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How Businesses Can Manage Risks and Opportunities from Natural Capital

June 06, 2017 |

This article was originally published on: Network for Business Sustainability

“A paradigm shift is underway. Once, businesses saw nature as a provider of free resources to be used as an input to production. Waste was dumped into water without thinking of the impact to those downstream; timber was harvested without concern for reforestation due to the vast amount of forest available.Today, savvy business leaders are aware of the fundamental role that natural systems play in business operations. They recognize that intact natural systems are economic assets.

The Value of Nature

Natural Capital is the term given to the planet’s renewable and non-renewable natural resources—land, atmosphere, water, and the many diverse ecosystems that support life. Natural capital provides economically valuable goods and services, or “ecosystem services.” Some of these have well-defined markets; these include minerals, oil, gas, commercial forests, and fisheries. Others are not traded in markets but sustain life; these include soil microorganisms, the atmosphere, and the quality of water used for consumption or production.

Virtually every business activity benefits from natural systems in some way. For example, fresh water is critical to many industrial processes, from agriculture to mining; wild genetic resources underpin the pharmaceutical sector; natural environments drive the tourism industry; and intact wetlands and forests protect buildings from flooding, storms, and other natural disasters. Even labour productivity is affected by natural capital: healthy environments improve workers’ mental and physical health and reduce absenteeism.

Yet, natural capital can fly under the radar. Decision makers often don’t think about ecosystem services. This is partly because many ecosystem services are not traded in markets—they simply can’t be owned. All too often, people only appreciate the value of an ecosystem service when it becomes damaged or scarce. Ask the farmer who needs to artificially pollinate his crops, or the business owner whose insurance premiums increase when degraded local wetlands and forests lead to flood damage on his property. Regulation can protect some ecosystem services, but it is a limited solution…”

Read on at: Network for Business Sustainability.

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