Improving Global Environmental Management with Standard Corporate Reporting Peter M

SPECIAL FEATURE: PERSPECTIVE PERSPECTIVE SPECIAL FEATURE: Improving global environmental management with standard corporate reporting Peter M. Kareivaa,1, Brynn W. McNallyb, Steve McCormickc, Tom Millerd, and Mary Ruckelshause aThe Nature Conservancy, Seattle WA 98105; bThe Nature Conservancy, San Francisco, CA 94110; cThe David and Lucile Packard Foundation, Los Altos, CA 94022; d202 Scott Street, Mill Valley, CA 94941; and eNatural Capital Project, Stanford University, Palo Alto, CA 94305

Edited by Stephen Polasky, University of Minnesota, St. Paul, MN, and approved November 13, 2014 (received for review May 2, 2014)

Multinational corporations play a prominent role in shaping the environmental trajectory of the planet. The integration of environmental costs and benefits into corporate decision-making has enormous, but as yet unfulfilled, potential to promote sustainable development. To help steer business decisions toward better environmental outcomes, corporate reporting frameworks need to develop scientifically informed standards that consistently consider land use and land conversion, clean air (including greenhouse gas emissions), availability and quality of freshwater, degradation of coastal and marine habitats, and sustainable use of renewable resources such as soil, timber, and fisheries. Standardization by itself will not be enough—also required are advances in ecosystem modeling and in our understanding of critical ecological thresholds. With improving ecosystem science, the opportunity for realizing a major breakthrough in reporting corporate environmental impacts and dependencies has never been greater. Now is the time for ecologists to take advantage of an explosion of sustainability commitments from business leaders and expanding pressure for sustainable practices from shareholders, financial institutions, and consumers.

corporate sustainability | ESG reporting | natural capital | ecosystem services | multinational corporations

The power of multinational corporations business in the next 3–5years(15).As disclosures could lead to consistent, industry- (MNCs) is evident in the massive scale of a result of these concerns, many high-profile wide reporting guidelines and vastly increase their revenues—roughly 40% of the world’s chief executive officers (CEOs) are now pub- the information value of reports for com- 100 largest economies are corporations as licly defining success in terms broader than panies and their stakeholders. In addition, opposed to nations (1, 2), and the impacts rapid profit-taking (Table S1) and acknowl- with greater input from ecosystem scientists, of their operations on the environment can edging the risks of environmental degrada- companies would benefit by better un- be profound (3, 4). As an iconic example, tion to their bottom line. The most obvious derstanding and anticipating environment- Walmart Stores, Inc. has annual sales that manifestation of the environment as a prior- associated risks and opportunities. are higher than the gross domestic prod- ity is the issuance of corporate sustainability In this paper, we discuss why now is a ucts (GDPs) of all but 25 nations, and its reports that communicate to stakeholders propitious time for scientists to engage 2.1 million employees outnumber the pop- the company’s environmental performance corporations in improving the measure- ulations of almost 100 nations (5). Given (7). In addition to CEO leadership, cor- ment of their environmental impacts and the scope of their influence on global com- porate reporting is driven by a combina- dependencies. Using the agricultural sector merce, human well-being, and the environ- tion of investor demands, possibility of as an example, we suggest key environment, the practices of MNCs have long material risks due to interrupted supply mental indicators as an illustration of how been recognized as integral to global devel- chains, and emerging national policies on ecosystem science might inform industry- opment outcomes (6). We focus on them corporate disclosure of nonfinancial infor- specific reporting frameworks. We also dis- here because of their enormous potential to mation (16-18). cuss the apparel industry as an example of impact the environment and because, thus Although the trend of expanding environ- how reporting transparency and collabo- far, larger companies have been shown to mental disclosure is encouraging, the content ration can facilitate the development of disclose more information (7), perhaps be- and depth of corporate sustainability reports common approaches to sustainability mea- cause they are more visible and face higher is varied. Companies are often accused of surement. Finally, we recommend that, levels of stakeholder scrutiny (8). MNCs are misrepresenting their environmental perfor- along with science-driven standardization also authoritative organizations that can di- mance, or “greenwashing” (19). There is also rect extraordinary levels of research and enormous inconsistency of corporate envi- development resources toward sustainability ronmental performance indicators (20). If Author contributions: P.M.K., S.M., and M.R. designed research; P.M.K. and B.W.M. performed research; P.M.K. analyzed data; and then spread technological advances (9). the chaos of current disclosures continues, P.M.K., B.W.M., T.M., and M.R. wrote the paper; and T.M. was Several recent reports have documented investors may lose interest in the possibility a consultant to the Moore Foundation and provided references widespread awareness among corporate of distinguishing companies on the basis and sources of business information. management that environmental hazards are of environmental performance even though, The authors declare no conflict of interest. materialforbusiness(10–14). A 2013 survey in principle, they see the value of making This article is a PNAS Direct Submission. 1To whom correspondence should be addressed. Email: pkareiva@ of corporate representatives across 17 sectors such distinctions (21). tnc.org. found that over half anticipated that natural We hypothesize that the inclusion of eco- This article contains supporting information online at www.pnas.org/ resource shortages will impact their core system services in corporate environmental lookup/suppl/doi:10.1073/pnas.1408120111/-/DCSupplemental.

