The time to act is now. We need to find common solutions to our problems by reimagining business models, redesigning value chains, addressing current flows and reaching the right level of ambition to reverse natural loss.
The science exploring the impact of nature and biodiversity loss
Founded in 2012, the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) was established to provide the bridge between science and policy on issues of biodiversity and ecosystem services.
In 2019, IPBES published, ‘The Global Assessment Report on Biodiversity and Ecosystem Services’6 It is a stark read with a key message,’ multiple human drivers have significantly altered nature across most of the globe, with the great majority of indicators of ecosystem and biodiversity showing rapid decline’.7
The rise in monoculture production is also addressed as local varieties disappear. ‘This loss of diversity, including genetic diversity, poses a serious risk to global food security by undermining the resilience of many agricultural systems to threats such as pests, pathogens and climate change.’8
In September 2020, the Convention on Biological Diversity (CBD) published the fifth edition of the UN’s Global Biodiversity Outlook Report. The report, providing an authoritative overview of the state of nature worldwide, noted depressingly that none of the 20 Aicihi biodiversity targets set in 2010 had been achieved.9 Six of the objectives were deemed to have been ‘partially achieved’.
Growing thinking around the interconnectedness of climate change and biodiversity led to IPBES and the International Panel on Climate Change (IPPC) to collaborate through a co-sponsored workshop approach, in December 2020. Together, they acknowledge,
Climate change exacerbates risks to biodiversity and natural and managed habitats; at the same time, natural and managed ecosystems and their biodiversity play a key role in the fluxes of greenhouse gases, as well as in supporting climate adaptation.10
For organisations, a systems thinking approach to both accounting for carbon and nature is likely to become the norm.
Growth or health? — The Economics of Biodiversity: the Dasgupta Review
Accounting for nature, allows organisations to stop and reflect. In this reflection, it asks us to broaden our thinking on measurement and modifying our focus beyond growth.
Traditionally, organisations have been focused on growth and maximising profit. These lead to business models based on wealth extraction, where nature capital has been exploited. In turn, countries then narrowly focus their success through Gross Domestic Product (GDP). Kate Raworth, economist and author, said it drives the wrong behaviour, ‘Growth is the wrong thing to get focused on. It’s the wrong tug of war. When economies go for growth as the goal, the health of communities and the living planet become the collateral damage’.11
An independent review, which the UK HM Treasury commissioned, the Dasgupta Review challenged the global obsession with GDP.12 Led by Professor Sir Partha Dasgupta, The Economics of Biodiversity, published in 2021, called for changes in the way we think, act and measure economic success. By doing this and measuring economic success differently, the report concludes, it will enhance and protect the natural world. In an interview, Dasgupta explained,
The accounting methods that we now have in place are completely out of kilter with what we are discussing, because natural capital doesn't even enter into the national accounts of national economies.We estimate GDP. But GDP doesn't measure the depreciation of nature, that goes hand in hand with the growth of national income. The accounting system needs to recognise that nature is an asset.13
Accounting for nature forces us to move our attention from wealth extraction to wealth creation. It moves measurement from a pure focus on growth measures to consider and measure the health of the natural ecosystems organisations, and countries that deal with the impacts.
Finance function and finance professionals have a crucial role to play in helping organisations and global financial systems shift their course to a nature-positive mindset.
World Economic Forum (WEF) — global risks and nature
The impacts of nature loss should be top of mind when thinking about global risks. In the World Economic Forum’s (WEF) Global Risk Report 2022, four of the top long-term global risks over the next five to 10 years are environmental, directly linked to nature.
2nd Extreme weather (32.4%)3rd Biodiversity loss (27.0%)4th Natural resource crises (23.0%)5th Human environment damage (21.7%)14
It is also worth noting that the societal risks at 6th — ‘social cohesion erosion’, and, 7th — ‘involuntary migration’ will increase in their severity if risks linked to nature are not mitigated.
With all these global risks having the highest potential to severely damage societies, economies, and planet, they must certainly be integrated into an organisation’s Enterprise Risk Management (ERM) system and processes as part of an organisation’s accounting for nature activities.
The unintended consequences of our actions on nature
If organisations don’t have sight of their impact on nature, or fail to build accounting for nature in their decision-making processes, the resulting operational activity can have unintended consequences for the entity and the ecosystem within it sits. The following are three examples demonstrate that a narrow focus on product or service efficiency without understanding nature and biodiversity impacts can lead to a much-wider unintended consequence. These consequences not only impact the organisation, but also the wider stakeholder community and biodiversity.
