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 / Autumn 2006 / Issue 44(originally published by Booz & Company)


Unrecognized Assets

Embracing a New Philosophy
Now the creative thinking begins. With the information and analysis in hand, decision makers can get a sense of their total assets. They can see potential alternative uses (timber or recreation, for example) and challenges (such as new housing developments nearby). And they are finally equipped to ask two questions: Can environmental assets meet future operational requirements (for example, will the organization be able to meet its water needs)? And can the organization, with its current practices, sustain its natural resources into the future?

Actions that sustain future growth and viability can take a number of forms. In North Carolina, for example, officials at Camp Lejeune Marine Corps Base saw that the development of new training ranges on the base would destroy existing wetlands. So the base created 1,250 acres of new wetlands to offset the anticipated destruction. Camp Lejeune now draws credits from its wetlands mitigation bank whenever its activities affect existing wetlands. Similarly, at least two airports in the U.S. are adopting air quality controls that go beyond strict compliance with regulations; this extra “headroom” helps position the airports for future growth.

Planning for future sustainability requires organizations to look beyond their boundaries at potential environmental issues. For example, a nearby housing development or farm could tap into a needed water supply, pollute the site’s natural filtering systems, or shrink buffers around a military installation or industrial plant. Similarly, a local community could pressure an airport to restrict late-night flights or protect endangered species on its property. An organization, appreciating how developments outside its fence line will affect its environmental assets and its ability to carry out its operations, can now operate proactively, in collaboration with neighbors, to prevent future problems.

Corporate environmentalists might argue that this concept isn’t novel; some experts have been making this liabilities-into-assets case for 20 years or more. But a convergence of several important trends has made the idea far more compelling now, especially as a planning tool. One is increased public awareness about environmental issues, fueled in recent years by debates over global warming and deforestation. People recognize the historic trade-offs between economic growth and environmental protection, and now look to government and business to devise creative and more effective solutions.

Meanwhile, within companies and governments, a second trend is under way: a major philosophical shift that posits the ecosystem as a provider of services. In this new view, for example, what is provided by a forest — the water control, climate regulation, habitats for diverse species, and recreational services — is far more valuable than the market value of its lumber. Organizations, even lumber companies, thrive not by cutting down the trees but by managing them as sustainable resources. Consider these examples:

• When New York City officials realized that runoff from farm animal waste, pesticides, and fertilizer — along with other land-use practices in the Catskill Mountains and surrounding region — was threatening the quality of the city’s drinking water, they weighed several alternatives. One solution would have been to install water-filtration plants at an up-front cost of $4 billion to $6 billion, plus an annual operating cost of $250 million. Instead, the city is spending $250 million on land in order to prevent development in the Catskill–Delaware watershed, west and north of the city, and is paying farmers $100 million a year to minimize water pollution, according to the Economist (“Are You Being Served?” April 23, 2005). Several other U.S. cities, following New York’s approach, have calculated that every dollar invested in environmental protection would save between $7.50 and $200 of money otherwise spent on filtration and water-treatment facilities.

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