Biodiversity, ecosystems and ecosystem services (BES)
The TEEB reports frequently refer to Biodiversity, Ecosystems and Ecosystem services often abbreviated to BES.
‘Biodiversity’ is short-hand for ‘biological diversity. Biodiversity is the living fabric of this planet. It is the whole gamut of the earths’ ecosystems, their extent and variety, the diversity and abundance of all species that inhabit them, and the number and variability of genetic material.
Ecosystems are thus one component of biological diversity. Ecosystems are a dynamic complex of plant, animal, and microorganism communities and the non-living environment interacting as a functional unit.
This living fabric, Biodiversity, provides us many benefits- called ecosystem services – from food, fuel and fibres, to services such as freshwater cycling and carbon capture and storage by forests, to crop pollination by bees, leisure and cultural values.
Natural Capital- our ecosystems, biodiversity and natural resources – underpins economies, societies and individual well-being. The values of its myriad benefits are often overlooked or poorly understood. They are rarely taken into account through markets or in day to day decisions by business and citizens, nor reflected adequately in the accounts of society. In addition to traditional natural resources such as timber, water, and energy and mineral reserves, it also includes biodiversity, endangered species and the ecosystems which perform ecological services. According to the Millennium Ecosystem Assessment (MA 2003), natural capital is one of four types of capital that also include manufactured capital (machines, tools, buildings, and infrastructure), human capital (mental and physical health, education, motivation and work skills) and social capital (stocks of social trust, norms and networks that people can draw upon to solve common problems and create social cohesion).
Payments for Ecosystems Services (PES)
One recommendation in TEEB is to set up “Payments for Ecosystems Services” also known as PES schemes. PES is a generic name for a variety of arrangements through which entities that benefit from ecosystems services pay the providers (i.e. land users that maintain certain ecosystems and their services). PES can be set up at local, national and international levels and can involve public and private sectors. Indeed, one of the many benefits of PES is that it starts to encourage private money, not just traditional public sector money to conserve the environment.
Direct Private Payments (PES)
Direct private payments are transactions that take place between private service providers and users.
Typically, they involve firms, conservation NGOs or households that benefit directly from certain environmental services. Stakeholders are motivated to conserve for a diversity of reasons – from ‘pure profit’ (for example, a mineral water company that depends on water quality and availability) to conservation concern. Payments may also be made by stakeholders who want to manage risk (avoid running short of a resource they rely on) or to pre-empt anticipated regulations. For example, firms are increasingly participating in carbon offsetting because of climate change concerns. These are often voluntary and initiated without regulatory incentives or requirements. Direct private payment schemes tend to work well because it is in the buyer’s interest to secure and monitor the service. Local policy makers can consider initiating and supporting direct private payment arrangements.
Direct Public and Government Payments (PES)
Direct public and government payments are government-financed schemes where the government pays service providers on behalf of their constituents. Governments participate in these schemes to secure ecosystem services: where the service is a ‘public good’ with many beneficiaries (like water provision); where the beneficiaries are difficult to identify; if an asset such as an endangered species will be lost if government does not act. Communities profit from payments for ecosystem services that are a public good by receiving income from such payments and by shifting to less environmentally damaging economic activities.
“A subsidy is a financial contribution by a government, or agent of a government, that confers a benefit on its recipients” World Trade Organization (WTO). This definition excludes general infrastructure provided by government. From the perspective of TEEB, non-internalisation of externalities– or government inaction more generally – will frequently act like a subsidy. For example, not internalising or factoring in the cost of pollution damages lowers costs to polluters in the market and thereby confers an advantage to them.
Environmentally harmful subsidies (EHS)
Environmentally harmful subsidies are a result of a government action or inaction that: “confers an advantage on consumers or producers, in order to supplement their income or lower their costs, but in doing so, discriminates against sound environmental practices.”
Gross Domestic Product (GDP)
Gross Domestic Product is the total market value of all final goods and services produced in a country in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports.
Calculating natural capital involves discounting. Discounting is banking talk for predicting the future worth of an investment. Economists discount any future benefit when comparing it to a current benefit. At one level, this is just a mathematical expression of the common-sense view that a benefit today is worth more than the same benefit in the future. But ethical considerations arise, for example when we consider giving up current income for the benefit of future generations, or the opposite: gaining benefits now at the expense of future generations.
‘Externality’ is a term used to describe a third party impact of a business transaction. A benefit in this case is called a positive externality, while a cost is called a negative externality. The problem with treating nature as an externality is that we don’t get to see the “BIG PICTURE”. So for example oil companies generate 25 billion pounds profit each year. But this does not take into account the costs of the environmental damage caused by oil drilling.