Golden eagles and organochlorine
In the Lake District, United Kingdom, farmers traditionally used organochlorine chemicals. These were primarily used in sheep dipping to protect their flocks against insect pests, between the 1940s to the 1960s. It was only when golden eagles were reintroduced to the area in the 1960s, after they had been eradicated in England by the Victorians, that the unintended consequences of the chemicals in the ecosystem were observed. The author, Lee Schofield, and site manager at the Royal Society for the Protection of Birds (RSPB) Haweswater site, explains,
Sheep would often die whilst grazing out in the fells, and their carcasses made up the bulk of the Haweswater eagles’ diet. And so the noxious organochlorine chemicals in the dips made their way into the eagles’ bodies, weakening would-be mothers and thinning the shells of their eggs.16
The organochlorine chemicals in sheep dips were preventing the Haweswater eagles from reproducing. Once organochlorine dips were banned, the bird recovered and began laying eggs again. Unfortunately, even with this discovery, the last sighting of a wild golden eagle was in the 1990s. Schofield concludes, ‘That the whole of England is incapable of supporting a single pair of golden eagles, where historically there had been hundreds, should be a source of national shame.17
Chicken farming and microscopic algae
So many nutrients are imported into the catchment in the chickens’ feed, then excreted in their droppings, that the soil cannot absorb them … Rain washes the surplus phosphates and nitrates into the river, fertilizing the microscopic algae.18
In the Wye valley, on the Welsh/English borders, the river Wye’s biodiversity is in rapid decline due to an annual explosion of algae. This has been linked to the building of massive chicken barns in the area, that house six million birds. The author, George Monbiot, explores the chain of events,
This algae explosion, through photosynthesizing, then sucks the oxygen out of the River Wye, leading to the asphyxiation of local fish populations. Its density also reduces the amount of light reaching the river bed, killing much of the river plant biodiversity. The unintended consequence of chicken excrement on the River Wye now extends to 110 kilometres of its course.19 Monbiot, notes
No application for a chicken farm had been refused. Worse still, the country councils in England and Wales and the government regulators treated every application as if it existed in isolation, making no attempt to determine what the extra increment of excrement would do to an overloaded river.20
Forestry and the wood wide web
The Canadian Professor of forest ecology, Suzanne Simard, in her research, discovered that trees and plants form a wood wide web of communication using mycorrhiza fungi as an underground network. This wood wide web allows forests of trees and plants to pass information to optimize shared resources and protect themselves against predators. This was at odds with how the foresters of British Columbia managed their woodlands. Simard explained that the prevailing wisdom of the logging companies focused upon, trees competing for resources, and the Darwinian notions around survival of the fittest.
In Western Canada, there was a war, a war on trees. That war was trying to get rid of the native plants. I saw the native plants is necessary in these ecosystems, whereas the foresters were trying to get rid of them because they thought they were competing with the coveted and valuable conifer trees like the Pines and the firs. I went about learning and discovering these [native] trees, that the foresters called weeds, were actually connected to the firs and pines, and that they formed this enormous web below ground, like an Internet. Through that Internet they exchange information and resources like water and nutrients in carbon, and they actually help each other out. The complete opposite of how these foresters were thinking …
Simard’s discovery, of underground mycorrhiza networks, turned forestry efficiency methods of woodland management on their heads. She went on to explain,
Foresters simplified the whole ecosystem into light, water, and nutrients. Everything needs those three things. In this dog, eat, dog world, if shading another tree competing for light. It's that simple. Or if the roots can grow wide, big, and deep they're going to get all the nutrients and water for themselves and grow into big trees. The thinking was that the ecosystem is like a pie, and you want to get the biggest piece of the pie for yourself. That's how foresters viewed ecosystems. Whereas, my view of an ecosystem was, there's all these plants that make the pie bigger, and bigger, and bigger. When they worked together, they actually create more, than just each one as an individual. That completely changes how we see ecosystems, instead of competing for a piece of pie, that's only going to be so big, let's actually create something that's a bigger pie. That's what they [trees and funga] do when they cooperate.21
A greater understanding of the woodland ecosystem replaced efficiency with forest wisdom.
Of course, many times, unintended consequences can also have positive impacts. In India, Pakistan and Bangladesh, the annual activity to irrigate fields is also impacting the farming habits in East Africa. Monbiot explains the impact and highlights global complexity,
The water inadvertently dispatched by farmers in South Asia increases the rainfall in East Africa by up to a millimetre a day. This might not sound like much, but in the arid parts of the region it appears to be crucial to the survival of farmers and herders, and the people they feed. The growing local population may have become dependent on this extra rainfall. The water vapour also reduces temperatures by about half a degree, through evaporation and cloud cover, which could be vital in a place where both people and livestock face severe heat stress. If irrigation in South Asia failed, the consequences could be grave not only locally but also far across the ocean.22
The fragility of this positive consequence for the farmers of East Africa will need to be monitored.
