Ecosystems and Human Well-being: Opportunities and Challenges for Business and Industry: What We Know

Key Trends in Ecosystems and Their ServicesThis is part of the Millennium Ecosystem Assessment report Ecosystems and Human Well-being: Opportunities and Challenges for Business and Industry

 

Over the past 50 years, humans have changed ecosystems more rapidly and extensively than in any comparable period in human history, largely to meet fast-growing demands for food, fresh water, timber, fiber, and fuel. The changes we have made to ecosystems have contributed to substantial net gains in human well-being and economic development. However, these gains have come at growing costs in the form of degradation of many ecosystem services (see Table 1), increased risks of abrupt and harmful changes in ecosystems, and harm to some groups of people.

 

Approximately 60% (15 out of 24) of the ecosystem services examined in this assessment are being degraded or used unsustainably—including 70% of provisioning and regulating services. While 15 services have been degraded, only 4 have been enhanced in the past 50 years, 3 of which involve food production: crops, livestock, and aquaculture.

The harmful consequences of ecosystem change will grow during the first half of this century. Most of the direct drivers of degradation in ecosystem services are currently remaining constant or growing in intensity, and they reflect various indirect drivers such as population growth, increasing per capita consumption, economic arrangements, sociopolitical and cultural factors, and technological change.

 

Actions to increase one service often cause the degradation of other services. For example, food production may be increased at the expense of water quality. It is difficult to fully assess the costs and benefits of ecosystem changes because many costs are difficult to quantify, slow to become apparent, or may appear some distance from the original activity. For example, excess nitrogen from fertilizers intended to grow more crops may be transported downstream, triggering so called “dead zones” (areas of low to no oxygen) in coastal waters. The degradation of an ecosystem represents the loss of a capital asset, yet the economic impact of this loss is poorly reflected in financial measures, including national accounts. (See Figures 3 and 4.)

 

 

Changes being made to ecosystems are resulting in an increased likelihood of potentially high-impact and abrupt changes in physical and biological systems, such as disease emergence, dead zones in water bodies, and fishery collapses. This increased likelihood of abrupt change stems from a variety of factors, including loss of biodiversity, increased numbers of invasive alien species, overharvesting, climate change, and nutrient loading. Capabilities for predicting such abrupt changes are improving, but for most ecosystems and their services, science cannot yet predict thresholds where nonlinear change will be encountered.

 

Whether or not a business directly uses natural resources, these trends could affect supply chains, access to markets, competitive dynamics, and corporate reputation. Some specific implications for businesses of these trends include:

Challenges

  • increased regulatory constraints as governments seek to protect degraded services;
  • risk to reputation and brand image for businesses most directly tied to threatened ecosystems and services;
  • substantial increase in costs of important inputs (such as water or agricultural products);
  • increased vulnerability of assets to floods or other natural disasters; and
  • conflict and corruption that may arise in areas plagued by scarcity of ecosystem services.

Opportunities

  • new markets and product opportunities to address ecosystem service scarcities;
  • enhanced corporate image and reputation, political capital, and brand value from genuine proactive management of environmental issues; and
  • cost and operational advantages derived from early recognition and action with regard to ecosystem service scarcity.

Ecosystem Trends of Particular Importance to Business

Six major changes are having or will have profoundly negative impacts on ecosystems: water scarcity, climate change, habitat change, biodiversity loss and invasive species, overexploitation of oceans, and nutrient overloading. Individually and collectively, these changes will have an impact on business.

Water Scarcity

Potentially of greatest importance to business is water scarcity. The MA found that 5–20% of freshwater use exceeds long-term sustainable supply and is met by water transfer or unsustainable mining of groundwater. Roughly 15–35% of irrigation withdrawal is estimated to be unsustainable. Scarcity of water supply will affect all businesses either directly or indirectly, just as increases in the price of petroleum affect the state of the global economy. Governments will be called on to allocate supplies and adjudicate water rights. Increasingly, markets and market mechanisms are being used to help achieve efficient use through prices that reflect scarcities.

 

 

Climate Change

Observed recent changes in climate, especially warmer regional temperatures, have already had significant impacts on biodiversity and ecosystems, including changes in species distributions, population sizes, the timing of reproduction and migration events, and an increase in the frequency of pest and disease outbreaks. Many coral reefs have undergone major bleaching episodes.

