Growing business interest and momentum towards Biodiversity Offsetting!

There are growing recognitions of importance of biodiversity conservation that have been observed particularly among the big business communities in recent years. We heard about carbon offsetting - making carbon history for last many years. Global carbon offset markets have tremendously grown over the last decade, which saw 3.6 billion tonnes (Gt) CO2e exchanged over the first six months of 2011, valued at some €50 billion (US$71bn), compared to €48bn in H1 2010 (Point Carbon, 20 July 2011).

Similar to carbon offsetting that puts a monetary value on carbon emissions, there is a growing desire on a market based approach to put a value on nature that would potentially stop the biodiversity loss and if possible reverse it. Named as 'Biodiversity Offsetting' that designed to replace the destroyed natural capital with measurable conservation outcomes and compensate for the significant residual impacts. The concept of Biodiversity offsetting is not new. In the US a wetland banking scheme where public or private developers restore, establish or enhance an aquatic resource to compensate for any unavoidable damage they cause has been in existence since the 1970s. More than 400 wetland banks have now been established in a market worth more than $3 billion a year (Levitt, 2010).

Biodiversity offsetting is measurable conservation outcomes resulting from actions designed to compensate for significant residual adverse biodiversity impacts arising from project development and persisting after appropriate prevention and mitigation measures have been implemented. The goal of biodiversity offsets is to achieve no net loss, or preferably a net gain of biodiversity on the ground with respect to species composition, habitat structure and ecosystem services, including livelihood aspects (Business and Biodiversity Offset Programme, 2008).

Natural loses, for example loss of forests and local eco systems, fisheries, wetlands, soils, species, oceans and corals have been so far invisible from the economic models. Market instrument such as 'biodiversity offsetting', in other word 'Bio-compensation' would certainly fill the gaps, where in essence particularly developers need to compensate or buy bio-credits to protect somewhere else if they have damaged the original development sites. However, there are still lots of questions needed to be answered with regard pros and cons on how the bio-offset markets will operate, as the complexity of eco-system's processes are immense, further more they are inter-linked, which raises the most important question about the 'common denominator' as we know CO2 in the case of carbon market.

Fundamental questions may be asked - why big businesses are so interested primarily to protect the biodiversity and reverse any eco-system loses? The answer is very simple and we can all envisage the grave consequences on humanity if the natural capital is systematically destroyed. Biodiversity offsetting can be a standard practice for business organisations that have got significant impacts on biodiversity from their business activities. This is an opportunity where business organisations can make a difference on their biodiversity footprint; reinforcing their license to operate in a particular area, more over become a trustworthy organisation to the local communities (particularly indigenous communities)  who may agree to provide the access (social license to operate) to the lands and oceans for commercial purposes.

Within the biodiversity impact mitigation hierarchy businesses must take efforts to prevent or avoid any negative impacts on biodiversity. Then efforts should be made to minimise and reduce, and then repair or restore any undesirable effects. After all these steps biodiversity offsetting could be implied to address the significant residual impacts that planned to achieve no net losses but if possible net gains of biodiversity. If the offsetting is not feasible then compensation can be offered. However, measuring the amount of compensation that would be suitable for significant residual impacts of any development could be complicated and difficult job. Department for Environment Food and Rural Affairs (DEFRA) developed a metric which is the ‘Guiding Principles’ of offsetting in England. Firstly, a development site should be divided into habitat parcels based on their distinctiveness (e.g. habitat category), which are called habitat type bands. These bands have numbers associated with them (e.g. High 24, Medium 16, and Low 8) and they are used to calculate the biodiversity units/hectare to compensate the loss of habitat.

Undeniable facts that there are array of many business benefits from biodiversity offsetting, yet it is not without any challenges, for example the notion of no net loss, ecological proximities and economic valuation. Challenges remain on how one should determine no net loss of biodiversity? How do you get a clear understanding of the land with regards its existing species and their habitats, interactions between them, measuring the impacts of land use on species and surrounding habitats and finally putting economic values on it, given the fact that every eco system is not equal? Among others, indirect impacts should also need to be considered, for example outside the boundary of any designated development site where further growth of human settlements will create undesirable negative impacts on biodiversity. Therefore, measuring the direct impacts on biodiversity of a selected development site may not be sufficient, indirect impacts need to be part of the equation.

Biodiversity offsetting should be like-for-like and that is why it is practically impossible to offset with one eco system with the other in a different part of the world; the reason being they are not equal. Unfortunately, this is why many business organisations cannot declare their reforestation activities as their biodiversity offsetting programme because impacts on biodiversity and land use from their business activities are taking place somewhere else. Therefore, it is recommended to offset biodiversity as close as possible to the development site, as a result making it more relevant to the local eco systems and gain more acceptances from the local communities. For sure there are needs for further work on methodologies particularly on economic valuation. Biodiversity offsetting is not a panacea to protect the eco system where development occurs but it has certainly made business case and many European observers believe that the biodiversity offsetting market will get bigger than carbon offsetting markets.       

Greening your business!