www.pnas.org/cgi/doi/10.1073/pnas.1408120111 PNAS Early Edition | 1of8 Downloaded by guest on September 24, 2021 of environmental reporting, there should also sometimes ranking companies in terms of Beyond reputation and workforce advan- be a move toward policies that mandate their environmental performance is yet an- tages, several prominent case studies and corporate environmental disclosure. other reflection of the growing relevance of reports have argued that a failure to address sustainability to business. For example, the environmental issues will undermine busi- Sustainability Reporting Is Now the Rule investment company RobecoSAM (Sus- ness performance. For example, the “Risky Rather than the Exception tainable Asset Management) conducts an Business” report commissioned by Michael Environmental sustainability is now com- annual sustainability assessment of more Bloomberg, Tom Steyer, and Hank Paulson monly mentioned as a core component of than 2,000 of the largest companies across incorporated the latest climate science from successful business (Table S2), and today the Dow Jones indices. The assessment’s the Intergovernmental Panel on Climate most corporations have sustainability officers results serve as the basis for listing on the Change (IPCC) and the US National Climate (22, 23). Indeed, McKinsey Global Survey Dow Jones Sustainability Indices (DJSI), Assessment into quantified estimates of the results from February 2014 indicate that 36% which has become a source of prestige for effects of climate trends on the US economy of CEOs (n = 2,632) view sustainability as companies with superior sustainability per- (48). Other case studies note the importance one of their top three priorities, and 13% see formance. The consulting firm Trucost offers of quantifying the value of environmental it as their number one priority (24). In 2012, data and management tools for companies services such as biodiversity (49) and water the majority of Standard & Poor’s 500 (S&P to understand their natural capital de- (50) to business. As examples of the business 500) (53%) and Fortune 500 (57%) compa- pendencies. It also provides risk analyses to case for prudent environmental management nies issued sustainability reports, up from investors based on supply-chain informa- are mounting, corporations are realizing that just 19% and 20%, respectively, in 2010 (25). tion and potential environmental liabili- they depend on nature and healthy func- In addition, business schools are preparing ties. TruCost was instrumental in Puma’s tioning ecosystems to thrive (26). students to understand and manage sustain- 2011 Environmental Profit and Loss (EP&L) Business is competitive, and it is important ability issues. Nineteen of the 20 highest Account, the first analysis to calculate net toknowwhetherthosecompaniesthatem- ranked master of business administration costs of a company’s environmental impacts brace sustainability fare better than those that (MBA) programs now offer courses and throughout its entire supply chain (35). neglect sustainability. There are some em- concentrations in environmental issues or The demand for professional analyses pirical studies that suggest a proactive ap- social responsibility (Table S3). of sustainability performance and data are proach to environmental issues enhances Atthesametimethatbusinessleaders coming from asset owners and institutional consumer loyalty and financial perfor- are embracing sustainability reporting, so investors. This trend is reflected in the large mance (51–53). In addition, several broader too are environmental leaders. Notably, number of financial entities signing on to the statistical metaanalyses (but not all) have several prominent environmentalists have United Nations’ Principles for Responsible found a general positive correlation between argued that the future of conservation and Investment (PRI), which commits signatories measures of corporate environmental and environmental stewardship depends on to incorporate environmental, social, and social responsibility and long-term financial the values of nature becoming standard governance (ESG) data into investment performance (54–58). One of the challenges business practice—something that is good analysis and decisions. The scope of PRI’s in linking financial performance to environ- for both the environment and business influence is significant: its signatories collec- mental performance is the fact that there is (6, 26, 27). Almost all major conservation tively manage over $34 trillion, roughly 15% no simple metric of the latter, and different organizations are establishing corporate of global investable assets (36). Within the measures yield different results (20). In ad- partnerships as part of their conservation United States, 10% ($2.7 trillion) of the assets dition, there may exist a substantial time lag toolbox (Table S4). under professional management are invested between “good behavior” and any detectable Another major impetus for environmen- with social and environmental responsibility uptick in a company’s reputation (59). tally friendly business is the formation of in mind (21). Long-term investments, such