Many environmentalists believe that the discipline of economics is an enemy to the environment. After all, they often argue, isn’t that what got us into this mess in the first place? Aren’t economists the ones who keep telling us to be efficient at all costs?
Robert Alexander (2005)
The natural human behaviour of making choices has led to the economic conflict between whether to invest in biodiversity or whether to invest in a project that, on the outset, appears to be more economically and financially attractive and viable.
There exist also opportunity costs in the later decision-making processes – for example, what benefits are being relinquished by establishing a game ranch for aesthetic tourism purposes rather than hunting tourism purposes, or the lost tourism by stocking more common species rather than the Big Five?
Each of these decisions has its benefits involved, but concurrently its costs, specifically lost benefits or opportunity costs. Decision-making should entail the acceptance of those decisions that maximise the benefits and minimise the costs inflicted by the forgoing of other incomes from alternative decisions.
It is ignorant to ignore the critical function that economics plays in the management of natural resources. Yet, it is equally naïve to assume that traditional economic theory can fully model and reflect the value that ought to be placed on natural resources.
Opportunity costs represent the base choices that exist in the decision-making process. Due to the social and political impact that an environmental choice can have, it remains important to consider the realistic alternatives that present themselves to policy and decision makers.
Yet the economic applicability of opportunity costs allows them to lend themselves also to later decision-making processes – those that exist post the security of the environmental product implementation. The traditional challenge has been representing these opportunity costs with viable values that do not cause the decision-making process to unjustifiably bias either in favour of or against a particular choice.
Since opportunity costs in their broadest sense reflect realistic forgone alternatives that may arise, it was necessary to find a valuation technique that equally represents the option for alternatives. The traditional valuation techniques have been criticised in the past, although they have their continued use.
This is what Endangered Wildlife OÜ has tackled. The company has developed a credible and justifiable statistical and financial valuation methodology that eliminates the legacy issue by calculating the financial value that biodiversity creates for society, economy and environment. This means this it is now viable to integrate biodiversity into the decision-making and reporting processes in a manner that has been unattainable in the past.
About Endangered Wildlife OÜ
Endangered Wildlife OÜ is an award-winning ESG SaaS company that is contributing towards solving the climate crisis by developing the Biodiversity Valuator, a disruptive solution that allows its users to calculate and understand the financial value of their impact through biodiversity. Endangered Wildlife OÜ has been nominated for the Earthshot Prize 2022.