By the end of the century, climate change may be the dominant direct driver of biodiversity loss and changes to ecosystem services globally. The scenarios developed by the Intergovernmental Panel on Climate Change project an increase in global mean surface temperature of 2.0–6.4 degrees Celsius above preindustrial levels by 2100 (see Figure 5), increased incidence of droughts and floods, and a rise in sea levels of 9–88 cm (4–35 inches). The balance of scientific evidence suggests that harm to biodiversity and degradation of ecosystem services will grow on a worldwide basis (although some ecosystem services in some regions could be initially enhanced) if the global mean surface temperature increases more than 2 degrees Celsius above preindustrial levels or at rates greater than 0.2 degrees per decade. IPCC projections indicate that atmospheric carbon dioxide concentrations must eventually stabilize at or below 450 parts per million in order to contain global average temperature increases to no more than 2 degrees Celsius.

Energy and Climate Change: Turning Threats to Opportunities

Energy production and use illustrate how threats to established ways of business from ecological stress (climate change) can turn into business opportunities and competitive advantage.

Reliable and abundant forms of energy are essential for economic development and human well-being. Throughout the twentieth century and the current decade, energy supply has been dominated by plentiful fossil fuels, including coal, petroleum, and natural gas. Vast investment and infrastructure have grown to facilitate the production, transportation, processing, and use of these forms of energy. Despite the very important role fossil fuels have played in economic development, however, their use has taken and continues to take a toll on ecosystems and the services they provide to people. This toll comes in the form of impacts to ecosystems during extraction, spills and air pollution during transportation, and air pollution and greenhouse gas emissions during processing and use.

The Millennium Ecosystem Assessment identified climate change as one of the most important drivers of stress and degradation of ecosystems and ecosystem services. Climate change is directly linked to the buildup of carbon dioxide in the atmosphere from the use of fossil fuels. A critical challenge in the protection and restoration of ecosystem services is the transition to an energy future with lower carbon emissions, less air pollution, and minimal risks from the extraction and transportation of fossil fuels.

At first glance, important industries will be threatened by such a transition: The producers of coal, oil, and natural gas; electric utilities; industrial users of energy such as steel and metals and chemical companies; and companies that produce devices that rely on fossil fuels, such as auto manufacturers. Nevertheless, leading companies have already seen that important business opportunities are possible in this transition.

For example, some leading oil and gas producers are making significant investments in renewable energy businesses, such as solar photovoltaics, and are seeing sales rise rapidly. These same energy producers along with several important utility companies are participating actively in establishing formal markets for trading in carbon emission reductions as these gain value under governmental mandates. These companies have already seen the volume of trades accelerate to a market of significant size. At the same time, most major oil and gas companies are focusing on the role that natural gas can play in the intermediate term as a lower carbon bridge (versus coal) to a renewable energy future.

Most major automobile companies are trying to capitalize on the growing demand for more fuel-efficient vehicles through the introduction of cars that combine electric motors with gasoline power (hybrids) and are positioning themselves for a hydrogen-based energy paradigm by working to perfect fuel cell technology. Power equipment manufacturers see a rapidly expanding market for wind energy and are acquiring expertise in order to compete. Leading industrial users of energy have committed to more efficient processes that will result in lower carbon emissions not only to reduce costs but also in appreciation of growing customer and societal concerns. Leading companies in some cases actively argue for greater scrutiny of the climate issue by the public and by governments.

These leading companies are moving ahead of changes called for by government regulation and in some cases ahead of customer demand. This “beyond compliance” and technology-forcing approach is driven by the desire to shape future markets and policy environments to favor their individual company’s strengths, attract the best partners and employees, build brand image and customer/investor loyalty with market segments that value their leadership initiatives, and reduce the long-term costs and risks that could arise as society becomes increasingly concerned about the loss of ecosystem services.

Leading companies are seeing that by being proactive, they are writing the rules of future competition to enhance their chance of long-term success.

