Biodiversity loss: What it means for businesses in Africa

biodiversity - climateaction

Biodiversity loss: What it means for businesses in Africa

Africa, no doubt, is rich in biodiversity which many consider having intrinsic value. Yet, the purpose of biodiversity conservation is premised on the belief that each species has a value and a right to exist, whether or not it is known to have value to humans.

Going by the natural order of things, species coexist and rely on one another everywhere on the earth. Every living organism, including humans, is a part of ecosystems, which are intricate networks of interconnected relationships.

However, the continent’s biodiversity is being threatened by climate change and the activities of businesses.

However, many companies have only just begun to explore their impact on biodiversity loss and only a small number of pioneering companies have published credible biodiversity strategies with robust biodiversity goals.

Investors are also increasingly considering how to address biodiversity as part of their assessments and how they direct capital toward companies that can demonstrate and report on their biodiversity strategy.

This has a double-edged effect: just as these businesses carry out bio diversity-disrupting activities, so also is the depleting biodiversity resulting in limited resources for the businesses to extract. The loss can be extensive and often unrealized, causing disruption to supply chains, increasing regulatory compliance costs, and potentially eroding social license.

Yes. Ecosystem collapse could cause significant operational risks for businesses. According to the World Economic Forum (WEF), more than half of the global gross domestic product depends on nature. These material nature risks can typically be linked to the following:

  •  Dependency — When a business is directly dependent on nature (i.e., for freshwater, pollination, or productive soils) as a part of its business model, it could impact its financial performance. For example, beverage companies should have a reliable supply of freshwater, food companies rely on the stability of crops and arable land, and biopharma companies rely on ecosystems to derive novel sources of medicines.
  • Impact — Where business activities are either directly or indirectly negatively impacting nature, this, in turn, can impact the business through reputational damage, legal action, or financial losses. Increasingly, employees, consumers, investors, policymakers, and communities are expecting companies to manage their biodiversity impact to preserve their social license to operate.

Way forward

Businesses should act now to help reduce the negative impact of biodiversity as doing so can lead to better outcomes for businesses in Africa and help make their value chains more resilient. For example, with careful planning and management of a greenfield residential property development, the work done to avoid the risks of fragmented landscapes and keep biodiversity systems intact can also help improve property valuations. As a simple example, a higher tree cover can help reduce urban heat and combat some of the physical effects of climate change.

In a similar example, a chemical company, valuing the river its operations depend on, can take that value into account in capital decisions — with benefits flowing to multiple stakeholders. Investing in the biodiversity of the areas surrounding the river can provide confidence that the water is of the required quality and quantity the company needs to sustain and grow its operations. But this same action can also lift the quality of life in local communities, help farms be more productive, and enrich local ecosystems.

Finally, biodiversity impact exists beyond rural areas in towns and cities. There are important roles for local governments, town planners, and developers to incorporate nature-related opportunities into their strategic planning, risk management, and asset allocation decisions.

Related Post