The Economics of Biodiversity: The Dasgupta Review - WBCSD

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The Economics of Biodiversity: The Dasgupta Review - WBCSD
The Economics
 of Biodiversity:
  The Dasgupta                            Summary
     Review                                brief for
             (2021)                       business

On 2 February, the UK Government         Nature is an indispensable system          value of a country’s economic
launched The Economics of                on which we all depend, and which          success, is a necessary step
Biodiversity: The Dasgupta Review.       must thrive for us to effectively          towards returning the world to
This independent review was              respond to challenges, such as             a path of sustainable prosperity
commissioned by the UK Treasury          those posed by emerging diseases           instead of continuing to live beyond
to shape the international response      including COVID-19 and climate             our planet’s means.
to biodiversity loss and inform global   change. The Dasgupta Review
action from all stakeholders.            makes clear that conservation and
                                         restoration efforts are solutions             WANT TO LEARN MORE?
The Dasgupta Review sets out             to these critical challenges and
a new framework, grounded in             provide many other benefits to the            You can find the Headlines
ecology and Earth Sciences, yet          economy and society. Not only does            Messages of the Dasgupta
applying principles from finance         the conservation and restoration              Review here. The full report can
and economics to understand the          of nature reduce serious risks to             be found here.
sustainability of our interaction        our economies, including business
with nature and prioritize efforts                                                     There is now ample evidence
                                         and financial institutions, but it also
                                                                                       that nature plays a key role
to enhance nature and prosperity.        contributes towards the mitigation            in the COVID-19 pandemic’s
                                         of, and adaptation to, the effects of         emergence and recovery. In
This business summary highlights         climate change.                               December 2020, WBCSD
the main points from the Dasgupta                                                      released COVID-19: A Dashboard
Review relevant to business and          The Dasgupta Review describes                 to Rebuild with Nature, a white
puts it in the context of other                                                        paper that proposes a dashboard
                                         the hidden costs of depleting
                                                                                       based on the two core planetary
landmark reports, as well as global      natural capital as being a major              boundaries of climate change
events and frameworks related to         constraint for long-term value                and nature loss. The report
the nature and climate agendas.          creation.                                     concludes that a nature-positive
                                                                                       food system is the most effective
The Dasgupta Review has the              It calls for action to increase the           way to build resilience against
potential to be a key input into the                                                   future shocks, including new
                                         quantity and quality of our stock of
                                                                                       pandemics.
Convention on Biological Diversity       nature and associated biodiversity
(UNCBD) COP15 and its technical          and demonstrates that acting now              In December 2020, the Nature
meetings ahead of the COP. In            will be significantly less costly than        Action project launched the
addition, it could also input into       delaying further. We must start               report Accelerating business
the UN Framework Convention on           accounting fully for the impact of            solutions for climate and nature,
Climate Change (UNFCCC) COP26            our interactions with nature and              which aims to clarify definitions
where nature and particularly            rebalancing our demand with                   to support the alignment of
Nature-based Solutions (NbS) will                                                      Natural Climate Solutions (NCS)
                                         nature’s capacity to supply.
                                                                                       with Nature-based Solutions to
play a key role, as well as the UN
                                                                                       accelerate investments at scale.
Food Systems Summit (UN FSS)                                                           In addition, the report helps
                                         Part of the solution lies in changing
action track on boosting nature-                                                       business to navigate the nature
                                         our measures of economic success.
positive agriculture.                                                                  and climate agenda by mapping
                                         Moving to inclusive wealth, which
                                         measures all capital assets (i.e.             the key initiatives, platforms and
                                                                                       conventions for collective action.
                                         human capital, produced capital,
                                         and natural capital) as the aggregate

                                                                The Economics of Biodiversity: The Dasgupta Review (2021)
Headlines you need to know from the report