“Increasingly for business, ‘green’ is green.”—Jeff Immelt, Chair and CEO of General Electric

 

 

Habitat Change

More land was converted to cropland in the 30 years after 1950 than in the 150 years between 1700 and 1850. Cultivated systems now cover one quarter of Earth’s terrestrial surface. A further 10–20% of grassland and forestland is projected to be converted between 2000 and 2050, primarily to agriculture. The projected land conversion is concentrated in low-income countries and dryland regions. Conversely, forestland is projected to continue to increase within industrial countries. (See Figure 6.)

 

 

Biodiversity Loss and Invasive Species

The total number of species on the planet is declining and the distribution of species is becoming more homogeneous. Over the past few hundred years, humans have increased species’ extinction rates by as much as 1,000 times over the background rates that have been more typical throughout the planet’s history. (See Figure 7.) Some 10–30% of mammal, bird, and amphibian species are currently threatened with extinction. Freshwater ecosystems tend to have the highest proportion of threatened species. In addition, the majority of species are seeing their populations fragmented and their population sizes and ranges decline. Genetic diversity has also declined globally, particularly with respect to cultivated species. The spread of invasive alien species and disease organisms continues to increase due to both deliberate translocations and accidental introductions related to travel and trade. Invasive species generally threaten native species and many ecosystem services. (See Figure 8.)

 

 

Overexploitation of Oceans

Increasing demand for seafood has been matched by increasing fishing capacity and technological advances. Reported catches from oceans increased steadily over the last century, reached a peak in the mid-1980s, then began to decline. (See Figure 9.) A number of economically important fisheries, such as the Atlantic cod off Newfoundland, have collapsed abruptly under intense fishing pressure, causing significant social, economic, and ecological system disruption.

Fleets now fish greater and greater distances from shore and in deeper and deeper waters as coastal fisheries have been depleted. (See Figures 10 and 11.) As fishing expanded across the open ocean, the proportion of depleted stocks rose from 4% in 1950 to 25% in 2000, while the “undeveloped” stocks plummeted from 65% to 0. During the period of increased catch, the overall consequences of the serial depletion of one fishery after another did not become obvious until all major ocean fish stocks had been exploited on an industrial scale.

Fishing has had a significant impact on ocean ecosystems above and beyond simply removing massive amounts of biomass and depleting individual species. Fishing targets the top predators, which are also the very large fishes in the ocean. As much as 90% of these fish—sharks, tuna, marlin, and swordfish—have been removed by industrial fishing. Overfishing of these large species has changed the composition of the oceans, modified interactions among species, and resulted in the targeting of previously less desirable species that feed lower in the food web.

Widespread collapses, overfishing of top predators, and declining catches are all symptoms of seriously disrupted ocean ecosystems. Such systems are not able to provide the full range of services they did in the past, including the provision of food. The ability of an ecosystem to absorb threats or to be resilient may be compromised with such massive disruption to the integrity of the natural system. Some businesses are already experiencing direct impacts through decreased provision of fish for food or feed, while other businesses are or may be indirectly affected by the increased frequency of outbreaks of disease or blooms of nuisance species that are symptomatic of unstable ocean systems.

 

Overall Business Implications of Ecosystem Change

  • Businesses are facing increased governmental regulation or stakeholder pressure (from activist shareholders, civil society, or customers) as threats to important ecosystem services from these changes become more apparent.
  • Leading companies are seeking advantages in addressing these issues first in an effort to build reputation and carve out markets and business opportunities.
  • Insurance companies are taking new approaches to setting rates that reflect growing risks from degradation of ecosystem services.
  • New technologies will be needed for extraction, use, and management of ecosystem services.
  • Businesses should take integrated responses to these challenges—recognizing their interdependence and the advantage of deploying flexible strategies, such as emissions trading.

Nutrient Overloading

Humans have doubled the flow of reactive nitrogen on the continents. Some projections suggest this may increase by roughly two thirds by 2050 and that the global flux of nitrogen to coastal ecosystems will increase by 10–20% by 2030, with most of this increase occurring in developing countries. (See Figure 12.) Excessive flows of nitrogen contribute to eutrophication of freshwater and coastal marine ecosystems and acidification of freshwater and terrestrial ecosystems, with associated harm to biodiversity. Nutrient pollution in coastal areas often triggers harmful algal blooms and is increasing the number and size of zones of low or no oxygen (so called “dead zones”). In addition, nitrogen can contribute to ground-level ozone, destruction of stratospheric ozone, and climate change—all with attendant environmental and health implications.

