Taking the fear out of the unknown: learning to be comfortable with nature-based solutions projects

6 January 2022 - Tom Divney, Business Engagement Consultant for the CISL Centre for Business Transformation, and CISL’s Alison Thompson, Director, Business & Nature, Centre for Business Transformation, reveal learnings on how to unlock more corporate-led projects that work with nature to achieve win-wins for climate, nature and business resilience.

Nature-based solutions (NbS) can be an effective tool for companies to achieve net zero carbon and other environmental goals, build supply chain resilience, and future-proof against strategic risks. As an emerging area, working with NbS projects requires a strategic-risk appetite for dealing with uncertainty.

Business constantly deals with forecasts; these are based on assumptions and therefore always come with an element of the unknown. Corporate decision-makers are used to risk-based decision-making. Yet research carried out by CISL found that the uncertainty and unknowns around NbS are roadblocks to their inclusion in corporate sustainability and risk-management toolboxes. Businesses cited the lack of data or information about NbS results, project efficacy, financial value and costs as the main internal stumbling blocks to the use of NbS. For example, recent debates about the amount of carbon captured by some NbS has sown doubt as to the overall value of these projects. This undermines investment certainty.

How then do businesses progress with this agenda? The simple answer could be rooted in corporate culture and mindset. Added to this is a need to use best available science, value NbS benefits and consider the counterfactual of ‘do nothing’.

1. Address corporate culture and mindset: it starts with a business’ decision to embrace NbS as a potential solution. Senior support for researching, evaluating, and trialling NbS, accompanied by a realistic, and palpable, increase in tolerance of experimentation and error, is just as much the start of a successful NbS journey, as it is for any new corporate initiative.
2. Use best available science: NbS is not a complete unknown; information exists about the environmental services delivered by NbS. Companies can tease apart this information to uncover potential business benefits, in the process evolving their risk appetite. For example, drawing from academic and institutional research papers about carbon sequestration in soils, businesses can model the carbon sequestration quantity ranges for different regenerative agriculture scenarios based on supply chain, environmental and agricultural conditions.
3. Value NbS benefits: How can a company assign values to biodiversity enhancement, replenished water aquifers, or soil erosion control? Natural capital valuation aims to incorporate the value and impacts of nature’s goods and services into business decisions. The Capitals Coalition, We Value Nature, G20 Insights, World Resources Institute, and the European Commission’s work on nature capitals valuation, are good starting points for those wanting to delve further into natural capital valuations. The important thing is to decide on a set of benefits and apply these consistently across a portfolio of projects. The evidence base will improve as NbS projects generate more data and results with time. When monetary values are not readily available for specific NbS benefits, consider the value of the ultimate impacts, such as the amount of water replenished, that is the sum of many NbS benefits.
4. Consider the counterfactual of ‘do nothing’: Calculating the opportunity cost of maintaining the status quo can increase investment certainty. In the face of growing regulatory drivers, including financial disclosures around business impacts on nature, it is important to future-proof business models. Doing nothing means missing the opportunity to create stronger and more resilient supply chains. It also heightens certain reputational and regulatory risks, decreases access to capital and does nothing for climate action or local communities.  Whereas ‘doing something’ can demonstrate leadership and could seek to reverse these negative impacts.  

There is a huge opportunity to accelerate private investment in action to address our biodiversity and climate emergencies. Our findings, based on insights with 35 individuals from 30 global companies, point to the need for early action to de-risk corporate business models and secure first-mover advantage in their markets and with their supply chains.