Introduction to Sustainable Development &Corporate Sustainability

Tata L. Raghu Ram, XLRI

Corporate Sustainability is a multi-layered, multi-hued, multi-disciplinary complexity

Business risk & opportunities from Ecosystem Service changes

Ecosystem

An ecosystem is a community of living organisms (plants, animals and microbes) in conjunction with the nonliving components of their environment (things like air, water and mineral soil), interacting as a system. These biotic and abiotic components are regarded as linked together through nutrient cycles and energy flows.

Regulating

Benefits obtained from regulation of

ecosystem processes

Cultural

Non-material benefits from ecosystems

Provisioning

Goods produced or provided by

ecosystems

Ecosystem services

Photo credits (left to right, top to bottom): Purdue University, WomenAid.org, LSUP, NASA, unknown, CEH Wallingford, unknown, W. Reid, Staffan Widstrand

Provisioning Services

Food Crops Livestock Capture Fisheries Aquaculture Wild Foods

Fiber Timber Cotton, hemp, silk Wood Fuel

Genetic resources Biochemicals Freshwater

Goods produced or provided by ecosystems

Photo credit (top): Tran Thi Hoa (World Bank),

Regulating Services

Air Quality Regulation Climate Regulation

Global (CO2 sequestration) Regional and local

Erosion regulation Water purification Disease regulation Pest regulation Pollination Natural Hazard regulation

Benefits obtained from regulation of ecosystem processes

Cultural Services

Spiritual and Religious Values Knowledge Systems Educational values Inspiration Aesthetic Values Social Relations Sense of Place Recreation and Ecotourism

Non-material benefits obtained from ecosystems

Ecosystem Services-The benefits people obtain from

ecosystems

RegulatingBenefits obtained from regulation of

ecosystem processes

climate regulation disease regulation

flood regulation detoxification

ProvisioningGoods produced or

provided by ecosystems

food fresh water fuel wood

fiber biochemicals

genetic resources

CulturalNon-material benefits

obtained from ecosystems

spiritual recreational

aesthetic inspirational educational communal symbolic

SupportingServices necessary for production of other ecosystem services.

Soil formation Nutrient cycling

Primary production

SupportingServices

ProvisioningServices

RegulatingServices

CulturalServices

Freedomsand

Choice

Security

Basic Material forGood Life

Health

Good SocialRelations

Ecosystem Services Constituents of Well-being

Consequences of Ecosystem Change for Human Well-being

Direct Drivers

Indirect Drivers

EcosystemServices

Human Well-being

Direct Drivers of Change Changes in land use Species introduction or removal Technology adaptation and use External inputs (e.g., irrigation) Resource consumption Climate change Natural physical and biological

drivers (e.g., volcanoes)

Indirect Drivers of Change Demographic Economic (globalization, trade,

market and policy framework) Sociopolitical (governance and

institutional framework) Science and Technology Cultural and Religious

Human Well-being and Poverty Reduction

Basic material for a good life Health Good Social Relations Security Freedom of choice and action

Life on Earth: Ecosystems

Conceptual Framework

Alarming Findings

Humans have radically altered ecosystems in last 50 years.

The Balance Sheet

CropsLivestockAquacultureCarbon sequestration

Capture fisheriesWild foodsWood fuelGenetic resourcesBiochemicalsFresh WaterAir quality regulationRegional & local climate

regulationErosion regulationWater purificationPest regulationPollinationNatural Hazard

regulationSpiritual & religious Aesthetic values

TimberFiberWater regulationDisease regulationRecreation & ecotourism

Enhanced Degraded Mixed

Bottom Line: 60% of Ecosystem Services are Degraded

CropsLivestockAquacultureCarbon sequestration

Capture fisheriesWild foodsWood fuelGenetic resourcesBiochemicalsFresh WaterAir quality regulationRegional & local climate

regulationErosion regulationWater purificationPest regulationPollinationNatural Hazard

regulationSpiritual & religious Aesthetic values

TimberFiberWater regulationDisease regulationRecreation & ecotourism

Enhanced Degraded Mixed

The Balance Sheet

Biomass of Table Fish (tons per km2)

Source: Millennium Ecosystem Assessment; Christensen et al. 2003

19002000

Mangrove ecosystem

shrimp

housing

crops

Mangrove Services: nursery and adult

fishery habitat fuelwood & timber carbon sequestration traps sediment detoxifies pollutants protection from

erosion & disaster

Trade-offs among ecosystem services

Value (per hectare)

0

$2000

$4000

Mangrove Shrimp Farm

Coastal Protection (~$3,840)

Timber and Non-timber products ($90)

Fishery nursery ($70)

Net: $2,000 (Gross $17,900 less costs of $15,900)

Pollution Costs (-$230)

Less subsidies (-$1,700)

Restoration (-$8,240)

Mangrove Conversion

Private Net Present Value per hectare

Mangrove: $91

Shrimp Farm: $2000

19871999Public Net Present Value per hectare

Mangrove: $1,000 to $3,600

Shrimp Farm: $-5,400 to $200

Source: Millennium Ecosystem Assessment; Sathirathai and Barbier 2001

Source: UNEP

Fiber

Food

Spiritual & religious

Freshwater

Genetic Resources

Climate regulation

Water purification

Disease regulation

Flood/Fire regulation

Recreation & tourism

Aesthetic

Economic Value ($)

Economic Valuation

Difficult or impossible

Easy

Private Benefit Capture

Difficult

Easy

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Many services are public goods

In the range of US$1654 trillion) per year, with an average ofUS$33 trillion per year.Global gross national product total is around US$18 trillion per year.Costanza et.al (1995 US$); US$ 46 trillion in 2007

Ecoservices contribute more than twice as much to human well-being as global GDP.

