A new report by the World Economic Forum (WEF) in collaboration with Pricewaterhouse Coopers (PwC) makes a case for why the environmental crisis will directly and significantly impact primary, secondary and tertiary businesses, and therefore disrupt the markets and the economy.
Titled Nature Risk Rising: Why the Crisis Engulfing Nature Matters for Business and the Economy, the paper is the first in the New Nature Economy (NNE) series that intends to explore how businesses must adapt in order to mitigate the risks posed by climate change. The NNE series is a part of the WEF’s Nature Action Agenda platform.
The Economy During A Nature Emergency
According to the report, “$44 trillion of the economic value generation – more than half of the world’s total GDP – is moderately or highly dependent on nature and its services and s therefore exposed to nature loss.”
Major industries like agriculture, construction and food and beverages (totaling almost $8 trillion in terms of gross value added), as well as other trades like chemicals and materials, aviation, travel and tourism, real estate, mining, supply chain and transportation, retail, and consumer goods, would face considerable negative consequences in terms of their financial performance.
As nature-related risks disrupt society, businesses must not only combat physical challenges but also face the possibility of losing entire markets of customers and the challenge of adapting to new laws and regulatory changes that may affect prices.
Adopting A Nature-based Solution
The report further contends that moving forward, businesses must pursue a “nature-positive way of doing business.” The report draws on research and recommendations based on climate change-related risks to enterprises to develop a mechanism for managing nature-related perils in the future.
It suggests that businesses across industries should incorporate nature-based risks within their existing risk management processes and protocols, as many have done for climate change as well as environmental, social and governance (ESG) procedures.
The report argues that only a proactive shift in existing practices can help tackle the increasing impact of economic activities on biodiversity. It calls industry leaders, investors, policy-makers and civil society to work collectively to make strides in this area by 2030.
Notably, the report emphasizes that nature-based risks for businesses will have far-reaching material consequences. Hence, it is in the self-interest for businesses and their stakeholders to take preemptive strategic and policy action.
The NNE report follows WEF’s 2020 Global Risks Report (GPR), which ranked the loss of biodiversity and ecosystem collapse as one of the top five risks to the economy in the upcoming ten years.
The Nature Action Agenda will be releasing two further reports on the issue in 2020. These reports will provide new assessments regarding the opportunities for investment in nature-based solutions to the problem as well as the financial aspect of the issue.