sustainable business coalitions. These coali- as those made by pension funds, insurance Limitations of Existing Measurement tions convene companies to test environ- companies, and sovereign wealth funds and Reporting mental assessment tools, share best practices, lead the trend toward the adoption of ESG A significant obstacle to the usefulness of and develop industry benchmarks (Table S5). data into portfolios’ risk and return profiles environmental disclosure and sustainability For example, the World Business Council (37, 38). assessments is the inconsistency of reporting for Sustainable Development (WBCSD) methods. Dozens of assessment tools have compiles case studies of ecosystem service Unpacking the Business Case for the been developed by NGOs and business coa- valuation techniques (28, 29) and provides Environmental Reporting and Valuing litions, and they vary widely in their selection guidance on available decision-making tools Natural Capital of indicators (18, 60). As a result, investors (30–32). Similarly, the Sustainability Con- There is no denying that one motivation and sustainability rating agencies find it chal- sortium (TSC) convenes companies from behind corporate sustainability is the desire lengingtocompareESGdatainreports(38). diverse sectors with universities and non- to burnish a company’simage(39).In- To overcome the lack of consistency, a governmental organizations (NGOs) to de- tangible assets such as management quality number of groups have promoted guidelines, velop scientific measures of product-specific and reputation now account for 80% of the but the guidelines have not quieted critics of environmental impacts. These consortiums market value of an average US company, current reporting standards (61). For in- represent businesses with global impact: the compared with only 17% in 1975 (40). In stance, the Global Reporting Initiative combined revenues of TSC members is over addition, firms with positive environmen- (GRI) guidelines, which is one of the most $2.4 trillion, and WBCSD members’ com- tal profiles appear more attractive to high- widely used reporting frameworks (16), is bined revenues are over $7 trillion. (33, 34). quality prospective employees (41–43). They questioned because its environmental scores The proliferation of professional ser- have also been found to retain a more satis- are determined by level of disclosure, not vice firms dedicated to quantifying and fied and productive labor force (44–47). by environmental performance (61). And,

2of8 | www.pnas.org/cgi/doi/10.1073/pnas.1408120111 Kareiva et al. Downloaded by guest on September 24, 2021 whereas the GRI provides some guidance The rapidly developing field of ecosystem depend on what degradation has already PERSPECTIVE on the incorporation of ecosystem services service science has made it clear that, with the occurred (68–70). Such analyses may require SPECIAL FEATURE: (62), it does not standardize the selection of exception of climate regulation, access to coordinated scientific efforts aimed at quan- performance indicators or methods of mea- ecosystem services is tightly linked to local tifying the total effects of business practices surement. In general, sustainability reporting and regional patterns of land and water use. on local environmental assets (e.g., habitats, often presents detailed descriptions of pro- The supply of these services is key to supply water, productive soil) throughout the value cesses, such as management and compliance, chains and risk management and in turn chain (e.g., siting and sourcing, production but neglects to disclose complete environ- can be degraded or improved by corporate processes, plant operations). Companies mental impacts (20, 21). The result is a pat- decisions. However, environmental dis- could use cumulative impact assessments to tern of selective environmental disclosure closures rarely attend to these explicit links. weigh risks and tradeoffs, adjust operational whereby companies tend to report outcome For example: strategies, and identify critical environmen- metrics that make their performance look tal metrics to monitor and report. • good (20, 21). The point of environmental few deal with implications for land conversion One major scientific challenge is address- disclosure should be to manage toward im- or changes in coastal and marine habitats; ing the possibility that cumulative impacts proved performance, but rarely is there a link • few explicitly link business activities to ma- risk crossing an ecological threshold. Scien- between disclosure and actions that lead to terial dependence on ecosystem services; tific understanding of and ability to predict observed improved performance (63, 64). • few deal with sustainable harvest or sustain- thresholds is still in an early research stage. Even the many professional service firms able use of renewable resources like soil; Thus, although there is consensus that once whose job it is to analyze sustainability do not • none of the existing reporting frameworks too much forest is cut, landslides and floods deliver full portraits of environmental value. take into account cumulative impacts and become likely, and