Half of World’s GDP is Highly or Moderately Dependent on Nature, Says New Report.
World Economic Forum, Davos, Switzerland, 19 January 2020 – Businesses are more dependent on nature and biodiversity than expected, according to The New Nature Economy Report, released today.
On 21-24 January 2020 about three thousand of the world’s movers and shakers will gather for The World Economic Forum Annual Meeting 2020 in Davos-Klosters, Switzerland. What happens there will likely effect every life on Earth.
“We need to reset the relationship between humans and nature,” says Dominic Waughray, Managing Director at the World Economic Forum. “Damage to nature from economic activity can no longer be considered an ‘externality’. This report shows how exposure to nature loss is both material to all business sectors and is an urgent and non-linear risk to our collective future economic security.”
Key Economic Issues At A Glance
- The latest science tells us that about 25% of our assessed plant and animal species are threatened by human actions, with a million species facing extinction, many within decades
- Businesses are more dependent on nature than previously thought, with approximately $44 trillion of economic value generation moderately or highly dependent on nature
- Construction, agriculture, and food and beverages are the largest highly nature-dependent industries, with an economic value roughly twice the size of Germany’s economy; China, the EU and the US have the highest absolute economic value in nature-dependent industries
- There is potential for a win-win-win for nature, climate, people and the economy if business and economic actors can respond with urgency to protect and restore nature and start regularly identifying, assessing, mitigating and disclosing nature-related risks to avoid potentially severe consequences
- Read the report here and for more information, visit here:
According to today’s WEF press release, analysis of 163 industry sectors and their supply chains found that over half of the world’s GDP is moderately or highly dependent on nature and its services. Pollination, water quality and disease control are three examples of the essential services an ecosystem can provide.
$44 trillion of economic value generation – over half the world’s total Gross Domestic Product (GDP) – is moderately or highly dependent on nature and its services and, as a result, is exposed to risks from nature loss.
Construction ($4 trillion), agriculture ($2.5 trillion) and food and beverages ($1.4 trillion) are the three largest industries that depend most on nature. Combined, their value is roughly twice the size of the German economy. Such industries rely on either the direct extraction of resources from forests and oceans or the provision of ecosystem services such as healthy soils, clean water, pollination and a stable climate.
As nature loses its capacity to provide such services, these industries could be significantly disrupted. Industries highly dependent on nature generate 15% of global GDP ($13 trillion), while moderately dependent industries generate 37% ($31 trillion).
According to the report “Nature risks become material for businesses in the following three ways:
- When businesses depend directly on nature for operations, supply chain performance, real estate asset values, physical security and business continuity
- When the direct and indirect impacts of business activities on nature loss can trigger negative consequences, such as losing customers or entire markets, legal action and regulatory changes that affect financial performance
- When nature loss causes disruption to society and the markets within which businesses operate, which can manifest as both physical and market risks”
Hidden Dependencies Revealed
“Given the scale and severity of nature loss, business needs a wake-up call.” Celine Herweijer, Partner and Global Innovation and Sustainability Leader, PwC UK.
This World Economic Forum report, produced in collaboration with PwC UK, found that many industries have significant “hidden dependencies” on nature in their supply chain and may be more at risk of disruption than expected. For instance, there are six industries which have less than 15% of their direct gross value added (GVA is defined by Wikipedia as “the total value of goods produced in an area, industry or economic sector“) that is highly dependent on nature, yet over 50% of their supply chains’ GVA is highly or moderately nature-dependent. The industries are chemicals and materials; aviation, travel and tourism; real estate; mining and metals; supply chain and transport; and retail, consumer goods and lifestyle.
In terms of global exposure, larger economies have the highest absolute amounts of GDP in nature-dependent sectors: $2.7 trillion in China, $2.4 trillion in the European Union and $2.1 trillion in the United States. This means even regions with a relatively lower share of their economy at high exposure to nature loss can hold a substantial share of the global exposure and, therefore, cannot be complacent.
“Given the scale and severity of nature loss, business needs a wake-up call,” said Celine Herweijer, Partner and Global Innovation and Sustainability Leader, PwC UK. “The cascading physical, regulatory and legal, market and reputation risks we see mean nature risk now needs to be a mainstream issue for corporate enterprise risk management. We have an opportunity to extend the recent response of regulators, businesses and investors on climate change to nature; both are interrelated and both pose a systemic risk to the global economy. As for climate, business leaders need to identify and minimize the material nature-related risks but also play a part in restoring nature.”
“The very need for this report shows that we are in dire straits. We all rely on nature and we all take it for granted,” said Alan Jope, Chief Executive Officer of Unilever. “Business and government leaders still have time to act on the findings of the New Nature Economy Report. If we work together, COP15 and COP26 can generate the commitments we need to move the planet from the emergency room to recovery.”
“Together we can put nature at the heart of a healthy world economy,” said Marco Lambertini, Director-General of WWF International. “This research provides compelling evidence of the tremendous extent to which our economy depends on nature and its services. Business can play a critical role in reversing nature loss by adopting sustainable practices – which make sound business sense. Governments must make ambitious decisions and adopt a New Deal for Nature and People in 2020 for the future of our economies and society.”
“Never before have we had such an awareness of what we are doing to the planet, and never before have we had the power to do something about that.”
Sir David Attenborough, at the World Economic Forum Annual Meeting in Davos-Klosters, 2019
Potential For A Nature Positive-Economy
Nature-related risks can be incorporated within existing ERM (enterprise risk management) and ESG (environmental, social and governance) processes, investment decision-making, and financial and non-financial reporting. Using a similar framework across environmental risk, categories should enable more efficient and effective integration into business decision-making.
Many large businesses have already adopted the framework proposed by the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) for identifying, measuring and managing climate risks. This could be adapted and leveraged for managing nature risks.
“It is important to note that there is a path forward,” Dominic Waughray, Managing Director at the World Economic Forum says “Businesses can formulate specific pathways to help ‘bend the curve’ of nature loss and damage within the decade by slowing down and halting biodiversity loss, then restoring nature and – as a massive co-benefit – contribute to achieving net-zero emissions by mid-century through smart nature-based solutions, all in the same package. There is potential for a win-win-win for nature, climate, people and the economy, but the science is telling us we must start this urgent transition now.”
As the trend for greater transparency and accountability continues, costs are likely to rise for businesses which have not begun to include nature at the core of their enterprise operations. Businesses that ignore this trend will be left behind while those that have embraced this transformation will exploit new opportunities.
The New Nature Economy Report series aims to catalyse a public-private momentum in 2020 with a focus on the UN Convention on Biological Diversity (CBD) crucial summit (COP15) in Kunming, China, and the related Business for Nature mobilization. In the run-up to this event, the UN CBD has released its zero draft of the post-2020 Biodiversity Framework with the aim of setting the path to transforming society’s relationship with biodiversity and to living in harmony with nature by 2050.
About the Annual Meeting 2020
The World Economic Forum Annual Meeting 2020 will take place on 21-24 January 2020 in Davos-Klosters, Switzerland. The meeting brings together over 3,000 global leaders from politics, government, civil society, academia, the arts and culture as well as the media. Convening under the theme, Stakeholders for a Cohesive and Sustainable World, participants will focus on defining new models for building sustainable and inclusive societies in a plurilateral world.
The Annual Meeting is bringing together governments, international organizations, business, civil society, media, culture, foremost experts and the young generation from all over the world, at the highest level and in representative ways. It engages some 50 heads of state and government, over 300 ministerial-level government participants, and business representation at the chief executive officer and chair level. For further information, please click here.
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