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ATTRIBUTING ECONOMIC VALUE

TO THE
NATURAL ENVIRONMENT:
Challenges & Possibilities

Key Words: Economy, natural environment, sustainability, growth, human life

Abstract: A sustainable world depends on what human beings do with their
freedom to behave and mingle with nature. To produce results ideas have to be
implemented. Humans are born with responsibilities not only towards other
fellows but also towards the environment and development of community and
society.
This present paper expresses the views of the author on the same lines about
challenges and possibilities of attributing economic value to natural
environment. The possibilities and existing practices are expressed in this paper
major being the steps towards sustainability reporting, new methods of
organizational governance, energy efficiency, green initiatives by governments.
The present paper is divided into 3 major parts;
1- Problems and current scenario of environment,
2- Cost analysis
3- Possibilities of attributing economic value to natural environment. This part
consists of setting of metrics for measurement & reporting initiatives
undertaken internationally.




Water used in food and drink production, timber for packaging, furniture and paper,
productive land for fruit and vegetables, and fibres for clothes, are amongst just some of the
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biodiversity and ecosystem services whose economic value is subject to the availability and
its cost estimation is mostly unprized, and largely unaccounted for in business life, the flow
and use of natural resources is embedded in the global economy every day.

Biodiversity underpins ecosystem services. Bees cant pollinate, nor can trees store carbon,
if they have all died. Diverse systems are better at capturing carbon, storing water and
preserving fisheries. Just how diverse an ecosystem has to be in order to supply the goods and
services needed by man is a matter of debate - a debate made harder by the fact that many
species may have uses that man has not yet found.
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. Using the implied social cost of carbon from the Stern report ($85 per tonne CO2), the long
run economic cost of 2008 net greenhouse gas emissions could be in the region of
$1.7trillion*. For the same year, the economic cost of biodiversity loss and ecosystem
degradation was estimated to be between US$2 and US$4.5 trillion (3.3 7.5% of global
GDP). While these numbers are not directly comparable, the fact that they are in the same
order of magnitude should give pause for thought.
To date discussions on biodiversity loss have focused on specifics such as coral reef
degradation, deforestation or declining fish stocks. All of these are of concern to particular
industries or regions. Recently, the broad systemic implications of biodiversity loss and
ecosystem degradation linking to resource management, climate change and population
growth have been more explicitly articulated. This briefing paper will explore both specific
and broader systemic effects and the associated business risks.
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Economic policy and social policy have been largely separate agendas involving different
participants. Many see the two as conflicting agendas because of the flaws in the capitalist
system. However, there is no inherent conflict between capitalism and social needs. A
productive and growing economy requires rising skill levels, a proliferation of new
companies, safe working conditions, healthy workers who live in decent housing in safe
neighborhoods, and a sense of opportunity. Social and economic policy must be integrated in
addressing societys ills and ensuring true progress.
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Pressures on biodiversity and the existing defects
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The world is today facing unique and daunting environmental challenges. These include
climate change; an emerging global crisis in water availability and water pollution; record
loss of biodiversity and long-term damage to ecosystems; pollution of the atmosphere; waste
production and disposal; impacts of chemicals use and toxic substance disposal; damaged
aquatic ecosystems; and deforestation and land degradation.
A process of ecosystem degradation, driven largely by population growth, and the
industrialisation and intensification of agriculture, beginning with land conversion, and
followed by overgrazing or soil degradation, has been a key driver of desertification,
resulting in the widespread loss of once productive land. Increasing water scarcity, itself
partly a result of deforestation or removal of vegetation, is compounding the problem in
many regions.
The economic cost of soil erosion in Europe is estimated at 53 per hectare per year12.
Annual economic losses caused by introduced agricultural pests in the US, UK, Australia,
South Africa, India and Brazil exceed US$100 billion
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Factors resulting in environmental degradation
Economic growth The development-centric vision that prevails in most countries and
international institutions advocates a headlong rush towards more development, whereby the
development of increasingly advanced technologies and more efficiently scaled economies
would help to protect the environment against the damage caused by the very same
development. Environmental economists, on the other hand, point to a close correlation
between economic growth and environmental degradation, arguing for qualitative
development as an alternative to growth. There are those, particularly within the alternative
globalization movement, who maintain that it is feasible to change to a degrowth phase
without losing social efficiency or lowering the quality of life.
Consumption The growth of consumption and the cult of consumption, or consumerist
ideology, is the major cause of economic growth. Overdevelopment, seen as the only
alternative to poverty, has become an end in itself. The means for curbing this growth are not
equal to the task, since the phenomenon is not confined to a growing middle class in
developing countries, but also concerns the development of irresponsible lifestyles,
particularly in northern countries, such as the increase in the size and number of homes and