once some threshold of Forexample,thesefirmsmaybehiredby habitat loss or degradation has been crossed, in turn the possibility of thresholds or non- acompanyandthenprovideaone-off species will disappear, exactly where these linearity in ecosystem responses; and analysis tailored to its interests, rather than thresholds exist is highly uncertain (71). • — conducting an objective analysis of environ- few are geographically explicit by which This current uncertainty is not a reason to mental linkages. Firms that provide sustain- we mean that few adjust impacts or depen- ignore thresholds. If scientists communi- ability ratings of many different companies dencies to the local context. cated threshold risks to business operations, often rely on proprietary data and confiden- Failure to address these environmental companies might then be more likely to tial models to apply financial value to eco- feedbacks between corporate activities and address cumulative impacts in their sus- system attributes. As a result, investors tend ecosystem services is a missed opportunity. tainability assessments. to lack confidence in company sustainability Instead of rigid templates for reporting, To further complicate matters, risk esti- scores (21). standards should take the form of a targeted mates will need to be tailored to local geog- In sum, corporations and their stake- series of “questions” or “inquiries” about raphy and ecologies. For example, the holders lack critical knowledge about the business practices and their links to the en- withdrawal of 1 million L of water from an arid region will have a different risk than environmental implications of company vironment, and then simplified, consistent withdrawing the same amount of water from operations. Despite technological advances presentations of information to investors and to supply chain management, methodo- an area with ample flows of water. Similarly, consumers. The structured inquiry that is logical shortcomings of sustainability trends in climate or development impacts are used to define each corporation’sactualen- measurement and a dearth of decision- spatially heterogeneous. vironmental disclosures would examine the support tools hinder corporate analysis of One reason given for an absence of cred- following dependencies and impacts: (i)land environmental impacts and risks (65). ible information in current reporting is that cover/land use conversion, (ii) air quality– According to a recent survey of corporate the data are too expensive and difficult to greenhouse gas emissions and other airborne professionals (n = 700), the integration gather (72, 73). Indeed, every sustainability pollution, (iii) fresh water supply and quality, of sustainability into core business func- report cannot demand original scientific tions remains a considerable challenge (66). (iv) sustainable use of renewable resources modeling to examine thresholds. Rather, the (e.g., soil for agriculture) and sustainable scientific community might generate and Avenues for Ecosystem Science to harvest or use (e.g., of fish or timber), and (v) regularlyupdateindicesofecosystem- Engage with Corporate Environmental coastal and/or marine habitat degradation or collapse risks according to geography, much Disclosure conversion. as the IPCC currently updates and revises its There is immense opportunity to address Companies with similar supply chains climate models and risks of negative impacts weaknesses in MNCs’ environmental disclo- would track similar indicators. For example, every 4 years. Similarly, inventory data on sure as the links between the environment some businesses may end up reporting pri- development activities such as power gener- and supply-chain disruption, commodity marily on water supplies, flood risk, and ation, infrastructure, and water withdrawals price spikes, and labor unrest grow more water quality. Coastal businesses may re- could improve consistency in life-cycle pronounced (23, 48). Corporate leaders port on the status of local shoreline hab- assessments and other strategic business-risk sense that businesses now need to know itats that are key to property protection evaluations (65, 74). Several global efforts are more than ever before about their full (67).Consumergoodscompaniesthatrely working to increase the accessibility of envi- supply-chain impacts and risks, ideally be- on biomaterials may report primarily on ronmental-change information, often based fore their stakeholders (9, 13, 24–26). This land conversion. on cutting-edge satellite and remotely sensed desire for information would be well-served A significant missed opportunity that war- data (75, 76). If these environmental in- with support from ecosystem scientists rants scientific attention is the assessment telligence platforms succeed, they could and investment in expanded environmental of cumulative environmental impacts, for lower the cost of acquiring environmental data coverage. which any particular corporation’simpacts data throughout the supply chain and make