The discount rate often used in capital budgeting that makes the net present value of all cash flows from a particular project equal to zero. Generally speaking, the higher a project’s internal rate of return, the more desirable it is to undertake the project. As such, IRR can be used to rank several prospective projects a firm is considering. Assuming all other factors are equal among the various projects, the project with the highest IRR would probably be considered the best and undertaken first.
GDP of the Poor
The full economic significance of biodiversity and ecosystems does not figure in GDP statistics. However, if one accounts for the agricultural, animal husbandry and forestry sectors properly, the significant losses of natural capital observed have huge impacts on the productivity and risks in these sectors. Collectively, we call these sectors (i.e. agriculture, animal husbandry, informal forestry) the
“GDP of the poor” because it is from these sectors that many of the developing world’s poor draw their livelihood and employment. Furthermore, we find that the impact of ecosystem degradation and biodiversity loss affects that proportion of GDP most which we term the “GDP of the poor”.
Millennium Ecosystems Assessment
In our reports and the website you may see we frequently refer to the Millennium Ecosystem Assessment (MA), particularly with respect to figures for ecosystem loss. The MA was a fundamental assessment of the state of ecosystems globally. “In 2000, the United Nations brought together a consortium of governments, non-profit groups, international agencies, universities, and businesses to conduct a global assessment of the Earth’s ecosystems and the services they provide.” ( The results were published in a seven-volume report released in 2005).1
A procedure by which a third party gives written assurance that a product, process or service is in conformity with certain standards.
The evaluation and formal recognition of a certification programme by an authoritative body.
Documented agreements containing technical specifications or other precise criteria to be used consistently as rules, guidelines or definitions, to ensure that materials, products, processes and services are fit for their purpose. Standards include environmental standards; organic standards; labour standards; social standards; and normative standards.
A label or symbol indicating that compliance with specific standards has been verified. Use of the label is usually controlled by the standard-setting body.
Ecological restoration is defined as “the process of assisting the recovery of an ecosystem that has been degraded, damaged, or destroyed” and is “intended to repair ecosystems with respect to their health, integrity, and self-sustainability” (International Primer on Ecological Restoration, published by the Society for Ecological Restoration (SER) International Science and Policy Working Group 2004). In a broader context, the ultimate goal of ecological restoration, according to the SER Primer, is to recover resilient ecosystems that are not only self-sustaining with respect to structure, species composition and functionality but also integrated into larger landscapes and congenial to ‘low impact’ human activities.
Restoring Natural Capital (RNC)
Restoring renewable and cultivated natural capital (Restoring Natural Capital – RNC) includes “any activity that integrates investment in and replenishment of natural capital stocks to improve the flows of ecosystem goods and services, while enhancing all aspects of human wellbeing” .2 Like ecological restoration, RNC aims to improve the health, integrity and self-sustainability of ecosystems for all living organisms. However, it also focuses on defining and maximising the value and effort of ecological restoration for the benefit of people, thereby helping to mainstream it into daily social and economic activities.
Four types of Capital
Natural capital (environmental resources such as a freshwater stream with all its ecosystem services);
Economic capital (cash and economic assets, such as privately-owned pastureland);
Human capital (animal husbandry skills, knowledge of local market conditions, physical ability, traditional knowledge);
Social capital (family, neighborhood or other social networks and associations such as a local micro-finance project).
No Net Loss, Ecological Neutrality, Net Positive Impact
The concepts of No Net Loss (NNL), Ecological Neutrality or Net Positive Impact (NPI) are based on recognition that certain economic activities (e.g. mining or agriculture) will inevitably result in some residual impairment of BES on a given area of land or sea, even with the best environmental mitigation and restoration efforts. While such residual impacts cannot be avoided entirely, a company can aim to achieve a net zero or positive impact by taking actions to conserve or restore BES in other areas, with a view to maintaining overall ecological integrity.3
Note: All definitions are taken from the TEEB reports except where external links are given
- The Millenium Ecosystem Toolkit, 2007 Island Press http://islandpress.org/assets/library/27_matoolkit.pdf [↩]
- Aronson, J.; Milton, S. J. and Blignaut, J. N. (2007) Restoring natural capital: definitions and rationale. In: Aronson, J.; Milton, S. J. and Blignaut, J. N. (eds.) Restoring natural capital: science, business and practice. Island Press, Washington, D.C.: 3-8. [↩]
- For more information see TEEB for Business Executive Summary and TEEB for Business Chapter 5 [↩]