NET PRESENT VALUE OF FOREST

Value of Timber and Fuel Wood

Value of Non Timber Forest Products

Value of Fodder

Value of bio-prospecting

Value of Ecological services of Forest

Value of Flagship species

Carbon Sequestration Value

Goods&ServicesprovidedbyaForest

NET PRESENT VALUE OF FORESTValuation example: Average Indian Forest

S.no. Goods & Service Valuation1 Value of Timber and Fuel Wood Rs. 1,52,830/ha2 Value of Non Timber Forest Products Rs. 7,631/ha3 Value of Fodder Rs. 2,958/ha4 Value of Eco-tourism Rs. 65,113/ha5 Value of bio-prospecting Rs. 25,553/ha6 Value of Ecological services of Forest Rs. 1,44,332/ha7 Value of Flagship species Rs. 2,58,400/ha8 Carbon Sequestration Value Rs. 1,20,780/ha

Total value of forest Rs. 7,77,597/ha

Madhu Verma committee report, 2014

COMPENSATORY AFFORESTATION FUND MANAGEMENT AND PLANNING AUTHORITY (CAMPA)

Supreme courton10thJuly2009ordered theformationofCAMPA asNACunder thecontrolofUnionministry ofEnvironment &Forests

Supreme courton10thJuly2009ordered theformationofCAMPA asNACunder thecontrolofUnionministry ofEnvironment &Forests

Formation

Topromote Afforestation&Regeneration activities tocompensate forforestlandsdiverted tononforest uses

Topromote Afforestation&Regeneration activities tocompensate forforestlandsdiverted tononforest uses

Objective

SCorders that Stategovernment tousethefunds collected through CAMPA SCreleased around Rs 11,000cr from CAMPAtotheStatesonprorata basis Government hasrevised thelevy charges,resulting inanaccumulationofoverRs 25,000crore with arecordrateofdeforestation

SCorders that Stategovernment tousethefunds collected through CAMPA SCreleased around Rs 11,000cr from CAMPAtotheStatesonprorata basis Government hasrevised thelevy charges,resulting inanaccumulationofoverRs 25,000crore with arecordrateofdeforestation

Latestdevelopments

Business Risk from Ecosystem Changes?

Tata Nano SingurVedanta Orissa

Sethusamudram projectCoke water crisisFord water crisis

ITC Bhadrachalam, Bhallarpur industries, Sree Seshasayee Paper millsTomato crisis for ketch-up makers

Fruit orchard Bee crisisUnilever / Nestle Palm oil crisis

Outline and prioritize strategies for managing the risks and opportunities

5. Develop strategies

Stepsinacorporateecosystemservicesreview

Key activity Identify and evaluate business risks and opportunities that might arise due to the trends in priority ecosystem services

4. Identify business risks and opportunities

Evaluate conditions and trends in priority ecosystem services, as well as drivers of these trends

3. Analyze trends in priority services

Systematically evaluate degree of companys dependence and impact on ecosystem services

Determine highest priority servicesthose most relevant to business performance

2. Identify priority ecosystem services

Choose boundary within which to conduct ESR Business unit Product Market Landholdings Customer Supplier

1. Select the scopeStep

MARKET SIZE FOR ECOSYSTEM SERVICES

These markets could represent major business opportunities and a significant part of the solution to the ecosystem and biodiversity finance challenge.

Service Provided Supplier Buyer

Instruments Intended Impact on forests Payment

Quality Drinking Water Upstream dairy farmers and forest landholdersA bottler of natural

mineral water

Payments by bottler to upstream landowners for

improved agricultural practices and

reforestation of sensitive filtration zones

Reforestation but little impact because program

focuses on agriculture

Vittel pays each farm about $230 per hectare

per year for seven years. The company spent a

total of $3.8MM.

WATER MARKETPerrier Vittels Payments, France

Source: http://www.unep.org/pdf/PaymentsForEcosystemServices_en.pdf

Green dividends/ Green bonus for Himalayan states Exercising statutory authority, extraction of timber

from natural forests has been banned by the Central government for mainly ecological and environmental reasons. State governments complained of loss of revenues. To compensate such losses of revenue to various State/UT Governments, the 13th Finance Commission has provided Grants-in-Aid of Rs.5000 crores for a period of five year from 2010-11 to 2014-15

NPV of forests