Alexandra Tracy, Green Finance Advisor of Friends of the Earth (HK)

Biodiversity is vital to most long term business survival.  Businesses need natural resources and ecosystem services as inputs into their production processes. They also depend on healthy ecosystems: networks of plants, animals and microbes which support life by dealing with waste, maintaining soil, air and water quality and much more.

Research by the World Economic Forum suggests that US$44 trillion of economic value generation – or more than half of the world’s total gross domestic product – is dependent on nature and natural ecoservices.

Negative business impacts on biodiversity

But businesses can have major negative impacts on biodiversity and natural habitats.  Direct effects are often connected with land use and waste generation, which can lead to habitat loss, land degradation and erosion or air, soil and water pollution.  Species loss may be compounded by the introduction of non-native species which can disrupt surrounding ecosystems.

The potential for damage to previously pristine areas in South East Asia is considerable.  Four of the world’s “biodiversity hotspots” are located in the region, which is home to many unique species.  In addition to the business itself, construction of associated infrastructure, such as roads and railways, can often harm or destroy the habitats of animals and plants in the area.  They may also make poaching and illegal resource extraction easier.

Moreover, the indirect impacts of a business on biodiversity may also be highly damaging, and are often most difficult to identify, manage and control.  For example, they may arise out of sourcing and production of goods and services associated with the company’s supply chain.  They might be caused by the use or disposal of the company’s products by partners or consumers.  Or they might come from changes in behaviour by employees or local communities which leads to problems such as unplanned migration or increased demand for natural resources.

A company’s failure to consider biodiversity and ecosystems could lead to disruption to supply of essential commodities, economic loss from floods or fires and even scarcity of food products.  As well as these practical problems, biodiversity loss can pose reputational, regulatory and financial risks to businesses.

How business can be part of the solution

Happily, businesses can learn to develop better relationships with biodiversity and healthy ecosystems.

The first step is to understand a company’s potential impacts on the environment, both directly and through its supply chain, and the potential opportunities to improve its performance.  These assessments may cover an analysis of the geographical localities – in particular, any biodiversity hotspots – that may be affected by the company’s operations, as well reviewing its upstream and downstream activities, including the extraction or production of the materials used in the business.

Using this analysis of biodiversity impacts, a business can define its priorities and set goals for improvements.  These may include targets for sustainable sourcing or promoting regenerative farming practices within the supply chain.  Some companies are also seeking to limit their land occupancy or to protect critical habitat around their operations, for example, by creating ecological corridors that allow for the movement of species.

Companies also can play an important role in protecting biodiversity by supporting external conservation efforts.  The United Nations Environment Programme estimates that investment in biodiversity, climate change and land restoration efforts (which currently stands at a little over US$130 per year) needs to triple in real terms by 2030 and increase four times by 2050 if the world is to meet its climate change, biodiversity and land degradation targets.  Currently, private finance makes up only 14 percent of the total investment, leaving enormous scope for business to do more.

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