The Economic Benefits of Biodiversity

Biodiversity, a measure of the variety of life on Earth, encompasses the diversity of plants, animals, and microorganisms, as well as the ecosystems they form and the variety of interactions between species. Biodiversity is essential to the health of our planet and all functions on earth, but its significance extends beyond environmental benefits and has profound implications for business.

In fact, new research from S&P Global Sustainable finds that 85% of the world’s largest companies in the S&P Global 1200 have a significant dependency on nature across their direct operations.

Economic endeavors rely heavily on biodiversity and natural capital, highlighting its importance as a driver of sustainable growth and innovation. Biodiversity underpins essential ecosystem services businesses rely on, including water purification, crop pollination, climate regulation, and nutrient cycling. Preserving biodiversity can ensure the continued availability of these critical services, directly benefiting businesses that rely on natural resources.

Changes to, or the loss of, natural ecosystems and the biodiversity within those ecosystems can have profound implications on companies in a variety of industries.

Agribusinesses, for instance, depend heavily on pollinators like bees for crop production. The loss of biodiversity, often caused by pollution, deforestation, and unsustainable land use, can disrupt these services, leading to increased costs and reduced productivity.

Consider the tourism and hospitality sector, which often depends on natural features, such as coral reefs, to attract tourists interested in snorkeling and diving. Coral reefs support diverse marine life, and their decline due to climate change and pollution can reduce tourism revenue.

The automotive sector depends directly and indirectly on biological diversity and ecosystems for renewable resources such as natural rubber for tires, leather for seats, and ready access to water supplies for production processes.

In the financial sector, biodiversity can be a consideration for investment decisions. Accounting firms are increasingly being asked to evaluate ESG disclosures as well as financial reporting.

The diversity of species offers a variety of materials, chemicals, and organisms essential to new products and services. Pharmaceutical companies, for instance, derive numerous drugs from compounds found in plants and animals. Similarly, the fashion industry relies on the variety of plant and animal fibers for fabrics and clothing production. Biodiversity is vital for research and development, driving innovation in various industries.

Preserving biodiversity can also open new markets and create economic opportunities. Consumer demand for eco-friendly and sustainable products is rising, and companies that integrate biodiversity considerations into their operations can gain market share. This shift can lead to the development of new business models, such as eco-tourism or sustainable agriculture, that can be profitable and environmentally sustainable.

For businesses, investing in biodiversity can act as a risk mitigation strategy because biodiverse ecosystems are typically more resilient to market volatility. For example, a diverse forest can be more resistant to pests, benefiting the timber industry. Biodiversity also plays a role in climate change mitigation, which is increasingly becoming a concern for businesses worldwide due to regulatory and reputational risks.

Recognizing the interdependencies within an ecosystem—specifically, the extent to which an organization depends on ecosystem services—can provide valuable insights into the potential risks the organization might encounter if an ecosystem service is disrupted.

From another perspective, engaging in biodiversity conservation can enhance a company’s reputation and brand value. Consumers have become more acutely aware of environmental issues and favor businesses that are committed to sustainability.

When a company openly communicates its dedication to eco-friendly practices, it showcases transparency and accountability and can build trust over time. This trust becomes a valuable asset, particularly during times of crisis or when introducing new products or services.

With the growing emphasis on sustainability, governments worldwide are implementing regulations to further protect biodiversity. Businesses will benefit from being proactive in understanding these regulations to be better protected from the financial risks of noncompliance. Additionally, tax or other financial incentives will likely continue to be available for businesses that successfully and consistently demonstrate a commitment to sustainable practices.

The economic benefits of biodiversity are abundant. Biodiversity ensures the longevity of natural resources that are essential for business operations and opens avenues for innovation, risk mitigation, and market growth. While the global economy benefits from nature, it is also driving nature loss and simultaneously prohibiting ecosystems’ ability to sustain their intrinsic services.

As the world more fully recognizes the importance of sustainability, biodiversity will become a crucial factor in strategic business planning, offering challenges and opportunities. Companies that understand and integrate the value of biodiversity into their business models will likely thrive in the emerging green economy and find value in staying aware of current conservation efforts.

If you’re curious about the benefits of biodiversity and risks associated with your industry, reach out to the Sensiba sustainability team for more information.