Without Nature, There Can Be No Business: The Harsh Bottom-line of Ecological Debt
Entrepreneur's New Year’s Guide
Earth Overshoot Day is the point where the world’s population uses more ecological resources than the planet can renew in an entire year. It is calculated by the Global Footprint Network that measures and compares the population’s demand and ecosystem’s supply of resources.
However, Earth’s natural resources have objectively appreciable monetary value – not just for global economies, but also for individual business organisations.
If we compare the value of what businesses take from the environment, especially in emerging markets, vis-a-vis the value of what they give back, we can think of the current ecological crisis as being in a state of ecological debt. The debt is particularly large for the world’s so-called more developed markets.
This crisis is not new. Worryingly, we have reached Earth Overshoot Day earlier every year since 1970 – clearly demonstrating we are flagrantly living beyond our ecological means. The world’s economies and businesses as their agents can no longer avoid repaying this debt.
Many parallels can be drawn between traditional business models and the current environmental state to illustrate the severe ramifications of ecological debt.
Businesses rely on investors, capital and sustainable income just to survive — let alone profit and grow. The same is true for natural capital and ecosystem services: businesses aim for limitless growth at the cost of ecological health.
What happens when a company’s resources dry up, when its capital is spent and it can no longer generate profits at a level needed to sustain operations?
In the mainstream financial world, when a business begins to fail, assistance may be offered in the form of ‘bailouts’, such as loans or cash infusions, which offer a safety net against bankruptcy.
However, when it comes to the natural environment, there is no ecological bailout. To be clear, there is no safety net against ecological collapse.
What happens when we overuse, when we overshoot, when we take more than we give back to nature?
Without nature, without its natural capital and ecosystem services businesses cease to exist. The very survival of businesses is dependent on nature.
The urgent ecological crisis we all face requires businesses to substitute their limitless profits and infinite growth strategies for ecological stock-taking and right-sizing within their ecological means. That is, if they intend to remain viable and help reverse the thundering advance of the Earth Overshoot Day.
Some tools already exist to get businesses started from a strategic perspective.
Ecological Budgeting and Footprinting
To right-size within their ecological means, businesses need to start budgeting. To develop an ecological budget, businesses must first establish their baseline. An ecological footprint measures the negative impact different business activities have on ecological resources. For instance, a business can measure the carbon footprint of its logistics’ network or the water footprint of its manufacturing operations. When a business knows its current impact, it can start budgeting and making improvements and reductions. The key is to set specific limits and targets across different functions. For example, budget how much plastic is used in both product packaging and in workplace purchasing; or set CO2 emission targets for both corporate travel and staff commuting.
Life Cycle Analyses
Undertaking a life cycle analysis (LCA) on every product and service will pinpoint where a business is having the most negative ecological impact and provide a roadmap for where it can start making the most urgent and effective changes. This process involves forensically examining the entire life cycle of a product from the time raw materials are harvested; to the manufacturing and packaging; then to all aspects of the supply chain such as transport, storage and delivery; to the point of reaching the end-user; and finally, the disposal. After completing an LCA, businesses can adopt responsible product stewardship practices such as container deposit schemes and in-store recycling drop-off points.
There is a caveat, however: small businesses often lack the means or capability to quantify footprints and conduct LCAs themselves. Operate on the assumption that your business has significant and irreversible negative impact, and take steps to improve and reduce natural resource throughput anyway.
Customers are currently an influential force in enacting only incremental change. Their demand for environmentally sustainable products force businesses to take action to remain viable.
Businesses, however, need to take a more aggressive and proactive stance to pay down Ecological Debt, as recent indications suggest we are already at the point of crisis.
When there are no more resources to mine or harvest, no amount of financial bailout will help businesses or our market economy, and that is the harsh bottom-line.