strategy+business is published by PwC Strategy& Inc.
or, sign in with:
strategy and business
Published: November 24, 2009
 / Winter 2009 / Issue 57


The Thought Leader Interview: Gretchen Daily

S+B: In your panel presentation, you said that it’s a new idea to regard an ecosystem as a valuable asset. What did you mean?
DAILY: Since the dawn of humanity, people have been a small-time force on the planet. Except for matters of local scarcity, nature’s life support systems were free and abundant. We never had to think about the dangers of running out of fertile soil, clean water, or pollinators (such as bees, birds, and bats) that made it possible to reap a harvest; an ozone layer to shield us from ultraviolet radiation; or forests to soak up precipitation and control flooding. Before the late 20th century, anyone living in Louisiana could take for granted that the barrier islands off the coast would help protect them from storms.

Today, that has changed. Shoreline ecosystems have been so eroded by development that many communities were more vulnerable to Hurricane Katrina in 2005, and to the Indian Ocean tsunami of 2004. The world’s population is close to 7 billion now, and many people in emerging countries hope to live like the Americans they see on television shows. They’re going to demand more protein, such as beef or chicken, in their diets, which will require a sixfold increase in the amount of grain consumed per capita. That would require much more arable land than we have on the planet, even if we cut down all the remaining natural forests. And if we did do that, the increase in greenhouse gases would make the risks of climate change far worse.

In other words, humanity is rapidly liquidating its own long-term life support systems. And we’ve only just begun to pay the price. Anywhere you look, there is suddenly a zero-sum game when it comes to land, water, or other key natural resources. We can’t afford to go on treating nature like an all-you-can-eat buffet. We need to recognize that there are a ton of people sitting around this one little table, and we’ve got to establish both prices and table manners to sustain the bounty.

S+B: How do you establish a price for an ecosystem?
DAILY: The first step is to appreciate that ecosystems are valuable capital assets that, when properly managed, sustain a flow of vital benefits over time. These benefits vary from place to place. But their value can be quantified — both in biophysical terms, such as how much groundwater is recharged or how clean the water is, and in economic terms, for example, what it would cost to manufacture a substitute for that free service we get from nature. We need to recognize, and put a price on, the value of the natural land and water around us, as we do for physical, financial, or human capital.

The next step is to get practical and set priorities about which ecological benefits are most critical. Which are at greatest risk of depletion, for which there are no substitutes at the scale required? Which merit new investments? Where will the return on investment be highest for either a private corporation or a government?

Scarcity will drive many of these decisions. For example, air quality is still relatively high in most places, so there is less incentive to curb air pollution. Other aspects of natural capital, like protection against disasters and reduction in greenhouse gases, have more value right now. In many parts of the world, fresh drinkable water has become the scarce resource most likely to determine economic growth and well-being. Wars will be fought over water supply.

Unintentional Moonscapes

S+B: What kind of scarcity are we actually talking about?
DAILY: I sometimes use the analogy of going to the moon. Suppose you were building a colony there. What ecological assets would you need to bring with you to sustain human life?

Follow Us 
Facebook Twitter LinkedIn Google Plus YouTube RSS strategy+business Digital and Mobile products App Store