Paying for Nature

Dow Chemical wants to put hard numbers on exactly how much the environment is worth to business

By Bryan Walsh Monday, Feb. 21, 2011
    • Siebe Swart / Hollandse Hoogte / Redux

    A Dow plant in the Netherlands recycles city water

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    Both Dow and TNC expect water to be the initial focus of the collaboration. As ecosystem services go, water is the closest to actually being part of a market — although its low price rarely reflects its true value. And Dow's chemical plants are unusually dependent on water — a fact the company's leadership has begun to recognize. Since 2007, the Dow production plant in Terneuzen, a city in the southwestern Netherlands, has recycled 2.6 million gal. (9.8 million L) of municipal wastewater a day for its operations — cheaper and greener than tapping river water. "If you have insufficient water, it can stress the ecosystem, and it can cause production problems," says Neil Hawkins, Dow's vice president of sustainability and environment. "Understanding those impacts can help us make better decisions."

    The Dow-TNC collaboration is just the latest piece of business news to suggest that environmental responsibility and corporate success aren't always opposed. In 2007, Goldman Sachs released a landmark report showing that companies that were considered leaders in environmental, social and governance policies tended to outperform the general stock market and their peers. Other major international companies have begun experimenting with ecosystem services. Coca-Cola has invested nearly $30 million in watershed programs around the world, replenishing for communities and nature the equivalent of 31% of the water used in its finished beverages in 2010. SABMiller is working with TNC in Bogotá to protect the basin that provides the Colombian capital with much of its drinking water. SABMiller's Colombian subsidiary, along with several other Bogotá businesses, has begun paying to protect the watershed and ensure a supply of clean water. So far they've spent about $700,000, and estimates are that the investment will pay off — through reduced water-treatment costs — in four to five years. "In the past, the big concern for companies on the environment was just to avoid risk," says Glenn Prickett, TNC's chief external-affairs officer and the point person for the Dow deal. "The difference is now they can look at nature as a source of business values."

    If it all sounds too good to be true — or too fuzzy — it's because ecosystem services are just being defined as a concept. Services beyond water — like biodiversity — are harder to price, and corporations won't stop pushing back against government environmental regulations they consider onerous. But in a world with a growing population and demand for resources, smart companies will learn to value ecosystem services, not just exploit them. "It's not a choice to play a zero-sum game anymore," says Liveris. "The economy and the environment are interdependent." And they're united by one color: green.

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