Paying for Nature: Dow’s Environmental Bottom Line

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Siebe Swart / Hollandse Hoogte / Redux

A Dow plant in the Netherlands recycles city water

A year ago I traveled to Detroit to moderate a discussion between Mark Tercek, the head of the Nature Conservancy (TNC)—one of the biggest green groups in the U.S.—and Andrew Liveris, the CEO of Dow Chemical. They were in town to talk about an innovative collaboration that would help TNC develop strategies that would help Dow Chemical maximize the environmental value of its operations, to figure out how the company could both go green and cut waste from the bottom line. But it wasn’t just about Dow—the ultimate aim of the collaboration was to figure out the value of nature, to put a dollar figure on clean water, intact forests and vibrant wetlands.

And now, a year later, some of the first results are coming in.

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I wrote about the partnership for TIME:

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.”

That’s a great sentiment. But if ecosystems service is going to become more than just a nice concept, it needs hard numbers. And that’s where the Dow-TNC collaboration may be able to bear fruit. The two groups just released the first progress report on the partnership. You can read it here (PDF)—the important news is the identification of the first pilot site for the study at Dow’s massive operations in Freeport, Texas, which produces more than a fifth of the company’s global products. Among the ecosystem services that will be studied include:

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  • The fresh water supply from the nearby Brazos River, which feeds the manufacturing facility. The study will look at how drought can impact the river—and where it might be possible to increase the water supply in the river basin.
  • The potential for tree replanting as a way to mitigate air pollution. Planting trees can help cut nitrogen oxides and other ozone precursors, which can help reduce the amount Dow needs to pay to meet environmental obligations. Planting trees can have additional ecosystem values by preserving and extending natural habitat, and improving carbon sequestration.
  • The value of coastal marshes and wetlands—Freeport is on the Gulf of Mexico—as a way to protect the facility from storms. Intact wetlands provide natural protection for storm surges, and they also provide a place for fish to spawn. It could be worth Dow’s while to invest in wetlands as a form of natural infrastructure to protect the facility from storm surges, instead of spending that money on sea walls and other artificial barriers.

The Dow-TNC partnership has another four years to run, so it will be awhile before we know just how meaningful ecosystem services can be for both business and the environment. But a year in, the project looks like a good start.

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