Accounting for carbon emissions in supply chains now occupies a central place in our efforts to achieve sustainable business practices and limit the negative effects of climate change on society and business and accelerate the process of decarbonizing the economy. Decarbonisation is the process of reducing or removing carbon dioxide (CO2) and other greenhouse gases from the atmosphere in order to meet the goals of the Paris Agreement and limit climate change.
However, achieving sustainable development is not limited to greenhouse gases and climate change. The biodiversity crisis is a topic of increasing importance for the achievement of the Sustainable Development Goals, both at the national level and for business. Studies show that more than 1 million species of organisms are currently threatened with extinction, and the rates at which some species are disappearing are tens to hundreds of times higher than the average for the past 10 million years (IPBES, 2019). Biodiversity decline also negatively affects the ecosystem services we receive from nature. For these reasons, biodiversity conservation is increasingly central to the ESG framework as well.
The topics of biodiversity conservation and the decarbonization of the economy are in fact inextricably linked. On the one hand, climate change is one of the five main causes of the biodiversity crisis. Changes in conditions in different ecosystems as a result of changes in temperatures, amounts and periods of precipitation, flowering of plants and other factors lead to changes in the equilibrium points of nature. Often the result is a decline in the quality of the ecosystem services we receive from nature.
What is the importance of ecosystem services for business?
The role of ecosystem services is not always obvious, but French Central Bank research from 2021 shows that 42% of the assets of financial institutions are highly or very highly dependent of at least one ecosystem service. Taking into account indirect dependencies on ecosystem services, all issuers of securities in the portfolio examined in the study are at least somewhat dependent of all ecosystem services through its value chains. This suggests that many companies are not sufficiently aware of their relationships and dependencies on biodiversity and ecosystem services, and the associated risks and opportunities. Similar research has been conducted by other central banks and major financial institutions and highlights the direction of the financial sector to take biodiversity and ecosystem services increasingly seriously in their risk assessment models. New tools and methodologies for assessing the investment risk associated with biodiversity loss are also constantly emerging, which will also affect investment decisions and cash flows.
Biodiversity and its conservation are not only associated with risks, but also with many opportunities to achieve better results in the pursuit of climate change mitigation goals.
Ecosystem services include regulating services (such as climate control through carbon capture and storage) that have the potential to play a key role in strategies to achieve climate goals. Ecosystems with a high level of biodiversity also provide higher value through more efficient ecosystem services. In other words, by thinking harmoniously about biodiversity and decarbonisation, we can achieve an upward cycle of development – environmental improvement leading to more decarbonisation through natural ecosystem services. These interrelationships highlight the importance of coordinated efforts for biodiversity conservation and decarbonization, which can lead to long-lasting and cumulative benefits aimed at achieving the Sustainable Development Goals.
Ecosystem services
Regulatory Services:
- Climate control: By absorbing and storing carbon, which helps limit global warming.
- Water Purification: Naturally filter pollutants and improve water quality.
- Pesticide and disease regulation: Some ecosystems help control pests and diseases, thanks to predators and natural antagonists.
Material services:
- Food: Plants, animals, and fungi produce foods such as fruits, grains, meat, and fish.
- Medicines: Many medicines are developed using natural sources and biologically active substances.
- Wood and fiber: Forests provide wood, lumber, and other fiber resources such as cotton and hemp.
Cultural services:
- Recreation and tourism: Natural places provide spaces for recreation, sports and tourism.
- Aesthetics and inspiration: Nature inspires art, philosophy and science.
- Spiritual Significance: Many natural places have spiritual and cultural significance to different communities.
Support services:
- Oxygen production
- Formation of soils
- Water Cycle
The benefits of biodiversity and its synergies with sustainability goals are not limited to climate goals – it contributes directly or indirectly to all 17 sustainable development goals of the United Nations. As with combating greenhouse gas emissions, businesses can incorporate biodiversity assessment and conservation as an additional tool in achieving their sustainable development goals, as well as bringing to the fore hidden business risks associated with the loss of ecosystem services.