Kareiva et al. PNAS Early Edition | 3of8 Downloaded by guest on September 24, 2021 individualized and spatially explicit sus- of renewable resources, and impact to coastal Quantity and Quality of Freshwater. tainability reporting routine. In the future, and/or marine habitats. The consistent Global water consumption and water qual- we might imagine standard corporate en- consideration of these dimensions would ity are strongly influenced by agricultural vironmental disclosures to include a sum- strengthen the materiality assessments that practices. The global water footprint from mary table that examines the environmental many companies already undertake. crop production is 7.4 trillion m3/y (95), not components we discussed in this section. It is clear that no single sustainability re- including 913 billion m3/y for grazing and port card will suit all sectors. An expansive 46 billion m3/y for livestock’s direct water “ ” Sustainable or Green Labels as analysis by the Governance and Account- footprint (96). Altogether, agricultural pro- a Related Phenomenon ability (G&A) Institute of 84 performance duction accounts for 70% of water with- Improving the consistency and scientific indicators across 1,246 organizations con- drawals (97). Agricultural water use in arid credibility of annual corporate environmental firms that companies from separate sectors or water-scarce regions also contributes disclosures could have a spillover effect and differ widely in their prioritization of envi- to desertification and other forms of soil also improve the “green” labeling of con- ronmental and performance issues (89). A degradation. sumer products. In particular, the same en- sector-specific approach is consistent with Data on agricultural water use are rela- vironmental indicators that inform corporate recent academic recommendations on im- tively easy to obtain because individual reports could ideally inform the labeling of proving corporate disclosures (90) and with farmers understand how their management products and in turn influence consumers. the production of industry-specific sustain- activities influence their water use. Spatial There are several instances in which mar- ability-reporting guidelines by the Sustain- information on agricultural and other water ket pressure from consumers has created ability Accounting Standards Board (SASB). uses might help farmers adjust their practices a business advantage to producing environ- To illustrate how our proposed dimensions to more effectively conserve for irrigation. mentally responsible products (77, 78). On might be used, we discuss how ecosystem This information would also be useful for the flip side, consumer boycotts of products science can inform indicators for agricultural businesses and investors to advance their risk perceived as socially irresponsible pose sig- sustainability and the apparel sector. We assessments of water scarcity and to distin- nificant risks to corporate brands and earn- select these case studies because they rep- guish between possible advances to water- ings, particularly because online communities resent the second wave (after forest products use practices and precipitation trends out- and social networks can rapidly organize and fisheries) of businesses self-organizing side their control. brand boycotts (79, 80). around sustainability metrics. The Walmart- Water pollution from nutrients, pesticides, Just as an absence of standards and con- initiated Sustainability Consortium (TSC) or sediments has a clear, direct impact on sistency haunt corporate sustainability and McDonald’s pledge to use only “sus- freshwater systems and on human wellbeing. reports, this lack of rigor undermines the tainable beef” are major ventures to advance Inputs of nitrogen and phosphorous are power of consumer labeling. Consumers sustainability in the agricultural sector, but likely the most significant and tractable fac- frequently report that they are skeptical the credibility of these commitments is un- tors in evaluating the effects of agriculture and confused by company disclosures on certain and methods to accomplish their upon freshwater systems (98). There are sustainable product labels (84–86). Indeed, goals are still being developed (91, 92). The several potential thresholds of interest with in 2010, 95% of “greener” products were apparel industry provides an example of how regard to water quality. Some pollutants will found to have some form of greenwashing companies are coordinating to share data and cause no adverse effect at sufficiently low (disinformation that presents a sustainable methods based on mutual interest in im- concentrations, cross a threshold where an image) (87). proving sustainability tools. In 2012, 49 com- adverse effect is detectable, and cross another There is some indication that the provision panies self-organized the Sustainable Apparel series of thresholds where conditions become of credible information is key to motivating Coalition (SAC)—representing over 30% of lethal for various freshwater species or have consumer action, with a number of recent global market share in the industry—to human health impacts (99). studies suggesting that a growing consumer develop a sustainability index suiting a wide At the global and national level, we recom- segment favors