Stakeholders: NGOs Archives

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:

  • Human life support: Earth's natural systems provide "ecosystem services," such as purifying water, enriching soil, providing natural infrastructure that reduce floods and protect assets (think wetlands on the Gulf Coast), and providing clean air and a stable climate (here's a fun video on these services). The long-standing, best estimate on the value of ecosystem services has been $33 trillion annually, roughly the same order of magnitude as the global economy.
  • Climate and carbon market value: The world's forests and farms can sequester carbon that could be worth billions in a carbon markets (however, the prospect of a functioning carbon market in the U.S. is very low in the near-term).
  • Self-interest: Species provide us medicine and sources of food. We find species that result in blockbuster new drugs to fight heart disease or cancer, for example.
  • Business continuity: All companies depend on natural services, such as water, either directly or in their supply chains. For a business wanting to, say, expand a facility, integrating the value of this input into investment decisions will be critical.
  • Inspiration, best practices, and biomimicry: Over billions of years, Nature has found the most efficient way to do things. Think of spider silk as a model for strong, flexible fibers or a shark's ultra-efficient movement through water, which has inspired everything from Speedo's now-banned swimsuits to Airbus' more aerodynamic plane fuselages. (See 15 cool biomimicry stories.)
  • Innovation: By cataloging our dependencies on nature, we can identify opportunities for better products and services, such as Bayer's drought-resistant crops (Note: Bayer is a client of mine).
  • Risk reduction: Managing your nature-sourced supply chain well can help avoid headaches and possible litigation. Gibson Guitars found this out the hard way in 2009 when the Fish and Wildlife Service raided the company for allegedly using illegally harvested rosewood in its instruments (giving an ironic twist to the word "ax").

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.

December 30, 2014

The 10 Most Important Sustainable Business Stories of 2014

Happy holidays and (almost) New Year.

For the 6th year now, I've taken a shot at summarizing the biggest themes in sustainable business over the last 12 months -- that is, stories about the biggest environmental and social challenges and how companies are navigating them. This year, given the incredible amount of activity on climate change, I devoted the first five themes to the biggest challenge of all -- the science, the costs and benefits (mostly the latter) of dealing with it, the deep impacts on energy and utility businesses, and so on.


For the skimmers out there, here are the top 10 "headlines" I created...
1. The bad news — climate change is now.
2. The good news — tackling climate change is getting much cheaper.
3. The utility and energy businesses are changing fundamentally (well, some of them are).
4. Serious legislation like a carbon tax — even in the U.S. — is seeming possible again.
5. A powerful social movement on climate takes shape.
6. Strategy and mission start to gain the upper hand on short-termism.
7. Rivals embrace radical collaboration.
8. The absurd amount of food we waste gets more attention.
9. A teenager pressures Cola-Cola and Pepsi – and wins.
10. The fight against inequality finds new business allies.

The full article appears as usual on Harvard Business Review online, and began like this...

It’s been an amazing 12 months in the world of sustainable business. From climate change to inequality, the scope of humanity’s biggest environmental and social challenges came into much sharper focus this year — as did the scale and range of opportunities to do something about them. And citizens, using new social media tools and old-fashioned marches, rose up to drive change. Both in response and pre-emptively, the world’s leading companies continued to aggressively pivot their businesses toward more sustainable and innovative ways of operating.

To make sense of all of this activity, I made a list of the year’s big themes, looking for the bigger story across multiple examples. But I also ran across a few specific company stories that were just really compelling or cool. So here is my admittedly subjective look at the top 10 sustainability stories and themes of the year, with sustainability broadly defined as encompassing people, planet, and profits:

1. The bad news — climate change is now.
The subtitle of this year’s summary could be “reports, reports, reports,” with important and fascinating (no, really) studies from economists, government agencies, scientific bodies, and business coalitions — all making a compelling case for action on climate change.

Over the last two years, the Intergovernmental Panel on Climate Change issued its fifth, multi-thousand-page assessment of global climate science. But some new, more layman-friendly voices are telling the science story and explaining how costly to business a hotter world already is. The American Association for the Advancement of Science (AAAS) issued the clearest document from scientists I’ve ever seen, a pithy report telling us that “What We Know” is the following: (1) “Climate change is happening here and now,” (2) the risks of irreversible, highly damaging impacts are high, and (3) the sooner we act, the lower the cost. Another report, the U.S. National Climate Assessment, led with the statement that climate change “has moved firmly into the present.”

Adding a business perspective, a group of heavy hitters, including billionaire Michael Bloomberg and former U.S. Treasury Secretaries Hank Paulson and Robert Rubin, issued the persuasive Risky Business Report. This short paper outlines how climate is “already costing local economies billions” and describes how hundreds of billions of property are at risk...

To see the rest of the discussion, the 50 or so links to interesting stories, and my 5 themes to watch out for in 2015, check it out here...

Have a great New Year!

(Andrew's new book, The Big Pivot, was named a Best Business Book of the Year by Strategy+Business Magazine! Get your copy here. See also Andrew's TED talk on The Big Pivot. Sign up for Andrew Winston's blog, via RSS feed, or by email. Follow Andrew on Twitter @AndrewWinston)