4 May 2016 | Do you ever feel that you are the last one to know something important? Or, have you ever had a sense that others around you—in competitor companies – are putting together fragmented, hard-to-read market signals like puzzle pieces, and discerning a picture in which they see business implications that you may be missing?
For those who have been watching the corporate leader awakening to a new body of work on investing in nature for business problem-solving and systems optimization, it definitely feels as if a vast group of business professionals are missing an increasingly well-documented trend.
The eagle-eyed corporate leaders—who have been scanning the horizon for trends and key new insights—are increasingly investing in nature-inspired solutions to business challenges, as well as financing the opportunities in restoring and maintaining natural systems. Some companies have been doing so for more than twenty years.
For example, Dow now has almost two decades of data from the United States to show how well a wetland can naturally filter water and improve water quality—at a tiny fraction of the cost of a built wastewater-treatment plant. Royal Dutch Shell has come to the same conclusion and is investing in large-scale wetland-based solutions to water management in the Middle East. Coca-Cola has concluded that maintaining a key input to their product (water) requires corporate investments in reforesting and revegetating lands far upstream from bottling facilities, even though lands are owned by others. Apple sees innovation and leadership opportunities by investing in trees and sustainable forest-management approaches that can balance and thus address the inputs for packaging. Danone has also been innovating and leading on the increasingly business-relevant issue of climate change, through trifecta-play investments that sequester carbon, benefit local people and economies, and introduce greater resilience into natural systems—within an approach that scales positive impact by enabling other companies to also invest. Allegheny Power has rationalized its real estate portfolio, while concurrently mitigating operational risks and realizing significant revenues and tax credits, by asking what parcels of land could do for the company versus what it could do for the natural environment. The list goes on, as laid out in a new BSR-REF business brief.
The business cases made to support these investments vary based on the specifics of the situation. In some companies, such as Dow and Shell, the let’s-work-with-nature approach is more cost- and operationally effective. End of case. In other companies, the fundamental drivers of investments in ecological restoration were the clear dynamics associated with demand and supply of a key natural resource input—such as watershed-wide, total water demand, and supply challenges. In other situations, investments make business sense when considered in relation to a growing set of threat multipliers, such as market demand trends (for timber, among many other commodities) or a decrease in reliable, high-quality supplies of essential raw materials, particularly when combined with climate change, water stress, and other challenges that present a growing array of risks to supply chains.
In many companies, once nature-based solutions to business issues are identified, then building a persuasive final business case is often a mix—as UCLA’s Ed Leamer has asserted is essential for building any business case—of “pictures, words, and numbers, in that order” (though pictures can be graphs representing patterns). The spreadsheets and financial assessment are key—and they should reflect low numbers because investments in infrastructure are commonly seen as adversely affecting the bottom line, at least in that quarter.
However, less widely appreciated in building the business case is the role of visual imagery. These pictures can include actual photographs that people can hold in their minds, or graphs that illustrate effectiveness of solutions. For Dow, a picture of three bottles of water—showing the relative viscosity versus clarity of various water-treatment solutions perfectly illustrated the effectiveness of a substantially cheaper nature-based solution to addressing water quality challenges (relative to a traditional waste water treatment plant solution). The business case was made.
Yet, despite the growing set of case examples of nature-inspired and natural-system restoration initiatives, as laid out in the BSR-REF brief—and the increasing ability of people in companies to build the business case through a combination of pictures, words, and numbers—it is still only a relatively small set of companies that are currently investing in nature-based solutions to business challenges and ecological restoration opportunities.
This relatively slow (though accelerating) uptake to date is not surprising in light of innovation diffusion theory, stemming from the work of Everett Rogers and others. Based on this research, the rate of innovation diffusion is expected to be a function of the relative advantage of new approaches, compatibility with existing values and practices, simplicity and ease of use, ease of testing (“trialability”), and observable results.
Investing in nature-based solutions does commonly offer relative advantages, ease of use, and testability. However, these ecological solutions can be perceived as incompatible with an engineering mindset and expected practices—in which certainty and assurances are the focus—while also extending beyond the customary training of engineers.
In addition, obstacles to nature-based solution uptake exist in terms of internal corporate dynamics. New expenses can be hard to justify within companies, even if they result in long-term savings. Corporate representatives reported, in the interviews conducted for this paper, that experienced business managers are often reluctant to lead nature-based solutions projects, particularly if they lack experience with the issues. Such a project hardly seems like an assured path to promotion—just as any new approaches (ones that are untested within a specific company) are often skeptically viewed as potential career risks.
These hurdles make it all the more remarkable that a growing number of corporate innovators and early adopters are investing in the (literal) foundations of their business—that is, the very ground on which key business facilities sit, or from which suppliers source inputs.
The reported results, though some are preliminary, are often positive and measurable across multiple metrics, including financial, community, and environmental. Illustrations of such measurement approaches have been developed by Restore the Earth Foundation, Commonland, and Dow in collaboration with The Nature Conservancy (TNC) through the Ecosystem Services Identification & Inventory, or ESII, among others. These and other such tools can show how nature-based solutions can offer significant quantitative, benefit-multiplier results and advantages over alternative approaches.
With both a set of case studies and tools, the takeaway for corporate decision makers is to systematically start asking:
- Are there opportunities to more efficiently run our business, by working with and gaining leverage from natural systems?
- Are there natural solutions (in every sense of the word) to business challenges?
- Can investments in maintaining, restoring, or mimicking nature’s systems create less expensive and more effective solutions to business operational problems?
- Can these investments offer multiple opportunities and upside, in terms of a benefit multiplier for local residents and regional communities, as well as for natural systems—in addition to financial return on investment?
The next step for corporate decision-makers is simple. Review the case examples and explore the relevance of further investigation for your particular company. Could adoption of nature-based solutions as well as investment in restoration of nature by businesses provide a promising pathway forward?