All corporations need a business relationship with nature
With nature as a negotiator at the table, companies can only take as much as they can give back
TLDR: Sustainability professionals often talk about the damage we are inflicting on nature. Flipping this paradigm, one might consider the benefits that nature is giving us every day — food, fibre, wood, metal, clean air, water, and so on — and what we must need to do to keep them coming. Nature gives to us unselfishly, yet its resources are limited. We must therefore have the necessary discipline to never take more than we can give back. By doing this, we might be able to scale business models that have so far remained small and overlooked. To ensure that this can happen, we must give nature a legal representation, as is becoming the case in many countries. Companies acting in service of nature must become more attractive to financial markets, and independent auditing for extra-financial reporting must become the norm. This piece originally appeared in February 2024.
The common narrative around sustainability revolves around all the damage we do to nature. Quickly, we jump to quantify this in tonnes of carbon. Biodiversity often enters the conversation as an afterthought. Social issues do not get any mention at all.
Carbon is indeed important. It can be quantified relatively easily, compared to many other measures of what we might be doing to the planet. Truth to be told, even simple carbon footprints can be difficult to assess with accuracy. With other sustainability-related measures, however, quantification gets even harder.
Other measures of human-caused damage, such as temperature rises or biodiversity loss are equally important. Quantification of these issues is indeed starting to gain traction.
Nevertheless there might be another way to look at this issue: Instead of focusing on the harm that humans are inflicting upon nature, why not consider the benefits that nature is giving to us every day? These include, but are not limited to food, fibre, wood, metal, clean water, and air.
We cannot guarantee that, by minimizing all harm on nature and keeping global warming below 1.5 degrees, nature will keep functioning the way it has over the past few decades. Climate-related disasters might happen anyway. Crop wipeouts could land millions of people in famine.
Imagine that you have a decades-long business partnership with an old friend. In recent years, you have been mistreating this partner in a variety of ways. Even for an outsider, it is clear to see that your relationship has soured as a result. To fix this relationship, you might establish a plan how you might stop beating up your old friend and calling them names by 2025. Or you might apologize for your shortcomings and send them a big gift that shows how much you still care about them.
In analogy, who is this old friend? Nature.
What might work better than pledging to stop mistreating your friend? Investing in your relationship.
Nature as a business partner
To make things clear, by “nature” a number of things can be meant: It could be a particular natural biotope, the planet’s atmosphere, or even humans with whom you interact regularly (or house plants, kids, and pets, for that matter). Humans are part of nature.
Nature is anything in your surrounding.
The most obvious business partnership with nature is agriculture. Farmers plant crops and make sure they have rich soil to feed of. In exchange, nature gives them food and fibre.
If a farmer becomes too greedy and starts planting monocultures or using pesticides to maximize their yield, nature strikes back. The monoculture depletes the soil of nutrients, and the pesticides kill of pollinators that help the plants reproduce. The result is a low-quality harvest in year one, and no harvest at all a few years down the line.
It is clear, then, that a farmer must treat nature a certain way to get what they want. In business, this is a no-brainer: If you treat your customer or key stakeholder rudely, you would not expect them to support you much longer. Nature behaves the same way — treat it wrong and it will no longer serve you.
In other sectors, this nature-dependent dynamic still plays out, albeit on a more abstract level. A bank, for example, will fail if it lends to farmers who manage their crops poorly and cannot repay their loans as a result. The bank must hence understand which farmers are managing their crops sustainably and wisely select its customers.
Benefits of doing business with nature
Viewing nature as a business partner has an obvious advantage: One sees all the benefits that nature brings us. According to the WWF, nature services amount to $125 trillion each year, which are currently provided to humans for free. This compares to around $100 trillion in human economic output: Despite our technological advancements, nature still brings more value to us every day than other humans have created for us.
Beyond this, a nature centric economy could unlock $10 trillion of business opportunities by transforming three sectors: food, infrastructure, and energy. If achieved, this would mean 10 percent more economic production than we are presently achieving every year.
Companies who capitalize on these opportunities early on will have a competitive advantage. What might sound somewhat wishy-washy at first (“have you ever had a conversation with a tree?”) quickly becomes economically viable, if not necessary.
Progress today: A mixed bag
Some companies are taking strides in giving back to nature. Other companies are not doing as much.
Positively outstanding companies include:
Unilever has set up a $1.5 billion climate and nature fund to protect and regenerate 1.5 million hectares of land, forests and oceans by 2030, among other restorative activities.
Walmart has committed to protecting, managing or restoring at least 50 million acres of land and one million square miles of ocean by 2030.
HSBC has set up a $1 billion investment fund, co-headed by climate change advisory firm Pollination. This fund intends to finance a diverse range of activities that preserve, protect and enhance nature over the long term and address climate change.
