Putting a price tag on nature

As many of you’ve probably figured out by now, I’m an avid gardener. Since I was a child, I’ve started many of my own plants from seed, and I’ve long been amazed that you can buy a packet of say, 30 tomato seeds, for about $3. Those 30 seeds turn into 30 tomato plants, and those 30 tomato plants provide so many tomatoes that you’re eating, canning, freezing, and giving them away all summer. The value of those tomatoes seems to be far more than a dime apiece.

And that’s what many environmentalists have long argued. You can’t put a price tag on nature. But now, at least according to a recent Time magazine article, there’s a growing movement to do just that. To figure out the economic value of soil and trees and water and air. “All the things that nature does for us fuels our prosperity,” says Peter Kareiva, a lead scientist with the Nature Conservancy, in the article.

We’ve already seen a price tag attached to carbon – $20 a ton on the European market – and now large companies like Dow Chemical are starting to look at ecological numbers on a balance sheet. Dow’s CEO says of his company’s latest partnership with Nature Conservancy, “Our planet’s natural resources are more and more under threat. But protecting nature can be a profitable corporate priority and a smart global business strategy.”

Back in 1997, the journal Nature published a study that tried to estimate the value of the ecosystem. The tally? $33 trillion. But that’s too big a number to really try to manage, so scientists and economists are taking a closer look. For example, the World Wildlife Federation examined a Costa Rican coffee plantation and learned that flowers closer to the woods received twice as much pollen from bees. They calculated that this extra pollination was worth about $62,000 a year, or 7% of the farm’s income. Cutting down the trees, a common way to monetize resources in developing countries, produced only $24,000 a year.

So how’s this Dow/Nature Conservancy partnership going to work? The details are still being ironed out, but here’s what we do know. Dow will donate $10 million over the next five years to fund scientific models, analysis and estimates to help assess the impact of Dow’s business decisions on the environment. The final goal is to include “ecosystem services” as a critical component in Dow’s entire business model. The first “ecosystem service” to be examined is likely water, since Dow’s plants are largely water-dependent.

In this respect, Dow is following Coca-Cola and SABMiller, both of whom have invested millions in watershed protection, replenishment projects and ensuring clean drinking water.

The exciting news is this emerging concept of ecosystem services. “In a world with a growing population and demand for resources, smart companies will learn to value ecosystem services, not just exploit them,” the Time article states.

It’s a whole new way to conduct sustainable business. It’s a glimpse into the future of how businesses will be judged as successful or not by Wall Street, governments, and ultimately, by consumers.