We need to change how we think, act               Decline of biodiversity happens               have proved unfit to manage the
and measure success. The Dasgupta                 30% less in areas that are managed            externalities. As such, we need
Review proposes three broad and                   by indigenous people.                         to recalibrate financial, business
interconnected transitions: 1) balance                                                          and economic models to better
                                             •    Nature-based solutions are
humanity’s demand with nature’s supply,                                                         understand the true value of people
                                                  estimated to have around 10
and increase supply relative to its                                                             and nature and integrate it into all
                                                  times the job creation rate
current level; 2) change our measures of                                                        levels of decision-making.
                                                  of investments in fossil fuels
economic success; and 3) transform our
                                                  according to the ILO. Bringing           •    An inclusive measure of wealth is
institutions and systems.
                                                  nature and ecosystem services                 needed to rebalance the risks and
1.   BALANCE HUMANITY’S DEMAND                    into spatial planning is essential            rewards for business interactions
     AND NATURE’S SUPPLY AND                      to ensure that conservation and               with nature. Introducing human
     INCREASE SUPPLY RELATIVE TO                  restoration are as effective as               capital and natural capital into
     ITS CURRENT LEVEL.                           possible in an increasingly crowded           national accounting systems
                                                  world.                                        would inform and improve
•    Nature is an asset, and we have
                                                                                                decision-making at scale globally.
     failed to manage our natural            •    Commodity production is the
                                                                                                Increased investment in physical
     capital in a manner that maintains           leading driver of biodiversity loss
                                                                                                accounts, standardisation of data
     resilience and productivity.                 and there is a growing share of
                                                                                                and modelling approaches, and
     According to the Global Footprint            global agricultural land that is
                                                                                                technical support would facilitate
     Network, we need 1.6 Earths to               used to grow crops other than
                                                                                                these shifts.
     be able to continue current living           food, such as biofuels and fiber for
     standards.                                   textiles.                                3.   TRANSFORM OUR INSTITUTIONS
                                                                                                AND SYSTEMS TO ENABLE AND
•    The quantity and quality of             •    Transparency in supply chains
                                                                                                SUSTAIN CHANGE.
     our stocks of natural assets                 will be a key part of the solution.
     need to increase significantly.              This will enable actors to identify      •    We must transform our financial
     Conservation of our natural                  where they can reduce their                   and educational systems to
     assets is easier and cheaper than            environmental impacts, and to                 enable these changes and sustain
     restoration, as it avoids potential          monitor actions taken to achieve              them:
     tipping points and the problems              sustainability commitments and
                                                                                                º What is required is a set of
     of reversing regime shifts, and              thereby improve accountability.
                                                                                                  global standards underpinned
     maintains option values through
                                             2.   CHANGE MEASURES OF                              by credible data that businesses
     conserving ecosystems and
                                                  ECONOMIC SUCCESS TO GUIDE                       and financial institutions can
     species.
                                                  US ON A MORE SUSTAINABLE                        use to fully integrate nature-
•    Any reductions in demand for                 PATH.                                           related considerations into their
     extraction due to increased                                                                  decision-making, and assess
                                             •    The Dasgupta Review develops
     efficiency have been neutralized                                                             and disclose their use of nature.
                                                  the economics of biodiversity on
     by the impact of increases in the
                                                  the understanding that we- and                º Establishing the natural world
     main drivers of resource extraction:
                                                  our economies- are ‘embedded’                   in education policy is essential
     human population growth and
                                                  within nature, not external to it. As           to empower citizens to make
     affluence.
                                                  nature is only capable of producing             informed choices and demand
•    Increased extraction of                      a finite flow of goods and services             the change that is needed.
     provisioning services now comes              (upon which we rely), the economic
                                                                                           •    Management and mitigation of
     at the expense of future provision           model of growth is bounded. If
                                                                                                nature-related financial risks
     of those same services, as well              capital markets are to function more
                                                                                                can lead to increased resilience
     as regulation and maintenance                effectively, we must account fully for
                                                                                                of balance sheets for financial
     services. It is worthy of note               the impact of our interactions with
                                                                                                institutions. The Dasgupta Review
     that much of said extraction of              nature and rebalance our demand
                                                                                                uses the analogy of biological
     provisioning services is subsidized.         on its capacity to supply.
                                                                                                diversity playing a similar role to
•    Conservation and restoration of         •    Nature’s worth to society (goods              the diversity of an investment
     ecosystems can have a positive               and services provided) is not                 portfolio in mitigating the risk of
     impact on job creation. The                  reflected in current market prices            betting heavily on a narrow spread
     International Labour Organization            because it is open to all, without any        of options. Biodiversity-related risks
     (ILO) estimates that 1.2 billion jobs        cost. But this is not simply a market         arise from changes in either the
     rely on effective management                 failure: it is a broader institutional        stock or condition (or combination
     and sustainability of ecosystems.            failure, too. Many institutions               of both) of natural capital from

                                                                      The Economics of Biodiversity: The Dasgupta Review (2021)
societal responses to changes in           •   Trade plays a major role in the            are often home to the world’s most
    the state or quality of natural capital.       nature agenda. Trade expansion             biodiverse regions, yet tend to
    This includes climate change-related           over recent decades has allowed            have less stringent environmental
    risks or other environmental financial         higher-income countries to off-            standards. More than 50% of
    risks. By channeling credit and                shore the adverse impacts of their         the biodiversity loss associated
    investments toward projects that               consumption on ecosystems and              with consumption in developed
    enhance, rather than degrade, natural          biodiversity through increased trade       economies is estimated to occur
    capital and ecosystem services,                in commodities, goods and services         outside their territorial boundaries.
    financial institutions are exposed to          with lower-income countries, which
    investments with relatively lower risk
    and greater certainty around yields.