These trailblazers are few and afar nevertheless. Although many companies are vocal about their plans and past green actions, much of the actual progress is yet to be seen. According to a survey by McKinsey, even climate-related targets remain scarce beyond climate change:
Keep in mind that these are only targets, most of which will receive little regulatory scrutiny. From a high level, it is difficult to assess how many of these targets are even serious commitments, or rather marketing efforts that might resemble greenwashing. In the coming years, however, more clarity should arise as corporate sustainability reporting becomes the norm or even mandatory in many jurisdictions.
Three key components for nature-based business partnerships
Trailblazing companies are leading by example, but more rigorous mechanisms will be needed to make business practices that give back to nature commonplace. These three key mechanisms are a legal representation, better financial modeling, and sustainability-related auditing.
Nature needs a legal voice
Speaking business with nature does not work very well — companies need to quantify and interpret the signs. Following major wrongdoing, nature also cannot file a lawsuit to claim its damages in many jurisdictions.
The legal landscape, however, has started to change in favor of nature. In New Zealand, the Te Urewera National Park was recognized as a legal entity in 2014, and the Whanganui River was granted legal personhood in 2017.
In India, the Ganges and Yamuna rivers also gained legal personhood in 2017. The constitution of Ecuador proclaims the rights of nature "to exist, persist, maintain and regenerate its vital cycles" since 2008, followed in a similar fashion by the Bolivian constitution in 2010. In Colombia, the Amazon river ecosystem has legal rights since 2018, Quebec’s Magpie river obtained legal personhood in 2021, and the lagoon Mar Menor in Spain gained legal personhood in 2022.
These examples show that momentum for change is underway. Giving legal personhood to nature as a whole or to specific pieces might sound eccentric at first glance; however, it is an important tool for defending its rights in court. This helps ensure that nature-related services can continue to flourish.
Good companies need to become more attractive for financial markets
Several companies around the world have made strides in protecting and giving back to nature like they would to a business partner. Unfortunately, the market does not seem to understand this yet. As an illustrative example, here is the stock price of aforementioned company Unilever, which has set up a $1 billion climate and nature fund and generally is making enormous progress in commercializing sustainability with its household products:
Despite earning a net profit of €8.3 billion in 2022 — and similar figures for other years, investors are overlooking this gemstone. It is similar for other businesses, which we might cover in detail in the coming months.
One key reason might be that Unilever’s financial performance for now is not massively ahead of that of its peers. Given its sustainability-related actions, it likely will be performing better financially in the long run, as its competitors struggle to keep up with the legislation. Many investors might, in the meantime, place their bets on other high-flyers like oil and gas majors or defense groups to reap any remaining capital gains.
To make trailblazing companies more financially viable, sustainability-related metrics must be incorporated into financial modeling, as Wangari is pioneering. This allows investors to see which companies are truly fit for the long term. Once the market wakes up to this, investors can reap the returns.
Sustainability-related auditing must become the norm
In every annual report of a company, financial data is audited. This means that an independent firm has checked the numbers before they were published, and every investor and financial analyst should be able to trust them.
With sustainability-related numbers, this is not the case. Investors have to take a company’s word for their progress, or do a lot more in-depth research. Common reporting standards are being established, but up until now there are no auditing requirements for sustainability.
This is slowly shifting: In the US, a proposed bill would force auditors to review a company’s sustainability-related claims, too. Nevertheless, such auditing requirements are likely still a few years away while regulators wait to see what the new wave of corporate sustainability play out first. In the long term, such auditing rules will be necessary to create the necessary confidence in financial markets.
Creating win-win-win situations
Given the fact that for many places, appropriate legal representation for nature and auditing requirements regarding actions towards nature are lacking, for now it is an invisible partner at the table. Nevertheless, companies should loudly advocate for nature and create situations where every business partner, visible or not, wins.
Businesses have in the past been part of the problem. They have exploited resources and dumped their waste in inappropriate places, all for financial gain and to the detriment of nature.
Businesses now have the chance to be part of the solution. They should seize it.
What we’re reading at Wangari
An eye-opening roundup of how human activity has practically always changed the climate, by
. None of this even comes close to what we’re doing to the climate in the modern age, but famines, deforestation, and keeping livestock have had an effect on global temperatures since the agricultural revolution around 10,000 years ago. The benefit of hindsight is a beautifully written must-read.As
writes in Don't Worry About Human Population Growth—or Decline, we have human population sizes pretty well figured out. Of course the devil is in the details — pension systems and old-age care do need to be figured out in aging and shrinking populations. However, overall it seems that humanity has achieved the impossible: population growth while getting wealthier overall. Population decline should not worry us too much either, as longer life expectations and a host of other factors might play a role in the future as well.In mining, Scope 3 carbon emissions are up to 50 times larger than Scope 1 and 2. This means that whatever miners need to do before starting to dig, and whatever they dig up from the ground emits much more carbon than their own activities or the energy they need to fuel that activity. Scope 3 forces mining companies into rethink, as
pointedly writes, about whether or not to divest their assets, and how to use carbon offsets for these emissions.