Embracing Planetary Boundaries is the Secret to Business Success

This article originally appeared in Triple Pundit.

Triple Pundit | Standard business practices have stretched far beyond planetary boundaries — placing Earth’s climate biodiversity and ecosystem services on the brink of collapse. Companies must reduce environmental impacts. It isn’t only a moral imperative — it’s essential to business survival.

Planetary boundaries are nine critical thresholds that delineate the limits of Earth’s essential functions. When the world operates within these limits, the planet functions like a well-oiled machine, benefiting businesses and the general well-being of all species. When the world operates outside those limits, there are devastating consequences — such as extreme weather events, mass extinctions, land degradation, droughts and pollution.

But it’s not all sacrifice. Bringing business operations back within planetary boundaries will unlock competitive benefits, such as increased economic resilience, reduced operational risk and an edge against competitors.

A matter of business survival, not just success

An analysis of financial disclosures found that over 200 of the world’s biggest corporations will face $1 trillion in climate change-related costs in the decades ahead. These companies also estimated $250 billion in assets may need to be written off or retired early due to high-risk location and government regulation. Other studies go even further, estimating up to $24.2 trillion in costs to the global financial sector.

While markets have not yet collapsed, there are many examples of significant business challenges related to droughts, biodiversity loss and extreme weather.

Droughts: Back in 2015, drought conditions in California contributed to a 28 percent decline in Campbell’s carrot business profit and forced Starbucks to move its water bottling operations to Pennsylvania. And last year, heatwaves and droughts in Europe resulted in steep drops in corn, sunflower and soybean yields.

As the planet warms, scientists predict droughts will become more frequent and severe. Local and federal governments will make tough decisions on who can use limited water resources, prioritizing essential services and citizens. Businesses producing non-essential goods and services will be at risk.

Extreme weather: In 2019, PG&E filed for bankruptcy due to $30 billion in liabilities from wildfires potentially caused by its power lines. Hurricanes have repeatedly devastated the tourism industry in Puerto Rico, causing hundreds of billions in damages. Due to record-high precipitation, floods in the U.S. Northeast are estimated to result in $5 billion in losses from New Jersey to Vermont this year. Businesses large and small can expect devastating liabilities, service disruptions, and loss of revenue as workforce continuity takes a hit.

Biodiversity loss: More than half of the world’s gross domestic product depends on ecosystem services, and their functional decline already costs the global economy $5 trillion a year. Food businesses are particularly strained by biodiversity loss. More than 75 percent of global food crops rely on pollinators, which are dying at rapid rates. Marine species loss from climate change and overfishing has resulted in insurmountable challenges for fisherman and the rapid decline of cod, crab and shrimp in the U.S. In Europe, Baltic fisheries are even forced to shutter operations due to regulatory pressure or just a lack of fish to catch.

Less biodiverse ecosystems are also sensitive to invasive species. Roughly 20 percent of Earth’s land and water are currently at risk, and scientists estimate the effects of invasive species have already taken a $1.3 trillion financial toll in just 40 years.

The benefits of heeding planetary boundaries

Despite the risks, many corporate leaders cite “high investment, low return” and industry competition as excuses to maintain or even increase environmental impact. But by bringing operations within planetary boundaries, companies can fortify their economic resilience and even outpace peers.

Improve economic resilience: The organic agriculture market is a great example of how alignment with planetary boundaries can increase economic resilience. Most nitrogen-based fertilizers are derived from the ammonia manufactured through natural gas. When the Russia-Ukraine war began, international sanctions on Russia caused natural gas prices to skyrocket. But due to industry standards that forbid the use of nitrogen-based fertilizers, organic producers kept costs stable while the rest of the market struggled.

As the world works to reduce the consumption of fossil-based materials, companies that are less dependent on fossil-based resources are shielded from risks posed by regulatory and inflationary challenges.

Outpace competitors: Contrary to popular belief, global studies show that the most sustainable companies are usually also the most profitable. Take Patagonia, for example: It’s one of the world’s largest and best-known outdoor apparel brands, approaching $1 billion a year in profits. Yet its “slow fashion” model helps the company align with planetary boundaries. Patagonia makes over 80 percent of its products from recycled materials, and the company’s free repair services and Worn Wear program extend the lifecycle of damaged and secondhand products.

See also the industry rise of sustainable native companies such as Veja, Native, Who Gives a Crap and Beyond Meat. These startups have embraced sustainable operations from the start and have flourished in the market both from a consumer brand perception and financial perspective, forcing traditional competitors to adapt.

Taking the first step

Humanity has an unconscious belief that it has separated itself from nature. The reality is that we are more dependent on the planet than ever before.

Discussing planetary boundaries in the boardroom starts with understanding operational dependency on nature. Start with these questions:

• Which commodities or sourcing areas is the business model most dependent on?
• How will climate change, biodiversity loss, and water scarcity impact key commodities or sourcing areas?
• What ecosystem services (such as pollination, water purification or soil moisture) are critical to business operations?
• If these ecosystem services ceased their function, how much would it affect the bottom line?
• Is the company currently replacing an ecosystem service (such as diverting water to a drought-stricken area, or transporting bees to pollinate plants)? If so, how much does it cost each year?

Every company is dependent on nature in some way, but many will quickly realize they don’t have answers to these simple questions. Nature dependencies are often missing from risk evaluations.

Once identified, leaders can develop a holistic plan to address environmental impact on all operational levels. While there is no silver bullet, companies must stop working against nature and begin working within planetary boundaries. The cost of inaction far exceeds action, and nature is coming to collect.