Harmonizing People and Nature: A New Business Model

Gretchen C. Daily

Professor, Stanford University, USA
The MIDORI Prize for Biodiversity 2010 Prize Winner

Until the next asteroid hits Earth, it is humanity – more than any other force – that will dictate the future course of all known life. Collectively, we have the power to wipe out most macroscopic species, and to change dramatically the future course of evolution of the rest. We exercise this power with little regard for the implications for human well-being, let alone that of our living companions. In the current 100-year period – “on our watch” – we are projected to drive about half of the world’s plant and animal species to extinction.

The realization is dawning that traditional approaches to conservation are doomed to fail. Nature reserves are – and are likely to remain – too small, too few, too isolated, and too subject to change to sustain more than a tiny fraction of Earth’s biodiversity (maybe just 5% of species) and life-support services to society, over the long run. For conservation to have enduring success, it must become both economically and culturally attractive and common-place in the sea of human activity.

A powerful vision is emerging worldwide, a future in which people, governments, and corporations recognize the values of natural capital – embodied in Earth’s lands, waters, and biodiversity – in supporting human well-being, and routinely incorporate these values into decision-making.

Realizing this vision requires recognizing the world’s ecosystems as natural capital assets. If properly managed, they yield a stream of vital benefits called “ecosystem services”. Mainstreaming natural capital into every-day decisions requires turning the valuation of ecosystem services into effective policy and finance mechanisms – a problem no one has solved on a large scale. A key challenge remains that, relative to other forms of capital, natural capital is often poorly understood, scarcely monitored – in many important cases – undergoing rapid degradation. Often the importance of ecosystem services is recognized only upon their loss, such as in the wake of the 2004 Indian Ocean Tsunami or the 2005 Hurricane Katrina. Natural capital and the ecosystem services that flow from it are typically undervalued by governments, businesses, and the public, if indeed they are considered at all.

Recently, however, great momentum has built around efforts to reveal the values of natural capital and mainstream them into decisions. Satoyama landscapes in Japan stand out as an important model. These are systems in which diverse farming, forestry, animal husbandry, fishing, and other activities are shaped and maintained by people in ways that sustain both human and environmental well-being. The “Satoyama Initiative” announced by the Government of Japan at the G8 Environmental Ministers’ Meeting in Kobe, in 2008, marks a very important commitment to harmonizing people and Nature, to revitalizing both traditional, cultural practices and the biodiversity-friendly character of these places. The Satoyama Initiative illustrates the global leadership needed to rebuild sustainable interactions between people and Nature and to address challenges of maintaining security in food, water, energy, climate, and health. It is fitting that Japan also led the world in hosting the 10th Session of the Conference of the Parties to the Convention on Biological Diversity, fostering critical and inspiring advances in conservation and human development.

China also has made major investments in restoring natural capital and, over the past decade, these have amounted to over USD 100 billion. These investments are focused on restoring forests and grasslands, to help secure people from flooding and sand storms, improve drinking and irrigation water supply, maintain efficient hydropower production and foster more sustainable farming and other aspects of human well-being. Other inspiring models of success are emerging in all major regions of the world.

The challenge now is to replicate and scale up these models. This requires innovation in three crucial arenas. The first is to develop new tools and approaches to value natural capital and incorporate those values into planning and policy. In promising a return (of services) on investments in nature, the scientific community needs to help decision-makers quantify and forecast this return. The second is to demonstrate the power of these tools in major resource decisions, in models of success that can be communicated widely to inspire. These demonstrations should be designed for replication and scaling up, to accelerate the embedding of natural capital approaches into formal business and government planning widely. The third challenge is to engage leaders in key institutions worldwide to magnify the impact of these successes, and effect the deep, global, and game-changing transformation needed.

A New Business Model

Where shall we begin in addressing these three challenges? How can people think, in a formal way, about which species and ecosystems are needed for human well-being? One way is to imagine trying to set up a happy, day-to-day life on the moon. Assume for the sake of argument that the moon miraculously already had some of the basic conditions for supporting human life such as an atmosphere and climate similar to those on Earth. After inviting your close family and friends, the big question would be, which of Earth’s millions of species do you need to take with you?

Tackling the problem systematically you could first choose from among all the species exploited directly for food, drink, spice, fiber and timber, pharmaceuticals, industrial products (such as waxes, lac, rubber and oils) and so on. Even being selective this list could amount to hundreds or even several thousand species. The space ship would be filling up before you’d even begun adding the species crucial to supporting those at the top of your list. Which are these heroes? No one knows which – nor even approximately how many – species are required to sustain human life.