Figure 1: Summary of Options for Change

                                                                      The Economics of Biodiversity: The Dasgupta Review (2021)
What can business do?

The Dasgupta Review, as with other           to vary by ecosystem and over time),          The Review highlights analysis from
milestone reports, calls for urgent          taxes imposed equally on imports and          the Waldron Report that we can feed
action from the business community           domestically produced products. In            the population as well as conserve
to halt nature loss. It emphasizes the       addition, more frictionless trade could       more nature (30%) without major
necessity of changing how we think,          reduce costs and waste, especially            financial losses and gain considerable
act, and measure success. Businesses         in the case of the global food trade.         social benefits and small net gains
have an important role to play in            Fundamentally, the ability to monitor         financially. In the Dasgupta Review’s
limiting the impact of their activities      and regulate supply chains in a more          framework, conservation is investment.
on the biosphere. That means                 transparent manner is highlighted,            Furthermore, conservation relies
accounting for these impacts and their       as well as increased development              on finance, and also regulation and
dependence on nature by obtaining            assistance. The latter would improve          institutional support, to be effective.
reliable and verifiable information all      outcomes of trade for biodiversity by         Community involvement is particularly
along their supply chains, as well as        helping countries overcome barriers           important, as well. Moreover, agricultural
holding actors to account. Private           to enter sustainable markets via              systems have the potential to be net
financial actors need to reduce harmful      certification schemes, or strengthen          providers of ecosystem services,
financial flows that degrade natural         capacity building on how to ensure that       including regulating and maintenance
assets and encourage unsustainable           developing countries can protect their        services beyond food production
activities; and scale-up positive flows      natural assets, among others.                 (i.e. agroforestry), as well as acting as
into conservation, restoration and                                                         carbon sinks. An action area could be
sustainable economic activities. This        The role of food production                   establishing agri-environment schemes
requires a greater understanding and                                                       that incentivize farmers to adopt
                                             Food production is referenced as
management of their dependencies,                                                          practices that foster biodiversity and
                                             one of the most significant drivers of
impacts, and nature-related financial                                                      increase ecosystem services. Climate
                                             nature loss. Coupled with technological
risks and uncertainty.                                                                     change is highlighted as a key driver
                                             innovation, producing sufficient food
                                                                                           of nature loss, and therefore business
                                             in a sustainable manner will be key
The role of trade                                                                          solutions should produce beneficial
                                             to decreasing land-use change, and
                                                                                           outcomes for both climate and nature.
Increased economic activity resulting        both halting and reversing nature loss.
                                                                                           Investing in nature-based solutions
from trade expansion increases human         While the Dasgupta Review points out
                                                                                           will become imperative to advancing
demands on the biosphere and thus            that technology alone will not balance
                                                                                           both the climate agenda and the nature
depletes natural capital. While trade        humanity’s demand with nature’s
                                                                                           agenda.
liberalization can facilitate the adoption   supply, it also highlights that it can play
of technologies and more efficient           an important role in producing food           WBCSD members interested in this
production practices, which may              more efficiently, reducing damage to          area can join the new Nature Action
reduce demands on the biosphere,             ecosystems and the environment.               project, which aims to help clarify for
it may also encourage specialization         These range from genetically modified         business the role of nature-based
by certain countries in extractive or        crops (including gene-editing), vertical      solutions in delivering nature and
pollution-intensive sectors, and thus        farming, precision agriculture, meat          biodiversity benefits, as well as climate
off-shore damage to natural capital          analogues, among others. For instance,        (together with the Natural Climate
by others. This is particularly apparent     life cycle assessments have estimated         Solutions project), health and other
when there is marked variation between       the potential of a plant-based burger         societal value, and how these can
environmental policies between               at around 90% less greenhouse gas             contribute towards an apex goal for
countries.                                   emissions, 46% less energy, 99% less          nature and science-based targets while
                                             water and 93% less impact on land use.        also supporting development of the
The Dasgupta Review considers
                                                                                           Task Force on Nature-related Financial
several trade practices and policies
                                                                                           Disclosures (TNFD). In December 2020,
that would mitigate these impacts, such
                                                                                           the two projects launched their first
as less trade in certain goods, border
                                                                                           joint report on Accelerating Business
adjustment taxes (which would need
                                                                                           Solutions for Climate and Nature,
                                                                                           focused on mapping nature-based
                                                                                           solutions and natural climate solutions.

