Global ecosystems are under severe stress. Ecosystem degradation is highly relevant to business because companies not only impact ecosystems and the services they provide – such as water purification and supply, carbon sequestration and air purification – but they also depend on them. Increasingly, competition for these diminishing resources is driving the emergence of Payment for Ecosystem Services (PES) programmes, also known as “green” markets.
PES programmes offer payments to those who provide ecosystems services, conditional upon them exhibiting acceptable conservation performance. The past successes of markets for carbon and other environmental commodities (like water, sulphur dioxide and nitrogen dioxide) have demonstrated the potential for using investment-based solutions to internalise the external costs of pollution, natural resource exploitation, and unsustainable development.
We are a major user and owner of land, biodiversity and water resources. This can present significant risks to our operations when coupled with the changing ecosystem service legislative frameworks. Three of the most significant risks include biodiversity compensation (through offsetting), rights to access and use water, and mitigation and offsetting of our carbon emissions. These present both financial and reputation threats but also opportunities for our operations. Without a rigorous management process, the business risk we face will continue to grow significantly.
We are developing a Natural Capital project to investigate the business case and methodologies around designing and implementing ecosystem service offsets and investments in non-operational, land based assets.
At our Kennecott Utah Copper operation in the US we have successfully developed and then sold wetland credits as part of our Inland Sea Shorebird Reserve project.
Although there are challenges, we believe that emergent ecosystems service markets have great potential to contribute to solutions for global environmental issues. At the same time, they can also enable global economic growth to continue in a more ecologically sustainable manner. For us they present an appealing vehicle to drive sustainable development outcomes as part of our operational activities.
In 2009 we formalised a programme to explore the threats and opportunities for the Group arising from emerging green markets in biodiversity, carbon, water and other ecosystem services. Rio Tinto also sponsored an IUCN paper on the cost of Reducing Emissions from Deforestation and Degradation (REDD). This paper was published as part of the Copenhagen Climate Change discussions in December 2009.
As part of the Natural Capital project we are also engaging in external initiatives such as the WRI Corporate Ecosystem Service and the Natural Value Initiative, led by Fauna & Flora International.
The Natural Capital Project has begun exploring the ecosystem service values of our extensive non-operational landholdings. Through our collaboration with the International Union for Conservation of Nature (IUCN) economics group, we have undertaken a preliminary assessment of the biodiversity value of forest conservation projects in Madagascar. This groundbreaking work has now been published as part of the IUCN/Rio Tinto technical series on biodiversity and ecosystem services.
In 2012, Rio Tinto Iron Ore is undertaking, in conjunction with IUCN, a major study on the value of water in the Pilbara.