Based on pricing psychology, consumers are driven more by perceived cost than by the actual cost of a product, which is effectively represented by a monetary price tag. This is the premise behind Endangered Wildlife OÜ’s solution: the Biodiversity Valuator. Despite the complexities and challenges involved, the Biodiversity Valuator allows for the calculation of a measurable financial value for individual species in specific locations. This translates the value of a species into an understandable, universal monetary value.
Consumers have become more eco-consciousness but likewise, based on multiple studies, more sceptical due to greenwashing. The ability to value impact means that a company has an alternative means of expressing positive and negative biodiversity impact. Therefore, the valuation can be used for external communication to stakeholders as a means of demonstrating a company’s alignment with changing needs and regulations.
The Biodiversity Valuator increases a company’s accountability and transparency, and can further emphasise and showcase a company in terms of positive impact and changes in operating behaviour. This can influence the company’s relationships with, for example, financial institutions, supply chains and customers that demand improved environmental policies and conditions.
There is also increased interest and focus on the inclusion of biodiversity into financial reporting. This is emphasised by the involvement of financial institutions and businesses in the development of the Taskforce for Nature Based Disclosure.
The current focus is the development of measurement reporting. However, biodiversity measurement can become confusing and potentially misleading if the reader does not have expert knowledge. Therefore, the ability to reflect on the impact on biodiversity in monetary terms allows companies and their stakeholders to easily understand and interpret the impact by using a common relatable language.
This further allows companies to report and to measure their impact using more traditional financial metrics such as Impact ROI or Price to Impact Earnings. This will allow for more robust comparisons between companies. This opens the opportunity for investors (particularly impact and ESG-driven investors) to better assess investment opportunities based on impact. This is a new opportunity that has not previously been possible to achieve.
Likewise, the ability for companies to integrate biodiversity into their operations in a positive manner could open up new business opportunities or benefit from the risk-reducing characteristics of biodiversity. This could be used to negotiate better terms with insurance and credit providers based on reduced risk levels.
Additionally, the establishment of a financial impact value for biodiversity will allow companies to easily incorporate biodiversity into strategic decision making and cost-benefit analysis. While this might not currently have a direct financial return to a company, there is an indirect payback through the cost-benefit analysis as there may be more beneficial solutions available through the incorporation of biodiversity into a strategic decision.
It should be noted, though, that the biodiversity value is an impact value and not necessarily cash generated for the company. It is the social, economic and environmental value that a species generates through various means that directly or indirectly feeds into the economy. While biodiversity may directly generate income for some companies, the financial value calculated using the Biodiversity Valuator is financial value that measures the positive or negative impact that a company creates through its interactions with biodiversity.
If you would like to learn more about Endangered Wildlife OÜ’s Biodiversity Valuator and methodology, please request a copy of our Biodiversity Valuation Whitepaper below.