Unexpected and Abrupt Changes

Changes being made to ecosystems are increasing the likelihood of “surprises” in the future, such as pest and disease breakouts, catastrophic floods, or species extirpations. As noted earlier, for example, intense fishing pressure caused the collapse of a number of economically important fisheries, such as the Atlantic cod off Newfoundland. (See Figure 13.) Examples such as this show that “tipping points” appear to be a very real phenomenon for ocean ecosystems under intense fishing pressure, and the same may be true for other ecosystems. Our abilities to foresee these abrupt changes are limited, and businesses caught by such surprises could face significant and unexpected challenges.

Business Implications of Ecosystem Change – Abrupt Change

  • Business strategies must be flexible in the face of uncertainties.
  • Businesses may experience negative repercussions when connections between today’s action and tomorrow’s damage become clear in retrospect. Businesses need to develop processes to help spot these connections at the earliest possible time.
  • The insurance industry is beginning to reflect these environmental uncertainties and the potential for “proximate cause” in its pricing and coverage exclusions.

 

Cultivated versus “Wild” Services

Sectors of the global economy are in major transition from reliance on ecosystem services provided in “the wild” to those provided through farming. For example, nearly one third of the fish and timber supplied to markets comes from farming. However, farming brings new sets of environmental concerns and impacts on ecosystems. For example, carnivorous fish such as salmon are fed fishmeal, which is made from wild caught fish. As the farming of carnivorous fishes grows, care must be taken that doing so does not further deplete wild populations. Sustainable aquaculture will also minimize nutrient and chemical pollution, escapees, and disease. Increasing consumer awareness of these issues is bringing pressure to bear on the aquaculture industry, favoring companies with more sustainable practices and policies.

Business Implications of Ecosystem Change – Cultivated Services

  • Companies in new and rapidly expanding businesses are under increasing pressure to address the environmental consequences of their activities.
  • Businesses throughout the supply chain and marketing channels of these new businesses need to be aware of environmental concerns, the impacts on ecosystems, and resulting threats and opportunities.

 

Business Implications of Shifting Demands

  • Protections afforded industries, such as agricultural subsidies, which were based on the traditional view of ecosystems and what they provide, may be removed to support new uses and priorities.
  • New business opportunities are developing based on changing values and demands of societies.

 

 

Shifting Demands on Ecosystems

As societies gain in wealth, their impact on ecosystems tends to increase and their demand for ecosystem services diversifies—often to consume more meat and to engage in more tourism and recreation.

Scenarios in the Assessment

To help decision-makers understand the implications of these trends in ecosystem services for the future, the MA developed a set of scenarios to explore the relationships between ecosystem services and human well-being. Scenarios are often used by businesses as planning tools or to explore logical consequences of different sets of conditions or choices. The MA scenarios compare alternative approaches to environmental decision-making and economic development and can inform decision-makers about the consequences of these alternatives.

The MA scenarios are distinct from previous global exercises due to the focus on ecosystem services and the effects of ecosystems on society and human well-being. The scenarios begin in 2000 and run until 2050 and were constructed along two main dimensions: contrasting transitions of global society (regionalization versus globalization) and contrasting approaches to governance and the implementation of policies related to ecosystems and their services (proactive versus reactive). (See Figure 14.)

No scenario represents “business as usual,” although all begin from current conditions. None of the scenarios represents a “best” or a “worst” path. Instead, they illustrate different choices that may be made and some of the trade-offs that will be faced. There could be combinations of policies that produce significantly better, or worse, outcomes than any of the four scenarios. However, across all scenarios there is a general tendency toward reduction in the availability of supporting, regulating, and cultural ecosystem services in order to increase the availability of provisioning services. For example, the ability of ecosystems to provide soil regeneration or climate regulation might be sacrificed in favor of increasing the supply of food, fiber, or timber (in the short term). Such choices often trade future capacity of ecosystems to produce services for more services today.

