The Economic and Business Case for Conserving Biodiversity. Joshua Bishop WWF Australia

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1 The Economic and Business Case for Conserving Biodiversity Joshua Bishop WWF Australia

2 The Economic and Business Case for Conserving Biodiversity Joshua Bishop TEEB

3 Outline TEEB overview What is biodiversity worth? Why should business care? What can business do? Case study

4 Who asked for TEEB? Potsdam Initiative Biological Diversity 2010 In a global study we will initiate the process of analysing the global economic benefit of biological diversity, the costs of the loss of biodiversity and the failure to take protective measures versus the costs of effective conservation. potsdam_initiative_en.pdf

5 Who was involved in TEEB? Study Leader: Pavan Sukhdev (ex-md Deutsche Bank) Advisory Board: 14 international scientific & policy leaders Administration: United Nations Environment Programme Scientific coordination: UFZ, Leipzig Over 500 individual editors, authors and reviewers Financial donors and other institutional partners:

6 What did TEEB deliver? Interim Report May 2008 Climate Issues Update September 2009 National & International Policy-Makers November 2009 Business July 2010 Local & Regional Policy- Makers September 2010 Ecological & Economic Foundations October 2010 Final Synthesis Report October 2010

7 Outline TEEB overview What is biodiversity worth? Why should business care? What can business do? Case study

8 UN Convention on Biological Diversity defines biodiversity Variety of species! plants, animals and microorganisms Genetic differences within each species! e.g., varieties of crops and breeds of livestock Variety of ecosystems! e.g., deserts, forests, wetlands, mountains, lakes, rivers, and agricultural landscapes

9 Millennium Ecosystem Assessment focused on ecosystem services

10 Example: Tropical forests and climate Tropical forests store about 1/4 of all terrestrial carbon 547 gigatonnes (Gt) Tropical forest capture carbon continuously up to 4.8 Gt CO 2 every year, compared to total emissions p.a. of ~33 Gt Slowing or halting deforestation is an excellent investment Reducing deforestation by 50% would deliver net benefits of US$ 3.7 trillion (NPV), just counting the avoided damage costs of climate change Sources: Trumper et al. (2009), Lewis & White (2009), Eliasch (2008) 10

11 Example: Shrimp farms versus mangroves US$/ha in 1996 Private profits Private profits (less subsidies) Public benefits $12,392ha $9,632ha $10,821ha Storm protection 5000 Subsidies - $8,412ha $584ha $1220ha $584ha $987ha Fisheries $584ha Forest prod. 0 All values in NPV over 9 yrs ( ) at 10% discount rate Net public costs of restoration after 5 years - $9,318ha Source: Barbier (2007)

12 Who is affected by biodiversity loss? Ecosystem services dependency Indonesia India Brazil 99 million 352 million 20 million Ecosystem services as percent of classical GDP 79% 21% 84% 16% 90% 10% Ecosystem services as percent of GDP of the Poor 75% 25% 53% 47% 11% 89% Source: Gundimeda and Sukhdev, D1 TEEB 18/04/ Ecosystem services

13 Outline TEEB overview What is biodiversity worth? Why should business care? What can business do? Case study

14 Business impacts on ecosystem services Cost (US$/m ) Market Price of Timber External Cost Flooding damage in 1998 Property loss from flooding pre Loss of river transport capacity Reservoir and lake sedimentation Desertification Reduced lumber output Loss of plant nutrients Lost water runoff Reduced precipitation! US$12.2 billion estimated ecological cost of deforestation in China ( )! 60% of this cost is attributed to logging! 64% of logging was for construction and materials sectors! External costs = 178% of the market price of timber (1998) Source: TEEB for Business, 2010 (Annex 2.1).

15 Business dependence on ecosystem services Value of insect pollination to food crops: 153 billion in 2005 = 10% of VA in the agriculture sector (Gallai et al. 2008) Example: Michigan USA blueberry crop worth US$ 124 million/year; totally reliant on pollination by bees at cost of about US $ 1.5 million/year (renting hives) Example: Wild pollinators increase coffee yields by 20% on farms within 1 km of forest in Costa Rica (Ricketts et al. 2004) Pollination services to agriculture are threatened by colony collapse disorder mainly affecting domesticated bees Source: Syngenta for TEEB

16 Consumer demand for green products and services Global sales of organic food and drink = US$ 60 billion in 2009 Sales of certified sustainable forest products increased four-fold between 2005 and 2007 The global market for eco-labeled fish products grew by over 50% from 2008 to 2009, to a retail value of US$ 1.5 billion

17 Result: growing business concern about biodiversity Source: McKinsey & Company (July 2010) Global Survey results: The next environmental issue for business Based on 1,576 responses from executives representing the full range of regions, industries, tenures, and functional specialties.

18 Outline TEEB overview What is biodiversity worth? Why should business care? What can business do? Case study

19 What can business do? Some ideas from TEEB 1. Set ambitious biodiversity targets 2. Measure, value and report your footprint 3. Use and improve tools for biodiversity management 4. Build biodiversity business 5. Support market-friendly environmental policy

20 1. Set ambitious targets! BC Hydro: long-term goal of no net incremental environmental impact.! Coca Cola: Our goal is to safely return to communities and nature an amount of water equivalent to what we use in all of our beverages and their production.! Danone Group: Attain carbon neutrality for the major Danone brands, including Evian, by the end of 2011.! Marks & Spencer: Our goal is to become carbon neutral by 2012 in our UK and Republic of Ireland operations.! Rio Tinto: Our goal is to have a net positive impact on biodiversity.! Sony: strives to achieve a zero environmental footprint throughout the lifecycle of our products and business activities.! Unilever: Today we source 10% of our agricultural raw materials sustainably. By 2012 we will source 30%; by %; and by %.! Walmart: Committed to permanently conserve at least one acre of priority wildlife habitat for every developed acre.

