Valuing the Priceless

Geneva, 12 December 2008 - Is it true that the service of pollination, provided mainly by bees for free, is estimated to be at least worth US$ 4 billion a year to the agricultural sector in the US alone? Or that coral reefs provide ecosystem services vital to off-shore fisheries and shoreline protection worth as much as US$ 600,000 per square kilometer? Or that the world’s protected areas (accounting for only 12% of total land surface) sustain a rapidly growing eco-tourism sector, support local livelihoods, and overall produce benefits for society in excess of US$ 4,000 billion a year?

The answer is yes, but here is the paradox: 20% of the world’s coral reefs and 35% of all mangroves have been destroyed, and two-thirds of all ecosystem services degraded, some perhaps beyond repair. Surely the economic incentives to sustainably manage and invest in conserving ecosystems and the services they provide, like water, food and fiber, should be well recognized. Unfortunately, the answer to this question is no.

One of the main underlying causes fuelling this paradox is the undervaluation of ecosystems and ecosystem services. For many ecosystems and their services, markets simply do not exist and thus lack convenient price tags. As a consequence, their over-use and degradation appear to carry very low to zero costs.

Such a clear flaw in the current accounting system seriously challenges business and its license to operate, as business can only function if ecosystems and the services they provide are healthy and balanced. Businesses not only impact ecosystems and ecosystem services, but also depend on them, and the implications of their degradation and loss are becoming clearer.

Not only does the loss of ecosystem services pose business risks, for example, through higher input costs, new government regulations, reputational damage, changing consumer preferences, and more rigorous lending policies, it also presents new business opportunities, including demand for new products, services and technology, and new revenue streams from managing and selling natural assets.

Recognizing and accounting for the full value of ecosystems, as well as the potential costs associated with the loss of ecosystem services, is required in order to reach the goals of efficient resource allocation and optimal decision-making.

Economic valuation is one approach that lends its support to this challenge by quantifying ecosystem relationships and expressing them in a monetary unit that is directly linked to a company’s bottom line. There are many ecosystem valuation toolkits and guidelines, but they have been developed for policy-makers and natural resource planners and managers. Geared towards project implementation by the public sector or as part of development assistance, they have limited applicability to business.

The WBCSD is looking to fill this gap through the development of a corporate guide to ecosystem and ecosystem service valuation with the aim of supporting the business license to operate in a changing ecosystems world.

http://www.wbcsd.org/plugins/DocSearch/details.asp?type=DocDet&ObjectId=MzI5MDM