Finance & Investment Circular Economy

Landmark Review Calls for Nature to Be at the Center of Economic Decision-Making

The UK Government commissioned an independent, global Review on the Economics of Biodiversity in Spring 2019. The report urges policymakers to start valuing ecosystems and says GDP encourages unsustainable growth.

Published 3 years ago | About a 5 minute read

Image: Leung Kwok Tung Ktleung/Pexels

Businesses and governments around the world will have to rethink economic growth as a measure of success if they want to make good on pledges to stop the destruction of the natural world, according to a UK government-backed report published today.

Commissioned by the UK government in 2019, the Review on The Economics of Biodiversity — led by University of Cambridge economist Professor Sir Partha Dasgupta — lays out key recommendations for reversing manmade declines in biodiversity that are undermining the productivity, resilience and adaptability of our natural world. It warns that this historic decline has placed economies and livelihoods at risk.

The study supports the assertions that environmental groups have been making for decades — that humanity has mismanaged its natural assets, and our demands on nature now far exceed its capacity to supply resources and vital services. The Review calls for the expanding and improvement of protected areas, increased investment into nature-based solutions, the creation or improvement of policies to eliminate damaging consumption of natural assets, and the incorporation of natural capital accounting and proper valuation of ecosystem services into all national accounting systems.

“This year is critical in determining whether we can stop and reverse the concerning trend of fast-declining biodiversity,” said UK Prime Minister Boris Johnson. “I welcome Professor Dasgupta’s Review, which makes clear that protecting and enhancing nature needs more than good intentions — it requires concerted, co-ordinated action.

“As co-host of COP26 and president of this year’s G7, we are going to make sure the natural world stays right at the top of the global agenda. And we will be leading by example here at home as we build back greener from the pandemic through my Ten-Point Plan.”

The Review also calls for ending the use of Gross Domestic Product (GDP) in favor of different metrics that would embed natural resources into today’s economic accounting, as part of a shift towards a more accurate and inclusive measure of wealth.

“Truly sustainable economic growth and development means recognising that our long-term prosperity relies on rebalancing our demand of nature’s goods and services with its capacity to supply them,” Dasgupta says. “It also means accounting fully for the impact of our interactions with nature across all levels of society. COVID-19 has shown us what can happen when we don’t do this. Nature is our home. Good economics demands we manage it better.”

The critical role of biodiversity in the longevity of life as we know it has been on the business world’s radar for the past few years — and has spawned a flurry of ambitious and promising efforts to help us course correct at scale. In 2017, the Natural Capital Impact Group developed a “healthy ecosystem metric” — based on the impact of a company on the quality and quantity of biodiversity, soil and water — designed to aid in business decision-making. In 2019, a group of conservation scientists, NGOs and indigenous leaders urged governments to adopt a “Global Deal for Nature,” to tackle the interlinked crises of biodiversity loss and climate change; Adobe and Pantone joined forces on a “Glowing, Glowing, Gone” campaign highlighting the global danger signaled by fluorescing coral reefs; and a diverse group of influential international organizations launched a coalition called Business for Nature, aimed at ensuring that a clear understanding of the relationship between nature, people and economies became integrated into all economic sectors, and at all levels of decision-making — a need echoed in the Dasgupta report.

A country’s GDP has long been debunked as a measure of human welfare — as it is merely a measure of the size of its economy, not an indicator of its wellbeing. Several alternatives to GDP have been put forward over the years as better alternatives for assessing welfare. They include the Index of Sustainable Economic Welfare, the Genuine Progress Indicator, Gross National Happiness, the Human Development Index, and the Comprehensive Net National Product, among others. These methodologies either (a) also quantify the size of economies in their own ways, or (b) do not quantify the size of economies at all and instead rate or rank them in their own fashion.

In 2017, Center for Sustainable Organizations founder Mark McElroy proposed a new way of measuring and reporting the performance of whole economies called Aggregate Capital Sufficiency (ACS) — an extension of multicapitalism, a new form of capitalism that interprets economic performance in terms of impacts on all vital capitals (natural, human, social, etc) and not just one of them (economic). ACS enables us to measure and report the sustainability of an economy, not just its size or its inhabitants’ well-being.

In 2020, WWF projected a US$10T hit to the global economy by 2050 if global biodiversity loss remained unchecked. In the past year, global companies including Kering, Natura, Procter & Gamble, Timberland and Walmart have embedded commitments to preserve or restore biodiversity into their sustainability strategies — but governments need to embrace this way of thinking for the necessary changes to take hold.