cars per person.
Destruction of biodiversity The complexity of the planets ecosystems means that the loss
of any species has unexpected consequences. The stronger the impact on biodiversity, the
stronger the likelihood of a chain reaction with unpredictable negative effects. Despite all the
damage inflicted, a number of ecosystems have proved to be hugely resilient.
Environmentalists are endorsing a precautionary principle whereby all potentially damaging
activities would have to be analyzed for their environmental impact.
Population Forecasts predict 8.9 billion people on the planet in 2050, representing an
increase of 41% from current numbers. This is a subject which primarily affects developing
countries, but also concerns northern countries; although their demographic growth is lower,
the environmental impact per person is far higher in these countries. Demographic growth
needs to be countered by developing education and family planning programmes and
generally improving womens status.
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Challenges
It may be relatively straightforward to demonstrate values in monetary terms and capture
them in markets. This applies most obviously to commodity values such as the number of
livestock or cubic meters of timber, but can equally be applied to amount of carbon storage or
the supply of clean water. On the other hand, in more complex situations involving multiple
ecosystems and services, and/or plurality of ethical or cultural convictions, monetary
valuations may be less reliable or unsuitable. In such cases, simple recognition of value may
be more appropriate.
The crisis caused by the impact of human activities on nature calls for responses by
international institutions, governments and citizens. Governance intends to meet this crisis by
pooling the experience and knowledge of each of the agents and institutions concerned.
Environmental problems of climate change, biodiversity loss and degradation of ecosystem
threaten to block solutions and already restrict economic development in many countries and
regions. Environmental protection measures remain insufficient. The necessary reforms
require time, energy, money and diplomatic negotiations. The situation has not generated a
unanimous response. Persistent divisions slow progress towards global environmental
governance.
The global nature of the crisis limits the effects of national or sectoral measures. Cooperation
is necessary between actors and institutions in international trade, sustainable development
and peace.
The effort to curb global warming is as stuck as ever, but that, whether we like it or not,
were all in this together.
The obstacles remain significant. Countless summit conferences since the Kyoto Protocol on
climate change was adopted more than 15 years ago have failed to budge the fundamental
roadblocks standing in the way of collective action: How should the costs be divided? Who
did what to whom? Globalization which in the process of exporting production and jobs
from rich to poor countries also exported the carbon dioxide emitted to make the products
consumed by the rich countries adds another complex twist to allocating responsibility for
the carbon in the air. The disquieting question is this: Are emissions the responsibility of the
countries that made them or of the countries for whom the products were made? Two years
ago, some of the greenest constituencies in the country asked Elizabeth Stanton and
colleagues at the Stockholm Environment Institute-U.S. Center to perform a set of
calculations on their carbon emissions. Rather than tally the carbon they produced, they
wanted an inventory of the emissions generated in making, transporting, using and disposing
of what they consumed. They were in for a surprise. San Francisco, for example, generated
only eight million metric tons of carbon dioxide equivalent in 2008. The citys consumption,
by contrast, added nearly 22 million tons of carbon to the air. Using consumption-based
measurements, Oregons emissions in 2005 jumped to 78 million tons from 53 million.
Understanding its impact on climate change is a necessary first step for families, and
municipalities, to take concrete action to mitigate carbon emissions. This sort of
recalculation, however, could have an unforeseen effect on the international politics of
climate change by shifting responsibility on a global scale. With the concentration of carbon
dioxide in the air zooming last spring to its highest level since mastodons roamed the earth
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some three million years ago, the United Nations, against all odds, hopes 2014 will finally
deliver the breakthroughs needed for the big carbon-spewing nations to agree on a plan by
2015.The diplomacy of climate change appears as stuck as ever. Poor carbon-spewers like
China justify their opposition to tight carbon limits on the grounds that, on a per-person basis,
their emissions are still very low. Moreover, most of the carbon in the atmosphere now, they
argue, was put there by Americans and other wealthy carbon-spewers, who burned a lot of
fossil fuels on the way to getting rich. Forbidding the Chinese from doing the same would be
tantamount to condemning them to stagnation. Policy makers in Washington retort that while
all this may be true, a deal that only required rich countries to limit emissions would be
pointless: their carbon savings would be negated by growing emissions elsewhere. Heavy
emitters of greenhouse gases like the agriculture and chemical industry would decamp
from rich nations to the less carbon-restricted shores of the developing world.
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1- Economist 2008
3-http://www.isc.hbs.edu/Creating_Shared_Value.htm
2,4 - A briefing paper for participants engaged in biodiversity related discussions at the
World Economic Forum Davos-Klosters Annual Meeting: Prepared by
PricewaterhouseCoopers for the World Economic Forum.
5-http://www.nytimes.com/2013/12/25/business/economy/what-if-consumers-not-
producers-paid-for-emissions.html?_r=0
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Benefits of protecting tropical forest ecosystems often outweigh the costs. While forest
conservation may be a good deal for society, the question remains how to make it a good deal
for the people who actually live there.

