The damage we are inflicting on species and ecosystems is so extensive and profound that scientists now believe we are witnessing Earth’s sixth mass extinction event—the last one marked the end of the dinosaurs.
Two facts about biodiversity are not up for debate. The first is widely known, the second less so.
Fact number one: biodiversity—the level of diversity in the natural world, at the ecosystem, species, and genetic levels—is being destroyed at an alarming rate. Fact number two: biodiversity loss has massive implications for business.
BCG set out to study the biodiversity crisis, understand the business role, and determine how companies should respond. Among our findings:
As ecosystems decline, business faces significant risks, including higher raw material costs and a backlash from consumers and investors. But the crisis also creates real opportunity. Companies that act to support biodiversity can develop powerful new offerings and business models, improve the attractiveness of existing offerings, and lower operating costs.
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Biodiversity reflects the range and variety of life on Earth—and thus the health and resilience of nature—at three levels (see Exhibit 1):
The delicate balance and interplay of ecosystems, species, and genes produce services that are vital to the functioning of society and the modern economy and, therefore, create sizable economic value. These ecosystem services fall into four primary categories: regulating, cultural, habitat, and provisioning.1 Notes: 1 BCG updated The Economics of Ecosystems and Biodiversity (TEEB) estimates from 2011, adjusting them for inflation, an updated carbon price, and the most recent market values of provisioning services. The value is split across the categories as follows:
On the basis of research from the TEEB initiative, we estimate that the combined annual value of these four ecosystem services is more than $150 trillion, almost twice the size of global GDP.
The Drivers and Dangers of Biodiversity Loss
According to the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES), five pressures are primarily responsible for driving biodiversity loss (see Exhibit 2):
Companies need to move aggressively in support of biodiversity. Forward-looking players understand that continued biodiversity loss creates significant risks for their business—and that as an early mover they stand to benefit from new business opportunities and improved standing with customers and investors. (See Exhibit 3.)
Risks. Businesses face three main biodiversity-related risks:
Opportunities. Companies that lead on biodiversity will have significant opportunities to benefit from these efforts:
Biodiversity impacts arise all along the economic value chain: The largest impact results from resource extraction and cultivation activities, which account for more than 60% of overall pressure. But resource conversion and manufacturing, services such as transportation and mobility, and consumption—including after-life treatment—have a considerable biodiversity footprint, too.
These four categories of activities occur in virtually every major value chain in the global economy. Four value chains are responsible for roughly 90% of biodiversity loss (see Exhibit 4):
To arrest or reverse large-scale biodiversity loss, companies across value chains must transform their businesses. We have developed a four-stage approach for companies that aspire to become biodiversity-positive businesses. (See Exhibit 5.)
To determine the appropriate scope of action, a company should take three concrete steps:
To integrate its strategic objectives into operations, a company must take three steps:
Companies should take three steps to enhance and refine their existing sustainability capabilities:
Companies can take action in three areas to build a biodiversity-positive business:
Some companies will want to move in one or two of these areas, while others will have opportunities in all three.
Because of the position they hold in their value chain, some companies can take actions that have far-reaching impact. In the food value chain, for example, suppliers of machinery and agricultural inputs such as seeds and fertilizer are in a strategic position to influence the activities of farmers and fisheries. Regardless of their value chain position, however, companies must move beyond mere declarations of intent and actually deliver meaningful and locally measurable benefits for ecosystems.
The authors thank Mario Vaupel for his invaluable contributions to the research, conceptual development, and writing of this report.