We know for a fact that there are 1m species at risk of extinction. We know for a fact that USD 44tn are at risk due to the impending biodiversity loss. We know for a fact that biodiversity provides humanity with vital material, non-material and regulatory services. We know for a fact that biodiversity underpins ecosystem functions and is necessary for resilient stocks of natural capital.
At the same time, according to The Economist, we know that chopping down 1ha of rainforest generates USD 1,200 for local communities but causes significant biodiversity loss and results in USD 25,000 worth of carbon emissions.
Now what if we were able to put a real USD value onto the biodiversity loss. We would then realise that it is not only USD 25,000 worth of carbon emissions that would be saved when saving the 1ha, and it is not only USD 1,200 lost for local communities. But in fact, it could be multi-thousands of USDs being destroyed per hectare.
Plants in the Amazon hold significant value besides their timber value. They can be sustainably harvested and used to equal or exceed the USD 1,200 income to communities. The fauna in the forests help to support the forest life, and equally generate value for the communities.
Understanding the sort of biodiversity value that Endangered Wildlife OUcalculates can help stakeholders on all levels to truly understand the cost of chopping down 1ha of forest. Sadly, though, until now there has been insufficient attention paid to biodiversity, and biodiversity has been grossly overutilised and marginalised.
The results coming from IPBES and many other species-specific scientific studies are shocking in terms of the declining trends in biodiversity. Policy makers are finally reaching a point that they are acknowledging the risks that we face as a global community caused by biodiversity loss. As result, there is a drive to integrate ecosystems into decision-making – this is key: Integration not isolation.
The goal to maximise the bottom line has been a short-sighted view that has caused irreversible damage and threatens the very businesses that have antagonised the current state. One of the biggest challenges for businesses though is how to alter the mindset and perceive biodiversity as an asset rather than a right to use.
There are challenges in interpreting and understanding metrics, in mitigating risks, and adapting businesses for a changing regulatory environment. Businesses need to find a balance between human demand and natural capital supply in order to ensure sustainable futures for businesses, society and economies.
Perhaps one of the issues is the lack of understanding. And, with the bottom line always playing a dominant role, until the financial benefit of integrating biodiversity can be understood and discussed through an organization, there will always be a level of reluctance.
While integrating biodiversity into businesses may be seen as foregoing profits, integrating nature may, in fact, reduce costs. Transitioning towards nature positive behaviour, according to the World Economic Forum, could result in 395m jobs and USD 10.1tn by 2030. And even though we know this, still only 20% of CEOs recognise biodiversity loss as a risk.
For many businesses there is a direct or indirect link with biodiversity – either through the supply of goods or services, or through the cost reductions and risk mitigation services that biodiversity provides. Each of these costs or benefits should be recognised in the same way as any other asset or liability is accounted for.
Following the events of COP15 there has been increased focus on two aspects of biodiversity for businesses.
The first is reporting. GRI recently published recommendations for its biodiversity reporting standards. This includes a significant amount of data that needs to be collected and published in annual reports. This is a valuable step forward in terms of being able to identify the levels of impact and exposure for businesses, but it holds the existing limitation of interpretation and understanding.
The second concept that is growing in terms of solutions for businesses are biodiversity credits and offsets. Both credits and offers serve a purpose and can be effectively used by businesses to signify their support for biodiversity. But there are two issues.
The first is that, unlike carbon, biodiversity differs based on location. For example, Endangered Wildlife OU has demonstrated that a wolf in Scandinavia has a value of nearly EUR 2m compared to the same wolf species in Yellowstone National Park which has a value of nearly EUR 5m. Even on a regional basis values differ, for example of a bald eagle in California is EUR 2.4m compared to EUR 1.2m in Iowa.
Therefore, from the perspective of offsets, it is not possible to directly offset a negative action in one region with a credit from another region. This is because biodiversity in different regions is not homogenous and therefore not truly fungible.
Secondly, how are credits priced? Take for example the Malaysian Biodiversity Conservation Certificate. Every 100sqm of restored or protected forest ecosystem was sold to oil palm companies at a price of USD 10. Now is that the just value of the ecosystem? – likely not.
By legal definition, a just value is the fair market value. The just value of a cow living on 100sqm of land would be worth more than USD 10, so why is an entire forest ecosystem worth only USD 10? For every hectare there would be significant value being generated so why would that hectare sell for a negligible value of less than or equal to a carbon credit – remembering that carbon is an element and not a living organism.
Therefore, while biodiversity credits have the potential to allow businesses to engage with conservation and consider biodiversity within their activities, it is crucial that the credits are based on real, just values.
The actual value that the species or ecosystem contributes to society, economy and the environment must be accounted for. This is something that is done for all other assets, so why make biodiversity an exception.
By financially valuing biodiversity, mechanisms such as biodiversity credits can be integrated at a more suitable level. An investment into biodiversity should be no different to that of a company investment. Biodiversity generates returns and creates significant value that should not be understated by using a simplified pricing method.
This is also a way to ensure that habitat restoration promotes ecosystem integrity. Planting trees for carbon is not always the solution and can, in fact, become detrimental to the native ecosystem. Only trees that are native to an area should be planted to ensure a healthy thriving ecosystem. This is how to maximise biodiversity impact and value, which far exceeds that of carbon.
Once the true value of biodiversity is understood, there is a greater incentive to support the foundations of life on this planet and to make a greater impact that is more meaningful than merely checking all the boxes. This is even a solution to actually quantify the SDGs such as Life on Land and Life under Water.
It is not the solution to rely on 30×30. This is a temporary measure that does not protect migratory species or those species that are not living in what are deemed as hot spots. Do we have the right to state that those lives are worth less?
Instead, biodiversity should be integrated into business strategies and benefit the bottom line. It is therefore the responsibility of the private sector to lead the way forward.
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 is the first to allow 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.