The Business Case for Taking Action

A stable environment - and the raw materials and biological services which it provides - is essential for a business to produce a return on its investments, resources and intellect that is sustainable over time. As well as being directly dependent on biodiversity for economic operation, as a user of biodiversity, business has a social responsibility to help conserve it for future generations.

This page describes how initiatives undertaken by the business community to conserve biodiversity will not only directly safeguard current and future operation, but can also improve the competitiveness and profitability of businesses through better stakeholder relations, market positioning and human resource management.

Resource acquisition and process operation
Regulation and licensing
Liability and risk management
Market position and customer retention
Investor relations
Community relations
Human Resource management

Resource acquisition and process operation

All businesses ultimately depend on the availability of natural resources - as companies which process raw materials directly or as companies that rely on the availability of a range of products manufactured from those raw materials. Biodiversity also provides the "services" upon which many businesses and process-based industries depend indirectly:

• the existence of a balanced microbial community to decompose solid wastes
• microbes to maintain nutrient cycling and soil fertility, and hence the plants that the soil supports
• insects to pollinate the plants we use as food, fibre, fuel and other raw materials
• organisms to control the pests and diseases which can reduce the availability of these resources
• provision of the diverse range of ecosystems which moderate the effects of flood and drought.

The maintenance of genetic biodiversity (the variety of genetic information within and between populations of species) is an essential input to crop varieties, livestock breeds, medicines and other products that are vital for many businesses. Biodiversity also plays an important role in stabilizing the earth's climate and reducing the impacts of climate change - which can affect the operation of all types of business, of any size.

Regulation and licensing

All businesses are subject to some form of regulation and licensing. The greater the likely impact upon the environment - or the risk they pose - then in general, the greater the extent of this regulation. Examples are the authorisations granted to process industries under Integrated Pollution Control by the Environment Agency. The penalties for transgression can be severe, in terms of fines, remedial action and potential loss of reputation. Directors of businesses are also personally responsible for complying with the law and may face fines or imprisonment for environmental negligence. It is therefore in business's interest to conduct its affairs in ways which comply with the regulations and licences. Businesses can avoid fines and legal action through:

• an understanding of the current legislation relating to biodiversity
• knowledge of biodiversity within and beyond your boundaries and how your business could impact on them.

The granting of consents and planning authorisation for new developments or changes to existing operations can be facilitated if biodiversity issues are anticipated and addressed. In many cases potential delays in consenting and the granting of planning permission can be avoided - with clear business benefits - by having a Company Biodiversity Action Plan.
The use of command and control to manage the licencing of operations which impact upon the environment is increasingly under question. A move towards open licensing, whereby the operator is given more freedom to manage the process, subject to suitable assessment of operational competence and low risk from the process, has been seen in Australia and Holland. Similar moves have been discussed in the UK. There are many factors involved in this change but it is clear that an understanding of business impacts on biodiversity and sound management of biodiversity issues will play an important role in demonstrating competence in the transition to an open licensing regime.

Finally, an improved relationship with the regulator, which should arise from demonstrated concern for biodiversity, will be part of a joint confidence-building exercise. In this context one would expect a more co-operative stance on environmental business constraints and reduced risk of business interruption in the event of any environmental incidents.

Liability and risk management

In operating any business, account must be taken of the liabilities which have been incurred due to past operations and the risks that are posed by continuing operation. The more precise the information obtained on these aspects, the more robust is the management of the concern. There are many aspects to these factors, but the impact on biodiversity is a key one. Knowledge of biodiversity resources, and management of potential impacts of a business upon it, reduces the risk of liabilities being incurred.

Engaging with biodiversity contributes to a sound environmental reputation and can build a reservoir of trust, providing what can be seen as a 'green shield' to reduce the risk of unplanned external events impacting on the business. Should a reputation crisis strike, a negative reaction from stakeholders is much less likely if they have come to trust the company and believe it will respond appropriately. Clearly, a token approach to biodiversity without the context of good environmental management in all aspects of a business runs the risk of being seen as 'greenwash'. However, if properly carried out and publicised, such work can help to move a business or individual operation away from the immediate firing line if an environmental incident occurs.

Market position and customer retention

The flip side of the risks and liabilities coin is the opportunity that exists to capitalise upon a businesses approach to biodiversity. In a competitive world, few products sell themselves and consumers, both domestic and commercial, are increasingly aware and concerned about the way products are made. A business which has invested money and resources on implementing a biodiversity action plan can reap rewards by linking their initiatives and performance to the products or services they are trying to sell. Such 'green branding' can enhance current sales or lead to the development of new markets.

In the current climate of environmental awareness, customers of all types will, other factors being equal, be more likely to trade with a business that gives them the assurance that they are purchasing from a provider with a commitment to the environment and sound environmental operation. This commitment will encompass a range of green initiatives of which biodiversity will form a key part.