Demonstrating environmental performance has now become a well-accepted business model for the organisations and the businesses. Faced with increased legislation, green consciousness and fulfilling customer expectations, supply chain pressure, industry began to develop new management techniques to deal with the agenda. Many big businesses in the developed countries already have mature ISO14001 Environmental Management System (EMS) to assess and manage their environmental impacts of their business activities. However, in the developing countries like Bangladesh this process has been so far quite slow.

An EMS can be described as ‘a programme of continuous environmental improvement that follows a defined sequence of steps drawn from established project management practice and routinely applied in businesses management’ (World Bank Group, 1998). In 1997, the International Organisation for Standardisation (ISO) has produced an international standard for environmental Management System – ISO14001. The series of ISO14000 are the sets of standards and guidelines defines the core of Environmental Management System (ISO14001) itself and the auditing procedures necessary for verification.

Environmental impacts occur at every stage of business activities – from the type and amount of raw materials being used (material input), to the production process, creation of waste and to the means of distribution (material output) and resource recovery and recycling etc. It says ‘if you can’t measure it, you can’t manage it’. On the basis of this principle, a good environmental management has to start with the measurements, for example identify, quantify and assess of all environmental impacts and be in a position to manage them.

Within the EMS, there needs to be an Environmental Policy and that is the main instrument for communicating environmental priorities of the business organisation. Followed by environmental programme (procedures) which ensure how to achieve specific goals and objectives highlighted in the policy. It is essential to monitor the progress, review the current situation and feed into any improvement plan to a simple systematic management ‘plan-do-check-act’ cycle.

Following are the internal and external factors that would shape the take-up and influence of EMS:

Internal factors:

- Awareness raising campaign: environmental policy must be clearly communicated to all the member of the staff so that everyone knows about it, also raising awareness of the potential impacts their work might have on the environment.

- Implementation cost: obtaining EMS certification would involve costs, time, trained personnel and effort for the businesses. These are main reasons why Small and Medium Sized Enterprises (SMEs) are still reluctant to uptake EMS.

- New attitudes to accept the changes: changes will inevitably be there if a business tries to establish its environmental policy into their procedure. For example, reducing energy consumption may require changes to the manufacturing process or using different raw materials may result in modification of the design of the products.

- Leadership - commitment across the company: leadership is required at all levels and in all functions for meaningful change to occur e.g. manufacturing, distribution, retail sales have the most visible environmental footprint. And the manufacturers or the producers are often come close to environmentally cautious customers within these processes.

- Resources, Roles, Responsibility and Authority: administrating an EMS programme needs a clear line of command and responsibility from the highest to lowest level. Each employee in the company must know exactly who is responsible for which aspects of the programme. More over, each employee needs to know within the scope of their assigned activities in accordance with environmental procedures and work instructions, also report to their departmental managers in case of any environmental non-conformity.

- The fear of failure : it is very important that the fear of failure should be eliminated from the staff’s mind and staff need to be encouraged in areas, which are unfamiliar to them and staff must gain confidence and knowledge in those areas.

- Earlier registration of any management standards: any history of ISO9001 quality management standards would be helpful to adopt EMS quite easily and quickly. The revised ISO9001 and ISO14001 Environmental Management System are compatible particularly with regard to terminology and content.

- Employees: sometimes employees take initiatives on good environmental practices, within their own organisations, for example segregating papers to be recycled. Colleagues can be a positive influence to other colleagues and the good intention can reach up to the senior managers who would think harder to resolve the issue when he/she sees that enthusiastic new ideas came from his/her own working forces.

External factors:

- Regulations: legislative compliance is unavoidable by the business organisations. It is very important that they are compliant with the current environmental legislation to avoid fines and prosecution, as well as considering forthcoming legislative requirements so that any changes whether it is related to products or services would be easily accommodated. Sudden change could incur costs, time and unnecessary disruptions.

- Consumers and corporate image: consumers are increasingly concerned about the environmental characters (e.g. negative impacts on the environment and human health) of any product. Therefore, it’s an opportunity for business organisations to enhance business’ image by going green. However, any false green claims from the organisation about their products will be very quickly found out and it will be harder to rebuild the good reputation again.

- Supply chain: Businesses need to ensure that their whole operation relating to that product is green. Both up-stream and down-stream supply chains need to comply with the environmental requirements. This way business organisation can also influence or put pressure on their supply chains to motivate them to act as environmental responsible businesses.

- Economic motivation and competition: competition with other businesses is another factor, which drive businesses to take up the environmental management system. When customers will see that a business organisation has got an environmental sound policy then they will be more attracted towards them than those who do not have any.

- Stakeholders’ pressure: external stakeholders, for example customers, local communities, supply chains, regulators, governments, insurer and Environmental Non-Governmental Organisations (ENGOs) are increasingly pressuring businesses to show green credentials and disclose environmental performances.

- Relationship with regulatory bodies: good environmental management practices will assist to maintain a good relationship with the regulatory bodies. Management quality will determine the nature and frequency of site visits from the regulators.  

 

Finally, an environmental management system will provide a useful tool for a business or an organisation to identify, quantify, monitor and assess the environmental impacts and providing a basis for external recognition. At the same time environmental management standards are not ‘magic bullets’ that will achieve environmental improvements where regulation and enforcement are ineffective or that can open market where competition is strong. Environmental Management System provides a framework on which to build better performance, greater efficiency, a competitive image and above all help greening your businesses.