February 7, 2011

Dow Asks, What's the Business Case for Protecting Nature?

The business logic for protecting nature has always been a harder sell than making the case for other green initiatives.


Companies are increasingly seeing the obvious benefits of slashing energy use, and beginning to include in their calculations the considerable risk reduction from managing water well or limiting the use of toxic chemicals. But there are aspects of going green that are much less directly quantifiable than kilowatts or tons of carbon -- or the avoidance of regulations or a lawsuit.

For example, how should companies handle the overuse of natural resources and the reduction in the planet's "biodiversity" (that is, the abundant variation in plant and animal life)?

One large company, Dow, is now tackling this issue, working with the environmental NGO The Nature Conservancy to try and make the business logic clearer. This odd couple announced a collaboration last week to "work together to apply scientific knowledge and experience to examine how Dow's operations rely on and affect nature."

But we don't have to wait for their work to come to fruition to cite a number of possible compelling arguments for managing the intersection of business and natural resources well, including:

In the end, all of these arguments are really part of a much larger logic, which was laid out best in the 1999 groundbreaking -- and now classic -- book Natural Capitalism by Paul Hawken, Amory Lovins, and Hunter Lovins (more info on ongoing work by the Lovinses here and here). In total, it's about a systematic and realistic view of the world.

In some sense, asking "What's the business case for valuing nature?" is ridiculous. We live in an integrated network on a single planet with limited resources. Either we manage these resources well, or we don't survive. In our current mode, we're systematically knocking down pieces of our own support structure. Or in business terms, we're drawing down the assets on the balance sheet of the world. This is no smarter than taking out load-bearing walls in your home.

But regardless of the macro-logic, business does run on financial valuations. Since none of the benefits above are truly measured in our models, we need news tools to value the natural world in business. This is why I was excited to see the announcement about the work Dow's doing with The Nature Conservancy.

The novel alliance will look at Dow's business and its supply chain through a natural world lens. They will identify risks and opportunities at Dow's facilities and in its products and supply chain, and try to value them correctly. In short, the $10 million collaboration will "advance the incorporation of the value of nature into business." But perhaps more importantly, the project will be an open-source exercise, with the partners sharing all the tools and lessons learned. As Michelle Lapinski, TNC's Director, Corporate Practices, says, "We hope to demonstrate to other companies that incorporating nature's services into decisions is a responsible, smart and viable business strategy."

As part of the joint press conference and announcement, Dow's CEO Andrew Liveris put it all in context: "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...companies that value and integrate biodiversity and ecosystem services into their strategic plans are best positioned for the future by operationalizing sustainability."

The Nature Conservancy's CEO Mark Tercek talked recently on his blog about the opportunity here for Dow and for nature. "Imagine the potential of a company with the size and reach of Dow making a commitment to incorporate nature into its global business strategies. What might that mean for green infrastructure? What might that mean for nature? What might that mean for a company’s bottom line? What might that mean for the health and prosperity of the communities around the world? Together, we’re going to find out." (For longer views on this partnership and perspectives from Dow's VP of Sustainability Neil Hawkins and the Conservancy's Mark Tercek and Glenn Prickett, see excellent pieces from GreenBiz's Joel Makower and TIME's Bryan Walsh.)

As usual with sustainability strategy, companies must strike a tough balance between pursuing competitive advantage and the kind of open-source partnership needed the tackle global-scale issues. But the companies that "get" how to value nature in their operations first will have the advantage, even if they then share that information. The leaders will win by integrating these new valuations effectively into their processes, products, and services. They will create an advantage through superior execution. It will be fun to watch how Dow navigates this tricky path -- while developing the tools for other businesses to follow in their footsteps.

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