environmentally friendly variety of apparel and footwear products (93). mend focusing on identifying areas with products if provided with specific information The SAC is recognized as an exemplary relatively high nitrogen and phosphorous on their impacts (81–83). In a recent survey, model of collaboration for creating standard- loading in streams. Some countries have ex- 63% of consumers agreed that they would ized industry-sustainability benchmarks (94). cellent data on nutrient loading. For ex- make more sustainable purchases if they ample, the Water Quality Portal from the had a clearer understanding of what makes Ecosystem Science Informing National Water Quality Monitoring Council a product environmentally or socially re- Agricultural Sustainability (NWQMC) includes extensive data for the sponsible (88). Therefore, advancing these Land use and land cover, water supply and United States, Canada, and Mexico and green or “sustainably produced” labels with quality, and soil maintenance represent limited data for Cape Verde, Guatemala, more scientific information may be impor- the key dimensions of agricultural sus- Iraq, and Peru (100). tant to validating company performance and tainability. Greenhouse-gas emissions are improving consumer response. also an important outcome of different Renewable Resources: Soil. Healthy soil agricultural practices, but their impact is is the foundation for farm productivity, but it Case Studies: The Agricultural Sector global and diffuse as opposed to local and is increasingly under threat. The global mean and Apparel Industry immediate. New science is especially needed rate of soil loss is roughly ten times the rate at As outlined in Avenues for Ecosystem Science to establish relationships between specific which soil is replenished (101). Several science to Engage with Corporate Environmental agricultural practices and their impacts efforts have sought to develop composite Disclosure, five ecosystem attributes impor- and dependencies on water supply, as well soil-quality indices that combine mea- tant for all MNCs to evaluate include land as their influence on soil stewardship as surable soil properties into a metric of use, air quality, water supply and quality, use a renewable resource. overall soil quality (102–108). But to be

4of8 | www.pnas.org/cgi/doi/10.1073/pnas.1408120111 Kareiva et al. Downloaded by guest on September 24, 2021 practical, a considerably simpler approach or independent NGO auditors using meth- estimates that 60% of the life-cycle environ- PERSPECTIVE is needed that does not require so much ods suggested by scientists. In stark contrast mental impacts of sneakers come from these SPECIAL FEATURE: elaborate data. to labels like “GMO-free” or “organically material choices (123). The process to create For the sake of discussion here, we target grown,” which are based on practices that the MSI involved an assessment of 80,000 soil retention and soil organic carbon (SOC). may or may not be linked to desired out- materials from 1,400 potential suppliers and The two are closely related because soil ero- comes, these metrics would directly assess an extensive review by Duke University sion is a major contributor to declines in environmental outcomes that impact both researchers to verify its scientific foundations SOC within agricultural fields (105–110). Soil the environment and business. (123, 124). erosion is the primary form of soil degrada- The MSI is also notable for the ecosystem tion (109), and it is a major driver of The Apparel Industry: A Model of attributes it is missing. The index rates desertification of agricultural lands (111). Industry Collaboration materials in terms of energy use and green- SOC both reflects and controls primary The apparel industry offers an example house gas emissions, water and land use in- productivity (109), which directly impacts of how companies have collaborated on tensity, and physical waste, but there are agriculturally-oriented businesses. Further- the development and implementation of critical elements missing from these evalua- more, atmospheric carbon emissions due to industry-wide sustainability benchmarks. tions. There is no consideration of soil loss, soil erosion are significant; they are roughly The Sustainable Apparel Coalition (SAC) has minimal consideration of impacts on water equivalent to 16% of carbon emissions from worked since 2010 to develop a self-assess- quality, and no sense of where local context fossil-fuel combustion and cement pro- ment tool for companies, the Higg Index, matters or possible thresholds exist. For ex- duction, or 55% of carbon emissions from which covers sustainability issues common to ample, land-use intensity represents how land-use change (110). the apparel and footwear industries. The SAC much land is required to produce each unit Remotely sensed reflectance within visible effort convened over 100 members, including of product but does not capture whether that and near infrared (VNIR) bands can be used brands, retailers, manufacturers, service pro- land use is in a region of conservation and to estimate SOC, with 74–77% accuracy at viders, and trade associations. The result is