The process requires work and effort, and likely – at least initially - the expenditure of resources. This can be seen as the cost of doing business in a changing economy. These upfront expenditures will eventually result in a leaner, more sustainable, and more profitable business model.


Aside from the various tools and mechanisms that can help businesses make the transition to sustainability, the CBD Secretariat has been involved in facilitating the development of the Global Partnership for Business and Biodiversity.


Risks

There are many risks associated with biodiversity:

Resource Dependency and Scarcity
Every company depends either directly or indirectly on natural resources. If a resource, upon which the company depends, is under severe stress, or in the worst case scenario collapses entirely, the company’s long-term viability may be threatened.



Loss of Investment
There are increasing numbers of ethical investment funds being developed, which may be unavailable to companies that are not undertaking sustainable environmental practices. Research demonstrates that investors are increasingly using companies’ nonfinancial disclosures to inform investment decisions and failure to manage environmental risk could result in withdrawal of funds.

Governmental Regulation
As governments increasingly recognize the importance of biological diversity, more legislation is expected to be in place to ensure its sustainable use. In almost all cases, a company’s ability to anticipate and respond to regulation in a timely manner will determine the level of risk and cost a company will bear.

Brand Reputation
Companies seen as environmental “villains” can be subjected to intense campaigns and product boycotts, which can have long-lasting negative consequences, resulting in significant loss of market share and increased conflict with stakeholders.

Clean-up and Compensation Costs
Industrial and natural disasters can entail huge and long-lasting clean-up costs that can severely effect a company’s bottom-line. In addition, disasters of this sort can be a major black mark on the reputation of the business involved.

Insurance Costs
Related to the aforementioned points, insurance companies are well aware of the risks associated with environmental degradation. Failure in managing these risks would mean higher insurance premiums.



Opportunities

As the trend towards sustainability continues to move forward, the ability to benefit from this momentum becomes ever greater:

Increased Market Share
Customer Loyalty: Businesses seen to be green leaders are increasingly being favored by customers. Good corporate practices can often translate, all other things being equal, into competitive advantages, leading to greater market share.


Cost Control: A well managed and streamlined supply chain will often improve operational efficiency and generate cost savings. Knowledge about the origin and processing of purchased resources and products improves cost control and at the same time minimizes negative environmental impact.

Better Relationships with Stakeholders
Businesses must continually communicate and cooperate with local communities, governments, NGOs or other stakeholders. If their practices are sustainable and seen as benefitting the community and the environment, their dealings will be that much easier and less costly. Furthermore, regulators will be more inclined to grant licenses to those who have demonstrated positive stewardship of their resources.





Attraction and Enhanced Loyalty of Employees
Research shows that employees are far more likely to want to work for and stay in companies with strong environmental commitment and performance. It further shows that corporate initiatives aimed at sustainability and biodiversity can increase employee loyalty, efficiency and productivity.

Long-term Viability of Business
If resources are harvested or extracted in a sustainable fashion, they will be available for the long term, thus allowing businesses to continue operating for longer. New products can also be found through the sustainable use of existing resources (i.e. forest generated products as opposed to simply harvesting the trees for lumber).

New Products: Bio-Prospecting/Bio-Mimicry
Investment in biodiversity often helps drives innovation. Many new technologies and products have been inspired by natural processes. This requires intensive study and time. Degradation of biodiversity can remove these natural inventions before they can be discovered, let alone understood. Additionally, new pharmaceutical and agrifood products are just waiting to be discovered, but without viable ecological systems to support them, they too can be lost.

  • United Nations
  • United Nations Environment Programme