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Symposium 2013

Proposal - Making the value of ecosystem services tangible – the role of governments and businesses

The Challenge

In light of declining public funds for nature conservation and in search of new investment opportunities for the private sector, water, biodiversity, soils and forests (notably their capacity for stor ...

In light of declining public funds for nature conservation and in search of new investment opportunities for the private sector, water, biodiversity, soils and forests (notably their capacity for storing CO2) are being turned into tradable goods. The prospect of going beyond compensation and actually turning nature conservation into a source of profit has captivated economists and nature conservationists alike.

Background: ecosystem services embedded in our social norms and values

Our culture is embedded in the natural world around us; nature consists of ecosystems. Hence, ecosystems are the very foundation on which our culture is built. In view of this, our social norms must start to acknowledge the value of ecosystem services in order to preserve and further develop our culture. A culture out of which our civilisation has grown. The role of governments is to protect nature and its ecosystems. Putting a value on ecosystem services enables policy and decision makers to make better informed decisions for sustainable inclusive growth within the planetary boundaries.

Ecosystem services are based on ecosystem functions and consist of the production of goods or services that society is dependent on, i.e. the direct and indirect contributions of ecosystems to people’s well-being. The long-term management of ecosystem services is dependent on well-functioning and robust ecosystems that are also resilient and adaptable to change. Improving knowledge of ecosystem services and making their value for society visible is a crucial step towards sustainable living.

Milestone targets should be set

The starting point is that by better defining the economic value of ecosystem services and integrating this value into the economy, we will be better equipped to use ecosystems sustainably and increase their capacity to produce ecosystem services. Governments therefore need a strategy to make the value of ecosystem services tangible. To make effective environmental efforts, governments should take the view that greater awareness of the value of ecosystem services is needed and that policy levers may need to be developed to manage the economic value of ecosystem services.

Governments should set milestone targets that include a target on ecosystem services and resilience. This should clarify the importance of ecosystem services and identify and systematise the factors affecting their maintenance. The importance of biodiversity and the value of ecosystem services should become generally known and integrated into economic decision-making, political considerations and other decisions in society where relevant and reasonable. Sweden has taken a decision to set such a target by 2018 at the latest. To this end, the Government has instructed the Swedish Environmental Protection Agency, in consultation with the Swedish Agency for Marine and Water Management, to compile information on important ecosystem services in Sweden and to identify factors affecting their maintenance. This data enables the Government of Sweden to analyse options for measures and propose cost-effective methods and initiatives to ascertain the value of ecosystem services and to improve the knowledge base concerning the value of ecosystem services to society. This year the Government of Sweden has assigned an inquiry to analyse measures and propose methods and initiatives to better ascertain the value of ecosystem services in order to improve the knowledge of the value of ecosystem services in civil society. The inquiry is to propose measures to promote awareness of the importance of biodiversity and the value of ecosystem services as well as integrating this concept in economic and other decisions in society where relevant and reasonable.

The role of business

Business is the major source of investment and job creation. Using the dynamic and innovative force of entrepreneurship and private sectors, new solutions can be found for challenging problems. Markets can support in generating economic growth and increasing demand for the rule of law, but need to be embedded within rules, customs and institutions.

The value of ecosystem services and the world’s natural capital is also a matter for business. Dependency on ecosystem services may pose a fundamental risk for the private sector. Investors should increasingly start to look at their dependency on ecosystem services in business production and supply chains and the risk this entails. At the same time, there are tremendous business opportunities. Huge investments are needed to protect, provide, maintain and sustainably use the ecosystem services in industrialised and developing countries.

One aspect of this is that the private sector must start to take into account calculations of the value of ecosystem services upon which they depend, both in the direct business model and in the supply chain and business partners. Businesses should observe due diligence – a process whereby companies ensure compliance with national laws, but also manage the risk of a wasteful use of ecosystem services with a view to avoiding this.

Governments should protect by enforcing environmental legislation and protection of national ecosystem services and natural capital. At the same time, businesses have a responsibility to respect the rules and regulations set in their national jurisdiction, no matter in where their business activities operate.
Many environmental NGOs are worried that putting a price on ecosystem services would weaken environmental legislation and open the door for corporations and failed states to “buy their way out”. It is important to clearly state that the role of government is to protect ecosystems, and that this can be done by putting a value, but not necessarily a monetary one, on most assets – natural capital included. Parallel to building up a case for markets for ecosystem services and natural capital, governments need to push for democracy and rule of law on a global scale. Business leaders are accountable to their stakeholders. This may well include consultation with local communities and partners.

However, the management, board and investors are not elected officials representing the community’s interest, and therefore cannot be accountable to the community to the same extent as democratically elected officials. So when creating a natural capital market, it’s important to hold government responsible and accountable for the protection of ecosystems and natural capital. Meanwhile, corporations could benefit enormously from using entrepreneurial, dynamic market forces to create new innovations for protecting, providing and using ecosystem services. Having said that, corporations must respect laws and regulations set in their own national jurisdiction and applied in extraterritorial jurisdiction, and address the risk of wasteful use of ecosystem services with a view to avoiding it.

Making the value of ecosystem services tangible to enable implementation

Public access and sharing of ecosystem service data is essential to enable all stakeholders with an interest in capitalising on ecosystem services to share in the market’s potential. This is important not least to enabling innovators and start-up enterprises to participate in problem-solving challenges in how to make use of ecosystem services while protecting them.

There is a need to determine the value of existing ecosystem services, what is required to enable this valuation, who should conduct the valuation, the contexts in which a valuation is required, relevant and reasonable, and the type of valuation methods that are appropriate from the point of view of reliability and costs. In this process, transparency regarding use of the database is essential, as well as building trust on how to use it.

Furthermore, governments need to analyse options for measures and propose cost-effective methods to achieve the target on the importance of biodiversity and the value of ecosystem services. They also need to propose a plan for how these measures can be implemented at national, regional and local level.
Governments should also indicate the economic impact on relevant actors and the potential impact on the government budget.

Consultation and reporting procedures

An important task for government is to engage in dialogue with relevant stakeholders. Any decision to include ecosystem services in the government budget would therefore benefit from collaboration with a cross-party committee.

Another essential task is to consult with researchers who have worked on and shaped discussions on ecosystem services and valuation methods, so that the outcome is grounded in scientific methods. To facilitate this work, a reference group may be set up comprising representatives of central government agencies and local and regional government, as well as representatives of the business sector and civil society.