biodiversity value. It is an open question as to coarse scales (112). At finer scales (at least that now major retailers such as Target whether Nike’s MSI represents the best we intheUS),wecanalsopredictchangesin are already undertaking analyses with the can reasonably create to index sustainability organic matter under various agricultural Higg Index. performance. However, because the data, management practices using the Soil Condi- Whereas the Higg Index represents a algorithms, and assumptions for calculating tioning Index from the US Department of success of industry collaboration, it does MSI scores are available for anyone to ex- ’ Agriculture Natural Resources Conservation not go far enough in guiding companies amine and to improve, there is an opportu- Service (NRCS) (113). measurement of environmental impact and nity for scientists to ask that question. As an indication of what could be done dependence. Instead of quantitative data, the with these data, in 1998, the NRCS produced Index reflects industry consensus around Improving Product Labels global maps based on water erosion (114), which sustainability issues are most impor- Industry-wide sustainable apparel labels that wind erosion (115), and desertification tant. It is a good starting point for more data- allow one to compare products between dif- (116). These coarse datasets identify areas based indices. ferent producers or brands will likely require with potential for erosion or desertification Nike in particular has moved beyond the several more years of collaboration, de- risk, but, to actually predict erosion, local data Higg Index for data-based environmental velopment, and uptake. In the meantime, on agricultural management practices are reporting at the product level. In particular, several leading brands are offering their also required (117). Several studies have Nike’s Materials Sustainability Index (MSI) consumers ways to compare the sustainability shown how to use remote sensing to detect offers a compelling example of a science- of items within their collections. tillage practices (118–120), which suggests based life-cycle analysis (LCA) approach For example, Puma recently released a that it may soon be possible to link in- (121, 122) to tracking environmental impacts product-level EP&L analysis to value and formation about where a crop was grown throughout complex supply chains. The MSI compare the impact of Puma products with to the risk of crossing a soil-sustainability is notable for its use in everyday business their conventionally produced counterparts. threshold. For businesses that source ag- decisions about what materials are selected Consumers can purchase biodegradable ricultural products—whether it be for food for Nike’s products. The MSI is intended to items from Puma’s InCycle collection, or biofuels or bioplastics—these maps of capture environmental impacts from “cradle- which were shown to reduce overall impact “soil risks” would reveal where part of to-gate,” meaning raw materials to a finished (in terms of greenhouse gas emissions, theirsupplychainmightbevulnerableto textile or a product’s component part. water, waste, air pollution, and land use) by further degradation. Nike published its MSI through a Creative roughly 30% (125). To put this information together, an ag- Commons license to encourage information Similarly, Levi’s offers apparel identified as ricultural company might track and report sharing (123). Today the MSI is the basis of less environmentally impactful. The com- by region: water use, soil loss, soil organic a public digital app to inform the choices pany’s “Waste

Kareiva et al. PNAS Early Edition | 5of8 Downloaded by guest on September 24, 2021 forMNCstomeetreportingrequirements will be needed. Scientists, NGO organizations, and government entities can each contribute to creating these enabling conditions for companies to improve their practices. Indeed, scholars are calling for further coordination among these groups to advance big-brand sustainability and global environmental governance (92, 94). In the natural sciences, major advances to ecosystem modeling are urgently needed in the identification of thresholds and in data collection and management. Particularly important is the development of spatially

Fig. 1. Sample apparel label presenting sustainability information. Labels might compare the environ- explicit environmental data in accord with mental performance of the product with others in the industry. For example, this T-shirt has an average thefactthatimpactsanddependencies(for environmental performance (grade C) as determined by its rank across environmental indicators. Labels all but emissions) depend on local contexts might also include the durability of a product, informing consumers of its typical lifespan, which could and geographies. Social scientists will have encourage purchasing of goods that lasted longer. a critical role in continuing their examination of corporate behavior and in identifying the decided on by industry-wide consortiums We argue that any approach to systemic most common motives for companies to such as the SAC. For example, an item of change must address