 

The four scenarios demonstrate that at every scale there are opportunities for combining advantageous approaches to achieve synergistic benefits. Actions to preserve marine fish species, such as “no take” marine reserves, for example, have also been shown to make coral reefs more resistant to the pressures associated with declines in other species or excess nutrients. Advantages may also be found by combining various aspects of each scenario. For instance, combining the advantages of green technology (TechnoGarden) with fairer markets (Global Orchestration) and flexible ecosystem management that encourages local creativity (Adapting Mosaic) may lead to improvements in ecosystem services and human well-being beyond those found in any individual scenario.

At the global level, and across all scenarios, the model projections had some common and robust results:

  • Demand for provisioning services such as food, fiber, fuelwood, and water increases.
     
  • Food security remains out of reach for many people, and child malnutrition will be difficult to eradicate even by 2050 despite increasing food supply under all four scenarios and more diversified diets in poor countries.
     
  • Vast, complex changes with great geographic variability occur in world freshwater resources and hence in their provisioning of ecosystem services.
    • Climate change will alter precipitation patterns. Precipitation could increase over more than half of Earth’s surface, making more water available to some societies and ecosystems but likely increasing the frequency of flooding in many areas. Climate change will also cause a substantial decrease in precipitation in some areas, causing a decrease in water availability. These areas could include highly populated arid regions such as the Middle East and Southern Europe.
    • While water withdrawals decrease in most industrial countries, water withdrawals and wastewater discharges are expected to increase enormously in Africa and some other developing regions, and this will intensify the water stress there.
       
  • Deterioration of the services provided by freshwater resources—such as aquatic habitat, fish production, and water supply for households, industry, and agriculture—is expected in developing countries. Under the scenarios that are reactive to environmental problems, this deterioration will be severe, while in the scenarios that are more proactive about environmental problems, it will be less severe but still important.
     
  • Growing demand for fish and fish products leads to an increasing risk of a major and long-lasting decline of regional marine fisheries. Aquaculture cannot relieve this pressure so long as it continues to rely heavily on marine fish as a feed source.
     
  • Land use change is expected to be a major driver of changes in the provision of ecosystem services up to 2050.
    • The scenarios indicate that 10–20% of current grassland and forestland may be lost between now and 2050. This change mainly occurs in low-income and arid regions. The provisioning services associated with affected areas (genetic resources, wood production, and habitat for terrestrial biota and fauna) will also be reduced.
    • Threats to drylands and their services occur at multiple scales, ranging from global climate change to local pastoral practices. For example, sub-Saharan Africa is projected to expand water withdrawals rapidly to meet needs for development. Under some scenarios, this causes a speedy increase in untreated return flows to freshwater systems, which could endanger public health and aquatic ecosystems. Expansion and intensification of agriculture in this area may lead to loss of natural ecosystems and higher levels of surface and groundwater contamination. Continued population growth and improving economic conditions over the next decades will exert additional pressure on land resources and pose additional risk of desertification in dryland regions.
       
  • Threats of wetland drainage and conversion, with adverse impacts on the capacity of ecosystems to provide adequate supplies of clean water, increased in all scenarios.
     
  • Terrestrial ecosystems are currently a net sink of CO2 at a rate of 1.2 (+/–0.9) gigatons of carbon per year. They thereby contribute to the regulation of climate, but the future of this service is uncertain. Deforestation is expected to reduce the carbon sink. Proactive environmental policies can maintain a larger terrestrial carbon sink (including incentives for such practices as afforestation and reforestation).

Most of the direct drivers of change in ecosystems are expected to remain at today’s levels or to increase over the next few decades. (See Figure 15.) Direct drivers include habitat change, climate change, invasive species, overexploitation, and nutrient pollution.

 

Business Implications of Scenarios

  • Opportunities should be abundant for businesses positioned to address developing countries’ needs for food, fiber, and fresh water, and especially those businesses that can enhance and build local capacities for provisioning services in sustainable ways.
  • Challenges will grow for businesses operating along the fish products supply chain, and technologies or instruments that improve the environmental sustainability of fishing and aquaculture should be highly valued.
  • Wetland protection will be a major societal concern that businesses must factor into planning.
  • Atmospheric carbon capture through terrestrial ecosystems should have value that can be realized through forest protection, afforestation, and reforestation.

