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website, 12 Jul 05 “Natural Capital” Investment or Higher Costs and Lower Profits Full New Millennium Ecosystem Assessment Report (PDF) New Millennium Ecosystem Assessment Report Urges Corporations to Face Environmental Challenges and Maximize Green Opportunities 12 July 2005 - Companies who use the Earth’s natural resources more wisely are likely to see bigger profits and enjoy more stable and predictable businesses, a new report published today argues. Many of the planet’s ecosystems such as fisheries, forests and water supplies are in decline. This could in as little as five years, trigger increased costs for companies who rely directly and in-directly on nature-based services. Therefore companies who manage ecosystems more prudently and who invest in their care and conservation are likely to enjoy multiple benefits including enhanced profits, improved reputations among consumers and new business opportunities. They will also be better placed to respond to sudden ‘shocks’ including higher oil prices, a dramatic fall in the availability of raw materials or greener rules, regulations and laws that may be in the pipe-line. Meanwhile, research and development in cleaner and greener technologies will increasingly be needed to reduce ecosystem damage and to better use nature’s goods and services. Investment in new technology is likely to pay dividends and spawn new products and businesses as governments, local authorities, shareholders and consumers demand higher standards and greater accountability. These are among the findings of the latest report of the Millennium Ecosystem Assessment entitled Ecosystems and Human Well-being: Opportunities and Challenges for Business and Industry. Klaus Toepfer, Executive Director of the United Nations Environment Programme (UNEP) which has played a key role in the Assessment and its spin off reports, said:” In the past the goods and services delivered by nature have all too often been seen as free and available at little or no cost. This report makes it clear that this must and will change as these resources become increasingly scarce and society demands higher standards of environmental care”. “Much of the Earth’s remaining natural capital, including genetic diversity up to the carbon storage of greenhouse gases and the materials and services underpinning tourism and developments in the food, pharmaceuticals and tourism industries are found in developing countries. For example the carbon absorption and storage capacity of the world’s tropical forests are now conservatively estimated to be worth $60 billion a year. We need imaginative financial mechanisms and incentives to give these resources real value and to encourage re-investment in the natural capital we have already over-used ,” he said. “In doing so we will not only conserve the life support systems upon which current and future generations depend, but also provide new income flows to overcome poverty and help us meet the United Nations Millennium Development Goals whose implementation will be reviewed at the 2005 World Summit in New York in September,” said Mr Toepfer. “Fortunately, many corporations are already aware of this and are grappling with these fundamental issues through initiatives such as the UN Secretary-General’s Global Compact. New markets, such as those that trade carbon and access and benefit sharing of genetic resources, are also developing. And many governments are drawing up regulations and legislation to steer firms onto a more resource efficient path, he said. “However, given the scale of environmental damage and the urgency to act much, much more needs to be done. I hope this report, the work of over 1,300 experts including representatives of business, will be that wake up call” said Mr Toepfer. The overall Millennium Ecosystem Assessment has concluded that two thirds of the world’s ecosystems ranging from wetlands and coastal areas to forests and soils are either degraded or being managed unsustainably. The new spin off report argues that this has important ramifications for business and industry. Some key Points from the Report Business and industry rely on ecosystems such as forests, grasslands, mangroves, rivers, lakes and the like for a variety of services including water and air purification, storage of greenhouse gases, nursery grounds for fish, pollination of crops, raw materials and new products. The impact of ecosystem degradation will be felt over the short term—the next five years—and the longer term, the next 50 years. Changes in ecosystems are increasing the likelihood of “surprises” in the future such as a collapse of previously reliable sources of food, pest outbreaks, catastrophic floods or the disappearance of economically valuable species. The net value or benefit of many ecosystems is higher when they are intact than when they are damaged or converted to other uses. For example, an intact wetland in a northern country is worth nearly $6,000 a hectare. Drained and changed for intensive agriculture, the value falls to just over $2,000 a hectare. Intact mangroves are worth $1,000 a hectare. Cleared and converted for shrimp farms, the value falls to about $200 a hectare. Water scarcity is probably of greatest importance to businesses and will, like changes in the oil supply, impact companies globally. Up to a fifth of freshwater use currently exceeds “long-term sustainable supply” and is being met by water transfers or unsustainable “mining of groundwater”. Companies will have to make decisions about where they locate operations based on water supply. Meanwhile, businesses that find new and more efficient ways of recycling and using water will fare better. Climate change presents significant threats and opportunities for business and industry in terms of the impact on ecosystems and their goods and services and the chances to develop and sell profitable low carbon technologies. Overexploitation of the marine environment is already impacting some businesses as a result of lower catches of fish for food and animal feed. More are likely to suffer as a result of pollution triggering disease outbreaks and blooms or ‘dead zones’ in the world’s oceans and seas. The decline in fish stocks has triggered a growth in farmed fish and products such as shrimp. Increasing consumer awareness of the environmental impacts of farmed fish and seafood is now favouring those companies with more sustainable and less environmentally damaging practices. Companies who continue to pollute and damage ecosystems may find themselves squeezed out of profitable locations by other industries. The report cites the case of tourism. “With tourism becoming the world’s largest employer and an important economic factor in developing countries, native forestlands, coral reefs and other natural resources will be increasingly perceived as vital business assets of many private companies,” it says. Companies who fail to factor in the business risk of declining ecosystems and the business opportunity of conserving them may find that raising finance and insurance becomes harder and more expensive. Environmental risk and the importance of ecosystems to a corporation’s ‘bottom line’ are increasingly being recognised by fund managers. This is underscored in numerous recent surveys and reports including ones by UNEP’s Finance Initiative endorsed by a wide range of financial institutions. What Business Leaders are Saying Antony Burgmans, chairman, Unilever N.V: “ The solutions of the past are often not robust enough under the conditions of global change and need to be re-thought and re-implemented”. Steve Percy, retired Chief Executive Officer of BP America and co-chair of the new report: “ All businesses will be more competitive if they create their strategies with the current and projected condition of ecosystems and ecosystem services in mind, and the Millennium Ecosystem Assessment provides an excellent source of information on the trends and linkages important to business”. The World Business Council for Sustainable Development: “ Business cannot function if ecosystems and the services they deliver—like water, biodiversity, fiber, food and climate—are degraded or out of balance”. Jeffrey Immelt, Chairman and Chief Executive Officer of General Electric Company: “We will focus our unique energy, technology and manufacturing, and infrastructure capabilities to develop tomorrow’s solutions such as solar energy, hybrid locomotives, fuel cells, lower-emission aircraft engines, lighter and stronger materials, efficient lighting, and water purification technology”. links Related articles on Global: general environmental issues |
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