Investor relations

Businesses are rightly concerned about the opinions held by the financial community about their companies. The factors which influence this have been studied and a recent survey by Business in the Environment on 'City attitudes' showed that financial issues still dominate. Indeed, in spontaneous responses over 95% of investors and analysts identified only financial factors as the 'most important concerns' when judging companies. It is notoriously difficult to measure the effect of sound environmental management and performance on fiscal indicators. Research by ICF Kaiser, a major US engineering consultancy, demonstrated that companies with environmental management programmes had a positive impact on perceived riskiness to investors, and thus cost of equity capital and value in the market place (James, PJ (1998) Environmental Performance and the Bottom Line, Professional Manager, July Issue, pp12-13). However, there is a long way to go before direct links can be made between, for example, movements in share price and biodiversity awareness.

However, all stakeholders agree that quality of management is paramount when assessing companies, and two thirds of investors believe that good management of environmental and social performance can help make a company attractive to investors. This reflects an increasing awareness in the financial community of these matters. This can be seen also in the requirements recently placed upon the trustees of pension schemes to let their members know what, if any, policy they have towards the environmental stance of companies they invest in. Furthermore the Turnbull Report on Corporate Governance encourages companies to take a wider view of risk, putting social, ethical and environmental issues more firmly into the realm of corporate governance and risk management (Turnbull, N (1999) Internal Control: Guidance for Directors on the Combined Code).

The importance of environmental performance is highlighted by several indices of ethical investment, including:

• The Business in the Environment (BiE) Index of Corporate Environmental Engagement which compares and ranks companies and also names the companies which do not take part in the survey.
• The FTSE series of SRI indices, branded as FTSE4Good, which will only include companies which have a credible record on the environment, human rights, social issues and stakeholder relations.
• The Dow Jones Sustainability Index, which tracks the stocks of companies that have a sustainable development agenda.

Both the BiE and the FTSE4Good indices specifically consider a company's management of biodiversity as part of its overall environmental responsibility.

Other initiatives are bringing the environment closer to the forefront of reputation management and investor relations.

• The Pension Disclosure Act which (from July 2000) requires occupational pension funds to disclose the extent to which they take environmental, social and ethical considerations into account in their investment decisions
• The Company Law Review 2000, which outlines the responsibilities of company directors to external stakeholders and stresses the value of company reputation
• The Sustainability Integrated Guidelines for Management (SIGMA) project led by the BSI is developing the next generation of management systems to embrace the three strands of sustainability. Biodiversity is one of the issues to be addressed in a strategy for sustainability. More information is available at: www.projectsigma.com

Community relations

It is recognised that developing and maintaining good relations with the local community can facilitate planning and consenting procedures associated with new business or modifications to existing operations. It can also help to mitigate business interruption due to environmental incidents, reduce risk of adverse local press coverage and possibly reduce risk of Third Party Claims.

Biodiversity and its management is an important aspect of the interests that local communities have in business operations, and a route to positive engagement. This is partly because it is an area which communities find relatively easy to understand and which relates to their everyday experience. Being able to demonstrate an awareness and sound management of biodiversity resources on your site will help build the trust and confidence of local stakeholders. In some cases Biodiversity Action Plans may provide direct benefits to the community through the creation of nature trails, educational facilities or improved visual amenity.

Human Resource management

Attracting the best people, retaining highly trained, competent staff and sustaining high levels of commitment, productivity and morale is a keystone of competitive advantage and company success. In the current market, "skill shortages are more of a problem than job shortages - well-qualified employees can be choosy and employers have to try harder to attract them." (Richard Caseby, 50 Best Companies to Work For, The Sunday Times, February 2001). Demonstrable action on biodiversity can make an important contribution to the company's image, culture and benefit package that will attract and retain high quality employees.

A track record of care for the environment, of which biodiversity is an important and easily understood component, can give a company an edge in the competitive and expensive search for the right team member. This is particularly the case for recruitment within the graduate market, where candidates may actively screen out companies with poor environmental and human rights records and unfavourable politics. Having a biodiversity policy and plan demonstrates that a company's environmental values go beyond compliance and sends a strong and clear signal on environmental responsibility to today's recruits.

Similarly, when it comes to the influences upon staff retention, commitment and morale, biodiversity initiatives show that your business is one that relates to your staff's own concerns, engenders pride in the organisation and helps them to feel that they are part of a movement that is universally approved. Whilst a full and proper implementation of a Biodiversity Action Plan is essentially a job for ecologists, some involvement by interested staff can be encouraged and should be welcomed. Examples are given in other parts of this site and can range from 'wardening' activities through to surveying habitats and species. Creating conservation areas within the business area can attract species of interest and provide amenity value for employees. All of these can lead to a greater sense of engagement by your staff, which in turn will lead to benefits for staff retention, commitment and productivity.

"Rio Tinto is aware that the wider world in which it operates has expectations beyond the traditional considerations of business. It is no longer enough for a company to be legal and profitable; we must recognise that we live in a constantly changing social environment. By developing a global partnership with Earthwatch, one of the world's leading conservation organisations, Rio Tinto is giving a strong message to our stakeholders (both internal and external) that the company is taking the environment and education of our employees seriously."
Andrew Vickerman, Head of External Affairs, Rio Tinto plc

Photo Credit: Peter Wakely/ English Nature