The scenarios demonstrate that there are strong trade-offs between food and water. Application of fertilizers in excess of crop needs causes large nutrient flows into fresh waters, estuaries, and coastal ecosystems. This overenrichment of water causes serious declines in the ecosystem services (food, recreation, fresh water, and biodiversity) provided by aquatic ecosystems. In addition, using water for irrigation of agriculture may reduce its availability for other uses, such as household or industrial use or maintaining other ecosystem services. There are possibilities for mitigating these trade-offs through technological enhancements or instruments such as cap and trade mechanisms for nutrients. Technological innovations and ecosystem engineering, coupled with economic incentives to facilitate their uptake, can lead to highly efficient delivery of provisioning ecosystem services. However, technologies can create new environmental problems, and in some cases the resulting disruptions of ecosystem services affect large numbers of people.

Business Implications of Trade-offs

  • Technologies that optimize food yield, nutrient loading, and water use in agriculture should produce significant value so long as appropriate care is exercised in minimizing the potential for harmful unintended consequences.

Changing Policy Environment

Many options exist to conserve or enhance specific ecosystem services in ways that reduce negative trade-offs or provide positive synergies with other ecosystem services, but barriers prevent their full implementation. Past actions to slow or reverse the degradation of ecosystems have yielded significant benefits, but these improvements have generally not kept pace with growing pressures and demands. Substitutes can be developed for some, but not all, ecosystem services. Even where a substitute is possible, its cost is generally high.

The MA has assessed many options for enhancing ecosystem services as well as addressing drivers of change such as climate change and nutrient loading. Several of these options hold promise and, if implemented, would yield benefits for ecosystems and human well-being. These options may become part of the future policy environment in which business will be operating. Here are some of these options in broad categories having significant impacts on future business:

 

  • Increasing use of integrated responses to address the degradation of ecosystems across a number of systems simultaneously, requiring the combination of a range of policies and strategies developed by actors from government, civil society, and private sector, including increased coordination among multilateral environmental agreements.
     
  • Integrating ecosystem management goals within other sectors and within broader development planning frameworks (such as bank lending requirements).
     
  • Increasing transparency and accountability of government and private-sector performance in decisions that affect ecosystems, including greater participation of concerned stakeholders.
     
  • Enhancing human and institutional capacity for assessing the consequences of ecosystem change for human well-being, and acting on those assessments.
     
  • Using all relevant forms of knowledge and information in assessments and decision-making, including traditional and practitioners’ knowledge.
     
  • Improving communication and providing education with respect to the sustainable management and use of ecosystems and ecosystem services.
     
  • Empowering groups particularly dependent on ecosystem services, including women, indigenous people, and young people.
     
  • Establishing resource management policies that take into account the growing importance and value that individuals and society are placing on ecosystem services such as water supply, recreation, and cultural services, including the incorporation of non-market values in decision-making.
     
  • Increasing the use of economic instruments and market-based approaches in the management of ecosystem services— including creation of markets (for instance, the carbon market), payment for ecosystem services (such as water), cap-and-trade systems for pollutant reduction, mechanisms for consumers to express preferences through markets, and user fees and taxes—and thereby shifting emphasis from efforts designed to further increase production of ecosystem services to efforts designed to increase the efficiency of production and reduce harmful trade-offs.
     
  • Eliminating subsidies that promote excessive use of ecosystem services (such as agricultural subsidies that lead to overproduction, reduce opportunities in developing countries, and promote the overuse of fertilizers and pesticides) and where possible transferring these subsidies to payments for non-market ecosystem services.
     
  • Promoting new technologies along with their careful assessment.
     
  • Promoting the sustainable intensification of agriculture through technologies that enable increased crop yield without harmful impacts related to water, nutrients, or pesticides.
     
  • Slowing the growth in nutrient loading.
     
  • Slowing climate change.
     
  • Investing in the restoration of ecosystem services.

Businesses that pioneer new technologies or integrative business strategies in anticipation of these kinds of changes will gain competitive advantage when new policies are put in place. “First-mover” companies can in fact work to shape this policy environment in ways that help solve environmental challenges but also create advantage by “raising the bar” for competition.

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This is a chapter from Ecosystems and Human Well-being: Opportunities and Challenges for Business and Industry (full report).
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(2011). Ecosystems and Human Well-being: Opportunities and Challenges for Business and Industry: What We Know. Retrieved from http://www.eoearth.org/view/article/152315

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