21 2. Measure, value & report Top 100 companies Annual reports 4% 2% Top 100 companies Sustainability reports 9% 11% 12% 15% 42% 23% 82% Don't produce sustainability report No mention of biodiversity or ecosystems Passing mention of biodiversity or ecosystems Discuss approach to reduce impact on biodiversity Identify biodiversity as a key strategic issue Source: PwC input to TEEB Report for Business

22 2 (continued) How to measure? Climate change: CO 2 e Biodiversity and ecosystems: 1 Living Planet Index (LPI) Wild Bird / Waterbird indices IUCN Red List Index (RLI) Marine Trophic Index Forest / Mangrove / Seagrass extent Coral reef condition (cover) Water Quality Index Ecological Footprint Nitrogen deposition rate Number of Alien Species (in Europe) Exploitation of fish stocks Climatic Impact Indicator (on birds) Protected Area extent Coverage by PAs of important habitats Area of forest under sustainable mgmt. International IAS policy adoption National IAS policy adoption ODA in support of CBD LPI for utilized vertebrates RLI for food & medicinal species RLI for traded bird species Business needs indicators for: site, product, group level processes & performance internal & external reporting 1/ Adapted from: Butchart et al. (2010 ) Global Biodiversity: Indicators of Recent Declines Science Express (29 April)

23 2 (continued) How to value? WBCSD Guide to Corporate Ecosystem Valuation shows how to use valuation methods to: Save costs Reduce taxes Capture new revenue streams Assess liability & compensation and more

24 2 (continued) How to report? Water reporting by SAB Miller Target: increase water productivity by 25% by 2015 Potential savings: 20 billion litres of water/year

25 3. Use & improve business tools Integrated Biodiversity Assessment Tool GIS database for site-level risk assessment Based on World Database of Protected Areas, World Biodiversity Database, IUCN Red List of Threatened Species Business and Biodiversity Offsets Program Guidance on designing and implementing biodiversity offsets to ensure no net loss Led by Forest Trends, Wildlife Conservation Society and Conservation International Certification and labelling Global hub for social and environmental standards Members represent fair trade, forest stewardship, organic agriculture, fisheries, etc.

26 4. Build biodiversity business Greening existing business Agriculture Biodiversity mgmt services Cosmetics Extractive industries Finance Fisheries Forestry Garments Handicrafts New products & markets Pharmaceuticals Bio-carbon & REDD-plus Retail Water quality trading Tourism Biodiversity banking

27 5. Support business-friendly policy Reform of harmful subsidies Tax credits and other incentives Voluntary certification and eco-labelling Payments for Ecosystem Services Environmental responsibility and liability Environmental trading schemes Public access to information

28 Outline TEEB overview What is biodiversity worth? Why should business care? What can business do? Case study

29 Case study of Rio Tinto: mining, biodiversity offsets and NPI! Our goal is to have a net positive impact on biodiversity (Rio Tinto 2004)

30 Biodiversity offsets: A key tool for achieving net positive impact (NPI) Biodiversity offsets are measurable conservation outcomes resulting from actions designed to compensate for significant residual adverse biodiversity impacts arising from project development after appropriate prevention and mitigation measures have been taken. The goal of biodiversity offsets is to achieve no net loss and preferably a net gain of biodiversity on the ground with respect to species composition, habitat structure, ecosystem function and people s use and cultural values associated with biodiversity.

31 Valuing biodiversity offsets in practice: NPI in Madagascar (Olsen et al. 2011) Madagascar: QMM mine environmental action includes the protection of 60,000 ha of lowland humid rainforest adjacent to the mining lease Case study assessed economic benefits and costs of continued deforestation (estimated 1-2% p.a.) versus conserving the Tsitongambarika forest (TGK) Source: Asity Madagascar, 2009

32 NPV of conservation: US$ 17.3 million Present value US$/TGK 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 Costs: 9,763,951 Benefits: 26,839,291 5,000, ,511,463 2,939, , , ,842 Investment costs Recurrent costs Foregone agric income Biodiversity Soil conservation Water supply Carbon storage Note: Present values of costs and benefits associated with conservation of TGK (at 5% discount rate, 30-yr horizon, assuming 1% p.a. deforestation) Source: Olsen et al. (2011)

33 Payments for ecosystem services (PES) Present value US$/TGK 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 Costs: Benefits: $ $ $ $ $ $ $ 9,763,951 $ 26,839,291 5,000, ,325 Investment costs 2,511,463 2,939,205 Foregone agric income Recurrent costs Biodiversity 270, ,842 Soil conservation Water supply Carbon storage Source: Olsen et al. (2011)

34 For more information

35 Investing in HoB for a Green Economy HoB Investing in Nature for a Green Economy Economic case for policy reform to underpin HoB s role in a Green Economy (REDD+ finance as transition mechanism for a GE) Political platform & Partners forum to support HoB3 Engage private sector to invest in nature and to green their operations Green Economy Vision for HoB

36 Thank You