                                                                     The Economics of Biodiversity: The Dasgupta Review (2021)
Creating the enabling environment for change

2021 is set to be the super-year           September and includes an action track       There have been signs that
for the sustainability agenda, of          dedicated to boosting nature-positive        policymakers and financial regulators
which nature is a key component,           agri-food production.                        will increasingly demand that financial
with the Convention on Biological                                                       institutions systematically assess
                                           As long as risks emerging from the
Diversity’s (CBD) fifteenth meeting of                                                  both Nature-related financial risks
                                           unsustainable use of the biosphere
the Conference of Parties (COP15)                                                       and their own impacts on nature.
                                           and opportunities to correct the
scheduled to happen this year. During                                                   Central banks and financial regulators
                                           overshoot are not reflected in market
the CBD COP15 countries are likely                                                      are starting to assess and manage
                                           prices, there will be very few incentives
to adopt a new Global Framework for                                                     nature-related risks, although to date
                                           for these risks to be incorporated in
Biodiversity, which includes an update                                                  they have been largely focused on
                                           financial decisions. This will result in
of the Aichi targets (none of which were                                                climate change. The Taskforce on
                                           the continuation of financial flows to
achieved). This new agreement will set                                                  Nature-related Financial Disclosures
                                           industries that are not sustainable,
how the world will measure and tackle                                                   (TNFD), for instance, will provide a
                                           as they would remain profitable over
nature loss for the coming decade. In                                                   framework for corporates and financial
                                           the short-term. The Dasgupta Review
addition, we will also have the UNFCCC                                                  institutions to assess, manage and
                                           states that corrections to market prices
COP26 this year, which has been                                                         report on their dependencies and
                                           are urgently needed (such as taxes and
named the “Green COP” and will focus                                                    impacts on nature, aiding in the
                                           subsidy reform) as well as a set of global
on how to deliver a “green recovery”                                                    identification of nature-related risk and
                                           standards underpinned by credible data
based on the COVID-19 stimulus                                                          the redirection of global financial flows
                                           which can help companies and financial
packages. On top of that, the first ever                                                towards nature-positive outcomes.
                                           institutions to fully integrate nature-
UN Food Systems Summit will be held in
                                           related considerations in their decision-
                                           making.

Working together to deliver solutions

WBCSD is working with members on           We also participate in multi-                Alliance, and multi-stakeholder
solution areas to create and mobilize      stakeholder initiatives and business         initiatives like the Food and Land
a collective voice of business and         coalitions like Business for Nature,         Use Coalition (FOLU) and the Food
create solutions to deliver against        One Planet Business for Biodiversity         System Dialogues.
these challenges through, the Climate      (OP2B), the Natural Climate Solutions
& Energy Program and the Food
& Nature Program which includes
the Nature Action project, the True         Additional resources
Value of Food, the Scaling Positive          In April 2020, the UK Government launched their Interim Report on the
Agriculture (SPA), FReSH, Natural            Economics of Biodiversity. This Interim Report provided the foundations for the
Climate Solutions (in partnership            final Dasgupta Review. Find WBCSD’s business summary of the report here.
with the Climate & Energy Program),
the sector projects Forest Solutions         WBCSD has published business summaries of other important reports over the
Group and Global Agribusiness                last year. Please see the UN’s IPCC special report on Land, with the business
Alliance, and the We Value Nature            summary here; the EAT-Lancet Commission on Food, Planet, Health with
training in partnership with the             the business summary here; The WEF New Nature Economy Series with the
Redefining Value Program.                    business summary here; and the IPBES Global Assessment report with the
                                             business summary here.

  About the World Business Council for Sustainable Development (WBCSD)
  WBCSD is a global, CEO-led organization of over 200 leading businesses working together to accelerate the transition
  to a sustainable world. We help make our member companies more successful and sustainable by focusing on the
  maximum positive impact for shareholders, the environment and societies.
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  gives our members unparalleled reach across the globe. Since 1995, WBCSD has been uniquely positioned to work
  with member companies along and across value chains to deliver impactful business solutions to the most challenging
  sustainability issues.
  Together, we are the leading voice of business for sustainability: united by our vision of a world where more than
  9 billion people are all living well and within the boundaries of our planet, by 2050.

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                                                                   The Economics of Biodiversity: The Dasgupta Review (2021)
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