Ecocentric

Nature: A Major Company Puts a Value on the Environment

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How much is nature worth? On one hand, the question seems absurd. Is it possible to put a price on the value of an endangered species? Or figure out the dollar worth of a clean river, or uncontaminated air. Environmentalism—at least its more romantic strain—has largely defined itself in opposition to the naked market, where everything has its price and everything can be bought. When the naturalist John Muir explored the Sierra Nevada mountains in the late 19th century—experiences that would later prompt him to push for national parks and found the Sierra Club—dollar figures weren’t first in his mind.

Yet at the same time, even the most hard-headed capitalist can’t deny that there’s a connection between natural resources and economic growth. Want to build and operate a factory or power plant? You’ll need a ready supply of clean water—and it’s often a lot cheaper to protect a natural source than build expensive artificial treatment plants. A sustainably logged forest provides a regular supply of timber and fiber, but it can also prevent floods and reduce erosion—protecting economic capital from natural disasters. And there’s no denying that in the U.S., at least, things often don’t have value until we can put a dollar value on them. “Nature is a source for sustainable business value,” says Glenn Prickett, chief external affairs officer for the Nature Conservancy (TNC).

What Prickett is talking about is a concept known as ecosystems services—an economic reckoning of the services provided by the natural world—and it’s about to get its biggest test in the real world. This afternoon at a panel in Detroit, TNC and Dow Chemical announced a $10 million, five-year collaboration that aims to make ecosystem services become a major part of Dow’s business. (Download a PDF of the press release here.) TNC’s scientists will advise Dow on how the $45 billion company’s business decisions impact the environment—and in turn, how the environment affects Dow’s business. Ideally, the ecosystem will become a new and major component for Dow’s bottom line, putting environmental sustainability on par with business sustainability. “This collaboration is designed to help us innovate new approaches to critical world challenges while demonstrating that environmental conservation is not just good for nature – it is good for business,” said Dow CEO Andrew Liveris in a statement. “Companies that value and integrate biodiversity and ecosystem services into their
strategic plans are best positioned for the future by operationalizing sustainability.”

If it sounds a little technical—”operationalizing sustainability”—that’s because it is. Ecosystem services is a relatively recent field, one that is just making its way from scientific journals to business practice. But the concept isn’t that tough to grasp. Ask yourself a simple question: if nature weren’t available to provide a service that human beings need, how much would it cost to provide that service artificially? In agriculture, for instance, wild bees pollinate a wide variety of crops far more efficiently than human workers ever could. By one estimate, the value of all pollinators for U.S. agriculture alone ranges between $4.1 and $6.7 billion a year—a number that is calculated in part by estimating how much it would cost to replace wild bees with managed bee populations. (A practice that, thanks in part to the baffling drop in bee populations, is becoming more common, adding costs for farmers.)

You can run the same calculations for virtually any natural resource: forests, waterways, grasslands, even certain species. According to a 1997 estimate, the total value of the planet’s ecosystem services may be as high as $33 trillion a year—nearly twice the total global GNP at the time. That’s so big as to be almost meaningless, but once you break it down case by case, it’s very often more economical to protect and conserve the natural resources already given rather than replace them with something artificial. New York City, for example. gets its remarkably clean drinking water from the upstate Catskill Mountains—a watershed that the city government supports by purchasing or protecting thousands of acres of upstate land. It would have cost the city far more to build additional treatment plants if the government hadn’t protected the natural source of its water. “You’re looking at a natural value that just can’t really be replaced,” says Peter Kareiva, TNC’s chief scientist.

That means that businesses—especially large ones like Dow that often own and control significant amounts of land—would be smart to figure out how nature might be impacting their bottom lines, and act accordingly. In a world where human population is growing—and where natural commodities like oil, food and water are becoming more scarcer and more expensive—well-run companies will need to manage natural resources for the long run, just as they would any other part of their core business. That means going beyond simply complying with government environmental regulations, and moving to proactively protect nature, if only because so they can continue to make use of it. Done right, ecosystem service management can have benefits for all of us. “We want to make this a natural part of business decision-making,” says Neil Hawkins, Dow’s vice president for sustainability. “This can make a big difference for our core plan of protecting the planet but at the same time growing as a company.”

The Dow-TNC partnership is just beginning, so it’s still not clear exactly how the collaboration will change the way Dow does business, or where those changes will occur. (As part of the deal, the Dow Chemical Company Foundation will donate $7 million to fund the basic research to help TNC develop an ecosystem services methodology, while the remaining $3 million will go to TNC essentially as payment for consulting services to help Dow carries out that methodology.) But the two organizations have collaborated in the past on similar, if smaller projects, including a $1.5 million deal to help protect forests outside Sao Paulo, Brazil as a way to preserve that city’s watershed. Over the next five years Dow and TNC will collaborate on three pilot projects—initially in the U.S. but eventually overseas as well—with the intent of publishing the results from their work as case studies. Ideally, Dow will be able to use ecosystem services to guide its management and expansion of its chemical plants—nearly all of which depend on reliable water supplies. “We’re approaching this with a lot of excitement,” says Hawkins.

So are the experts over at TNC, who see the partnership as a chance to make ecosystem services work on just about the biggest corporate stage possible. Nonetheless, this is still more theory than practice, and I wonder how Dow will make it work. Air, water and forests have usually been seen as public goods, even though they’ve always been a part of business—and companies have been able to make money in part by privatizing the value of those public goods while leaving the costs to the rest of us to clean up. Government environmental regulations came into being because private companies, left to their own devices, didn’t exactly prove themselves as reliable stewards of the natural world. There may be times when the short-term values of the shareholders of Dow conflict with longer-term ecosystem needs—and if that happens, can we trust that nature will really win out?

Of course, given the new Congress’s generally hostile attitude towards environmental regulations, greens might be better off putting their trust in smart companies than in the power of the federal government—at least for now. “We won’t have unlimited streams of state and federal dollars for this,” says Prickett. “Having the business community at the table is important.” It may be tough to put a dollar figure on nature, but now is not the time to sell the planet short.

I’ll have a larger piece coming up in the dead tree TIME on this deal and ecosystem services.

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