Costs of Biodiversity Loss
The total annual economic cost of biodiversity loss and ecosystem degradation
is estimated to be between US$2 and US$4.5 trillion, or 3.3 - 7.5% of global
GDP, according to a PricewaterhouseCoopers analysis
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The UN study The Economics of Ecosystems and Biodiversity (TEEB) indicates that scrutiny
of big business and its impacts on the worlds natural capital is likely to intensify as better
evaluations and assessments come to the fore. Already, TEEB estimates the global economic
impact annually of biodiversity loss at between $2-4.5 trillion, and is to be felt in product
pricing, availability of products and financing, impact on climate and supply chain
disruptions for consumers, business and government.
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The values of nature vary according to local biophysical and ecological circumstances and
the social, economic and cultural context. Intangible values, which may be reflected in
societys willingness to pay to conserve particular species or landscapes, or to
protect common resources, must be considered alongside more tangible values like food or
timber to provide a complete economic picture.
Valuation is seen not as a panacea, but rather as a tool to help recalibrate the faulty economic
compass that has led us to decisions that are prejudicial to both current well-being and that of
future generations. The invisibility of biodiversity values has often encouraged
inefficient use or even destruction of the natural capital that is the foundation of our
economies.
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Conserving forests avoids greenhouse gas emissions worth US$ 3.7 trillion
Halving deforestation rates by 2030 would reduce global greenhouse gas emissions by 1.5 to
2.7 GT CO2 per year, thereby avoiding damages from climate change estimated at more than
US$ 3.7 trillion in NPV terms. This figure does not include the many co-benefits of forest
ecosystems
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With more than a million people in China dying prematurely each year from breathing its
dirty air, and with warming temperatures portending rising sea levels and disruptions to food
production, the centrally planned Communist country is experimenting with a capitalist
approach to address the problem: it is creating incentives so that the market and not the
government will force reductions in emissions.
Carbon cap-and-trade programs align environmental goals with market incentives.
Conventional regulatory approaches cannot ensure achievement of emissions targets, create
problematic unintended consequences, and are very costly for what they achieve, says the
economist Robert N. Stavins, director of the Harvard Environmental Economics Program.
So how did America detour away from emissions markets, which are the preferred approach
of many economists, climate and consumer advocates, and many electric utility companies
that own and operate power plants?
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It all comes down to politics. Before the last recession, political support was building for a
carbon market, with various Republicans, including Senator John McCain, his partys 2008
presidential nominee, supporting a market-based approach. After House Democrats approved
a cap-and-trade bill in 2009 that put a price on fossil-fuel emissions, the issue became a target
of the Tea Party. In the midst of the worst economy in 75 years, the Senate declined to take
up the measure, and cap and trade became a dirty term on Capitol Hill.
Even so, several states already have turned to this approach. Californias effort began in
January. Nine mid-Atlantic and Northeast states use it under the Regional Greenhouse Gas
Initiative.
In Washington, faint whispers of a carbon tax are still occasionally heard as a solution for
budget and environmental problems in a single policy. But even if that were to happen, the
tax would probably be small and would not guarantee the reduction in emissions needed.
Like a tax, carbon markets can also generate revenue that can be rebated to consumers or
used to lower other taxes.
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4,5 - News Release : Date: 14 September 2010 : Pricewater Cooperhouse.

