We use nature because it is valuable, we lose nature because it is free.

- Prof. Edward Barbier, member of TEEBs Advisory Board

As the human demographic continues to expand, our increased use of resources to satisfy our standard of life enter into conflict with biodiversity in most of the unprotected places¹.

When speaking about the depletion or competition around the use of resources, one comes to consider trade-off for decision making. Currently, most of the decisions we do are based on financial considerations reflected by markets which do not give any value to nature services. Analysing trade-off and accounting for the value of nature requires new methods and tools that are provided by the fast developing field of natural capital accounting and ecosystem services valuation.

Besides the importance of getting measures and metrics to manage nature, new tools and institutions are needed to manage and conserve biodiversity once its value has been recognised.

Investment in Watershed Services (IWS) is a key set of institutions, mechanisms and solutions to conserve biodiversity through the recognition of ecosystem services and benefits it provides to our society. The basic principles around IWS are based on the common interest of two or more stakeholders, which include at least one downstream stakeholder that perceives the benefit from the watershed (for example, clear water provision) and an upstream owner, which owns lands on which the ecosystem providing services is located (for example a forest, which provides clean water).

Investment in Watershed Services the Future of Conservation

Based on this simple example, different solutions might be used, for example:

  • Bilateral agreements (payments or other kind of compensations)
  • Publicly or privately regulated funds
  • Trading & offsets

The radical difference of IWS compared to other approaches is that it becomes particularly useful in a context where we need to ensure the cohabitation between our society, our built capital and nature. How? In a situation where trade-offs need to be analysed, due to a competition over natural resources, IWS provides efficient tools to ensure that all stakeholders benefit from the activities put in place². IWS also tackles challenges that traditional conservation initiatives alone cannot address, such as aligning the interests of the ecosystem managers and beneficiaries of downstream ecosystem services, as well as balancing trade-offs between built and natural infrastructure.

Despite their comprehensive approach, IWS solutions have not been widely used by the private sector, apart from a few exceptions. One case example of IWS can be found around Lake Naivasha in Kenya, where Swiss retail company Coop has used insetting projects within its corporate water stewardship strategy to create shared value for small scale farmers and reduce the supply chain risks of its flower exports:

Lake Naivasha, the heart of Kenya's horticulture industry, currently accounts for 70% of the country's cut flowers exports - a full 9% of Kenya's total foreign exchange earnings. Nonetheless the Lake Naivasha basin has begun to suffer from poor water quality due to extended periods of incorrect land use practices on the slopes of the catchment, deforestation, as well as the poorly functioning sewage treatment facilities within the town of Naivasha. With the help of South Pole, Valuing Nature and WWF, Coop has started to engage with stakeholders to explore how using smartly planed trees and forests ecosystem services could ensure the provision of clean water for both upstream and downstream users of the Naivasha watershed. The envisioned program for financing and monitoring sustainable forest management would not only contribute to the wellbeing of the Lake Naivasha basin, but also improve livelihoods through food security and alternative revenue from timber and non-timber products. The sequestered carbon would additionally contribute to reaching Coop's internal emission reduction goals.

Going forward, the importance of IWS will surely gain more prominence within the corporate community. Given the current context where pressure from stakeholders, needs for transparency and external risks related to sustainability are all increasing across the value chains of companies, it is very likely that the private sector will invest more in IWS tools as a key part of their sustainability strategy. It will have a direct benefit for them to ensure reduced costs through security of supply of raw materials, licenses to operate, reduced risks and increased access to markets through increased reputation and sustainability related communications (annual reports, targeted marketing and labeling, among others). New types of collaboration will be needed with, for example, with solutions providers and NGOs having experience in such initiatives (Forest Trends being one example.)

¹See the environmental footprint concept and my article about a case study in Switzerland
²A good source of information about existing case studies is the Ecosystem Market Place created by Forest Trends