This means that rather than listing species directly, you would have to list instead the life-support functions required by your lunar colony; then you could guess at the types and numbers of species required to perform each. At a bare minimum, other companions on the spaceship would have to include species capable of supplying a whole suite of ecosystem services that we take for granted. These include generating four classes of ecosystem services:

  • goods such as food, water, timber and fiber
  • life-support services such as stabilizing climate, protecting valleys and coastlines from inundation, renewing soil fertility, and protecting or improving water quality
  • life-fulfilling services for recreational, aesthetic, educational, community and spiritual opportunities
  • options for the future, such as genetic diversity for pharmaceuticals and improvement of crop varieties

Using this framework, leaders in communities, governments and businesses are beginning to incorporate the values of natural capital into decisions.

To address the first challenge in doing so, creating credible tools and approaches, the Natural Capital Project has developed a software system for Integrated Valuation of Ecosystem Services and Tradeoffs (called InVEST, available at www.naturalcapitalproject.org). InVEST quantifies the provision of ecosystem services today and under alternative scenarios for the future. It helps decision makers visualize the impacts of potential policies, identifying tradeoffs and compatibilities between environmental, economic, and social benefits by modeling and mapping the delivery, distribution, and economic value of ecosystem services under alternative scenarios.

Addressing the second challenge, turning theory into real-world policy and action, decision-makers in diverse countries and sectors worldwide are using this tool in resource decisions concerning climate, water, energy, infrastructure development and many other aspects of human well-being. For example, InVEST is now being tested and used in China in land-use planning, with dual goals of securing critical natural capital through targeted investments across landscapes and to alleviating poverty through targeted wealth transfers from coastal provinces to inland regions where many ecosystem services originate. Specifically, the Chinese government aims to secure biodiversity and ecosystems for flood control, sand storm protection, hydropower production efficiency, irrigation supply, more productive agriculture and ecotourism. In addition, it wants to change the economic structure in rural areas to increase local household income while simultaneously making local households’ patterns of land utilization and agricultural production more sustainable. Future ecosystem service investments in China are potentially enormous: a new set of reserves is being planned that will span 25% of the country.

Another powerful demonstration of these approaches is advancing rapidly in Latin America. “Water funds” are being established to link beneficiaries of natural capital to suppliers, through a payment system. In water funds, water consumers (such as municipal water suppliers, hydropower facilities, irrigators in agriculture, and beverage companies) pay into a fund that is invested in improving upstream watershed management for securing water quality and supply. Investments are of several kinds: protection and restoration of native forest and other vegetation; fencing of rangelands; implementation of best agricultural practices; and capacity building and education. The design, implementation and monitoring of these funds is now being standardized through a “water fund platform” across 32 major cities in Latin America.

There are new demonstrations emerging in the marine context as well, for zoning in order to achieve coastal protection from storm surges and sea level rise, sustainable fisheries, recreation and tourism, wave energy, and other key benefits.

Together, these kinds of efforts now span a wide array of sectors, including agriculture, forestry, mining, energy, transportation, water supply, and urban development. The country of Colombia is taking the most comprehensive approach, factoring natural capital values into all resource licensing and mitigation (in agriculture, forestry, mining, transportation, and energy sectors).

What we see today is only a beginning. Leadership is crucial to advance this movement and create a new paradigm for harmonizing conservation and human development in the 21st Century and beyond. Future generations depend on Japan and other nations to drive innovation and demonstrate real change for a sustainable world.

Profile of Dr. Gretchen C. Daily

Dr. Daily has discovered the economic costs of environmental destruction caused by human societies and their economic activities, and has contributed to the preservation of the ecosystem through utilizing the concept of ecosystem services. She has published over 150 scholarly papers, and has made tremendous contributions in creating international research frameworks on the environment such as Ecosystems and Biodiversity (TEEB). In recent years, she has focused much of her energy on “the Natural Capital Project,” the ultimate objective of which is to improve the state of biodiversity and human well-being by motivating greater and more cost-effective investments in both. She has enhanced recognition of the value of ecosystems and has successfully translated scientific knowledge into practical frameworks that can be used by business and in the political area. It is expected that she will continue such innovative work and promote awareness of the concept of ecosystem services in the international community.