6,7 - TEEB (2010) The Economics of Ecosystems and Biodiversity: Mainstreaming the
Economics of Nature: A synthesis of the approach, conclusions and recommendations of
TEEB.Pavan Sukhdev and TEEB Team, Preface.

8-http://www.nytimes.com/2013/08/10/opinion/pollution-
economics.html?src=rechp&_r=1&- Author: Dirk Forrister is president and chief executive
officer of the International Emissions Trading Association. Paul Bledsoe is a senior fellow in
the energy and climate program at the German Marshall Fund of the United States

Metrics of sustainability in Legal framework

Sustainability
"Meeting the needs of the present without compromising future needs
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Most effective on environmental issues where improvements can yield immediate economic
benefits
In other areas, intangible long term consequences provide a weak justification for short term
costs.

The importance of businesses in improving the quality of life is well recognized. However,
there is growing awareness that in an increasingly complex world, businesses also have
significant and long-lasting impacts on people, our planet and our ability to sustain the levels
of holistic development that we all aspire to. This realization has also brought an increasing
concern amongst all stakeholders, who are demanding that businesses of all types and sizes
need to function with fairness and responsibility. Specifically, this calls for businesses being
thoroughly aware and conscious of their social, environmental and economic responsibilities,
and balance these different considerations in an ethical manner.

In India the National Voluntary Guidelines on Socio-Economic and Environmental
Responsibilities of Business brought out by the Ministry of Corporate Affairs will help the
Corporate sector in their efforts towards inclusive development. Businesses now have to take
responsibility for the ways their operations impact society and the natural environment. The
Corporate Sector must now focus its attention on achieving the 'triple bottom line'- people,
planet and
profit. Urged by the Prime Minister's Ten Point Charter, the Corporate Sector is
now trying to ensure that economic growth is socially and environmentally
sustainable.
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When it comes to philanthropy, executives increasingly see themselves as caught between
critics demanding ever higher levels of "corporate social responsibility" and investors
applying pressure to maximize short-term profits. Increasingly, philanthropy is used as a form
of public relations or advertising, promoting a company's image through high-profile
sponsorships. But there is a more truly strategic way to think about philanthropy.
Corporations can use their charitable efforts to improve their competitive context--the quality
of the business environment in the locations where they operate. Using philanthropy to
enhance competitive context aligns social and economic goals and improves a company's
long-term business prospects. Addressing context enables a company not only to give money
but also leverage its capabilities and relationships in support of charitable causes. Taking this
new direction requires fundamental changes in the way companies approach their
contribution programs. Adopting a context-focused approach requires a far more disciplined
approach than is prevalent today. But it can make a company's philanthropic activities far
more effective.
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9 Page 2: Foreword: R.P.N. Singh, Minister of State, Corporate Affairs ,Ministry of
Corporate Affairs : National Voluntary Guidelines on Social, Environmental and
Economical Responsibilities of Business being brought out by the Ministry of Corporate
Affairs.
10- http://www.isc.hbs.edu/soci-corporate_philanthropy.htm
Green Initiative in Corporate Governance in India
In order to promote the Green Initiative in Corporate Governance, the Ministry of
Corporate Affairs (MCA) vide its circular No.17/2011
dated 21 April 2011 has allowed paperless compliances by the Companies pursuant to the
provisions of the Information Technology Act, 2000.
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Advantages of Green Initiative
1. Reduction in paper consumption
2. Contribution towards a greener environment
3. Ensure prompt receipt of communication
4. Avoid loss in postal transit
5. Savings in paper and postage costs


With the passage of time certain metrics have come up to standardize the and legalize the
movement of environment protection some of them are ; ISO 50001, Global Reporting
Initiative, ISO 140001, National Green Tribunal.