corporate environmen- prioritize the environment. NGOs will con- clothing might be labeled with relative tal decision-making protocols. The mecha- tinue to be important auditors of company impacts on standard environmental indica- nisms to achieve this change will include performance, and their assessments will likely tors and be graded according to its perfor- market-driven pressure from consumers as improve with standard presentations of en- manceanddurability,asinFig.1.Labelsfor well as advances to ecosystem science de- vironmental information. Governments and other consumer products might also present scribing businesses’ material dependence stock exchanges can facilitate the material information on the absolute amount of re- on the environment. However, it is note- consideration of environmental issues by sources being used, similar to a nutritional worthy that mandatory disclosure is likely mandating integrated reports, which pres- label display, or use a certification system that necessary. When reporting is voluntary, ent shareholders with sustainability and fi- is based on this information, as shown in Fig. there is too much opportunity for selective nancial information together. 2. Many models for advancing eco-labels will disclosure. Although many obstacles likely lay ahead, likely be proposed, and their adoption will If natural capital degradation is treated as there are also compelling reasons to believe require the collaborative effort of companies a true cost by these massive entities, we can in the potential of concerted collaboration. and the scientific community to agree upon imagine an economic system that rewards Asset managers and financial institutions — industry standards that both capture critical resource efficiencies and more effectively are interested in these data and, if they environmental dimensions and are practical yields shared value for business and society. were standardized, they could better guide to report. Such a system will likely require mandatory investors. Consumers are also interested in corporate disclosure of several ecosystem these data, if they are credible and easy to What Will Be Needed for Corporate dimensions. Consensus on industry-specific interpret. The success of the dolphin-safe Sustainability Reporting to Improve environmental indicators, standardization label in persuading customers to buy labeled Global Sustainability? of impact metrics, and strong incentives tuna, in conjunction with strong legislative Most environmentalists and sustainability scientists would agree that a sustainable planet hinges on improved corporate practices. However, methods to modify corporate behavior vary greatly. Our suggestion to deepen collaboration between ecosystem scientists and corporations is a departure from a well-trodden approach of vilifying their environmental misdeeds. Although public- opinion campaigns and boycotts against MNCs have been successful in changing the sourcing of some products, these episodic victories can require several years of con- tinued pressure, and their lasting impacts are unpredictable. Calls for a more sustainable capitalism aregrowinglouderinthebusinesscommu- – Fig. 2. Sample cereal label showing environmental dimensions on which the sustainability score could be nity and among academics (128 132), sug- based and a breakdown of relative lifecycle impacts. A certification label indicating that this assessment gesting that the time is ripe for collaboration. has occurred could be displayed in addition to the “Sustainability Facts” label.

6of8 | www.pnas.org/cgi/doi/10.1073/pnas.1408120111 Kareiva et al. Downloaded by guest on September 24, 2021 support for the definition of the label, Ultimately, corporate environmental of natural capital accounting into corporate PERSPECTIVE demonstrates the potential for green labels management is unlikely to improve un- practices and reporting. Without such SPECIAL FEATURE: to shape consumer decisions in a way that less models and measurement are grounded reporting, “short-termism”—which is reflec- is relevant to environmental outcomes in scientific understanding of ecological ted in the observation that, from 1975 to (133, 134). Label standards can also in- systems. To meet this need, the scientific 2010, the average length of time a stock fluence manufacturers to make improve- community should expand its focus on was held on the New York Stock Exchange ments. For example, several businesses are using environmental data and monitoring (NYSE) declined from 6 years to less than shifting their seafood procurement in re- solely for its own research, and embrace 7 months (137)—will continue to drive sponse to rating systems like the Monterey the potential of applying new data and business toward environmental abuse. The Bay Aquarium’s Seafood Watch and the information to private-sector decision- time is ripe to standardize corporate en- Marine Stewardship Council’s certifica- making. There may be no better pathway to vironmental sustainability disclosures with tion (135, 136). a sustainable future than the incorporation sound ecosystem service science.

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