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 Market Mysteries of the week

   Should corporations be concerned about draining the earth’s vital resources?   

Answer:

Yes. Corporations have started to recognize that we don't live on a planet of unlimited resources, launching programs to preserve biodiversity. They will need to act with more urgency, though.

Why is it essential to preserve biodiversity?

Biological diversity supports life on our planet.

The interconnection and interaction of different animals, plants, insects, fish, bacteria, and fungi preserve the quality of our air, water, and soil. A wide variety of different organisms

makes the environment more resilient to disease, famine, drought, and other calamities

in the same way a diversified portfolio protects your investments as the market fluctuates. Biodiversity is vital for a healthy planet.

As human activity damages our global biodiversity, more living things face the risk of extinction. More than

75% of global food crops rely on wild pollinators

to succeed, but

wildlife populations are falling at an alarming rate

.

Since 1970, wildlife populations have declined by 68%

, and more than

1 million animals face extinction

in the coming decades.

This consistent loss of organisms

threatens our ability to grow food to support our global population

. More than 95% of our food comes from the soil, but United Nations officials believe that

we only have 60 years of farmable soil left on the planet

, given the current rates of soil degradation. Protecting biodiversity can increase the likelihood that every person on this planet will have enough food to survive.

What have been the biggest threats to biodiversity?

Biodiversity loss has been driven by

mostly everything our economy does

- clearing forests and ecosystems, overharvesting resources, and polluting. That's not to mention climate change in general, from which natural disasters and rising sea levels have

devastated global ecosystems at an alarming rate

.

Deforestation and the destruction of natural habitats

have been

the most severe disruption

to biological diversity.

Since 1990, more than 10% of the world's forests have been cut down 

for logging or converted for other uses, primarily agriculture. This process creates a cascade of problems as it displaces animals and people who depend on the ecosystems, creating refugees and eliminating animal species.

From

overfishing

the oceans to industrial agriculture draining nutrients from soil,

we are depleting our natural resources faster than they can regenerate

. Modern industrial agriculture has focused heavily on cultivating a single plant on a single piece of land, also called monocropping.

Monocropping decreases the biodiversity

of the soil, making the ecosystem

less resilient to disease

and pests and more reliant on costly and environmentally-damaging artificial fertilizers and pesticides.

Air, water, and land pollution are also devastating ecosystems. We've

discussed in the past

how

plastic pollution has infiltrated almost every natural environment

and will remain on this planet well after we're gone.

Where can corporations make a difference?

This is an economically-driven problem

.

More than half

of global economic production is moderately or highly

dependent on natural resources

. The World Economic Forum identifies biodiversity loss as

one of the most urgent and existential threats to the global economy.

Corporations can play a significant role in slowing their climate impacts by

focusing on how they source their raw materials

- from cotton to corn, metals, and even leather. For fashion companies,

most of a garment's greenhouse gas emissions and water usage occur at the earliest stages of the supply chain

. The agricultural industry is estimated to be responsible for roughly

30% of global carbon emissions, 70% of freshwater use, and 60% of biodiversity loss

.

Food distributors from

Whole Foods to PepsiCo and Walmar

t and fashion companies like

Gucci and Patagonia

have started investing in regenerative agriculture.

Regenerative agriculture

moves away from monocropping to farming techniques that

increase biodiversity and soil health

. There is a wide range of tactics from animal grazing to crop rotation that decreases reliance on artificial fertilizers and enrich the soil's ability to remove carbon from the air, in effect

reducing the carbon footprint of the company's supply chain.

Global investors and corporations are also

paying closer attention to deforestation practices at the earliest parts of their supply chain

. Companies like

McDonald's, Walmart, Yum!, and JBS

have come under pressure to ensure their paper products aren't sourced from illegal logging operations and their beef farms aren't clearing forests for grazing. These

corporations still lack many tools and technologies to trace these kinds of issues

, so they have been contributing to the cause indirectly by

donating and partnering with external wildlife conservation groups

like the Nature Conservancy and the World Wildlife Foundation. It's estimated that in order to combat the current loss of biodiversity,

conservation groups will need more than $350B each year

, while they currently get only $50B per year.

With more significant investment in biodiversity conservation, companies will end up protecting their supply chain in the long run.

Has your company identified biodiversity protection as a priority yet?

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