Q & A

Does conservation make business sense?

The global nature of environmental issues demands collaboration across borders and across sectors. Mark Tercek became the President and CEO of the Nature Conservancy in 2008 after 24 years at Goldman Sachs. He discusses how finding business solutions to environmental problems is essential.

Q: The Nature Conservancy has a global presence. What are some of the issues the organization is working on right now?
Of course, we're focused like a laser on climate change. It's not only a threat to the programs that we want to pursue in the future, it's a threat to what we've already done. We are a science-driven organization. Our business is protecting nature; protecting habitat that animals, plants, and people need for success; and climate change really is a threat to upset all of that. 

Looking at where we have the expertise to make a difference on this issue led us to forests. Almost a quarter of the carbon dioxide emissions that cause climate change come from the destruction of forests around the world. 

The Waxman-Markey Bill is a cap-and-trade carbon bill to deal with climate change. While it is not a perfect bill, it includes a number of key elements including "forest offsets," which would allow regulated entities in the U.S. to buy emission offsets that, in this case, would pay for the carbon sequestered by protecting forests, either in the U.S. or in other parts of the world. 

Politically, society won't tolerate a bill that is unduly harsh on the economy. So we want the toughest bill that we can get, but we want it at the lowest possible cost. These forest offsets are a great way to keep costs low. The core benefit would be preventing carbon emissions, but it will also provide co-benefits like biodiversity protection and livelihoods for local people. In fact, if you look ahead and imagine the developed world all signed on to tough climate regulation which includes forest offsets, this could be the greatest source of revenue for conservation, ever. 

It is complicated to make these programs work on the ground. You need a lot of science. You need a lot of compliance. You need good governance. And you're working in places where it's hard to make all that happen. The Conservancy is very optimistic, though. We did a project along these lines in Bolivia, in the mid-1990s. The local people participated. We protected a big swathe of rain forest. The carbon is sequestered. It worked.

Now we're trying to prove that it can work at an even bigger scale in places like Indonesia and Brazil. And, my goodness, this is a great place for the private sector to work with the public sector and NGOs like ours to make important things happen. 

Q: What has changed in businesses’ approach toward environmental issues?
There's greater awareness than there was in the past about how some of our economic objectives, if not moderated and carefully thought about, can do real environmental harm in a way that can't be reversed. And business leaders understand that, in order to pursue their objectives successfully, they need to be welcome in the communities where they work. Maximizing shareholder return is not the only criterion by which they will be judged. It's more complex than that. 

The business world is dynamic and competitive. The best businesses pay attention to one another and see that there are opportunities to pursue projects that are both good for their bottom line and good for the environment. 

One of the companies that I give a lot of credit is Wal-Mart. First, because of Wal-Mart's size, stature, and global reach, if they do anything, it gets people's attention and makes a difference. Second, they just are so good at execution. If they take something on, you can expect that they will execute it well. 

When they looked at how they used resources, it led to changes that saved them an enormous amount of money. They made their transportation networks more efficient, they took excess paper products out of their packaging, they designed their buildings to be more energy efficient. The world noticed, especially in the retail space. So that’s black-and-white evidence of really good, win-win stuff. 

Now you see capital intensive companies like FedEx using their fleet in a more energy-sensitive way. You see Starbucks trying to source supplies in a more environmentally-sustainable way. You see General Electric trying to be smart about developing the capital equipment for a greener economy.

Q: How do we sort out situations where business interests and conservation interests conflict?
If you think about a Venn diagram where one circle is business objectives and one circle is environmental organization objectives, there is a huge area of overlap. That's the stuff we were just talking about. Sometimes there is conflict. Sometimes there will be a need for regulatory or government intervention, but above all I'm an advocate for being in the same room, comparing notes, thinking about how we might do business with one another so that we might have the best outcomes we can achieve. 

Q: What are some of the market mechanisms that work for conservation?
There are huge needs for fresh water. And there are engineering solutions, but there are also a lot of nature-based solutions. For example, Quito, Ecuador, was considering building a filtration plant for the city’s water. But we went to them with a business argument, not a conservation argument, that if Quito paid for good, thoughtful upstream conservation it would get clean, secure water at a lower cost. It's been an enormous success. It was so well received that we now have about a dozen of these across Latin America. And that excites us, too, because one-off projects are never going to really move the needle. We need to do projects that can be replicated, and not just by us. 

Another exciting element of these funds is that they are not based on a philanthropically-intensive model. Even at our scale, and we're the biggest environmental nonprofit, we're not big enough make the necessary changes alone. These water funds are self-funding, eventually. We get it started, but thereafter, the users of the water pay for the upstream conservation. The fee-for-ecosystems-services structure helps people understand that it pays to take care of nature. 

Another example of this ecosystems-services approach is our work with the Three-Gorge Dam Company in China on their dams on the Yangtze River. The dam will have two purposes: generating hydropower and flood control. The problem is that the two purposes are in conflict. In order to maximize power generation, you would fill up the reservoir behind the dam. But then you have no extra capacity to absorb the flood waters. Our scientists proposed wetlands restoration downstream from the dam. This restores natural flood control, it also provides some great conservation, and you can fill the reservoir behind the dam. Economically, that additional water in the reservoir will generate incremental hydropower revenue which will be more than enough to pay for the wetlands. Again, it becomes self-funding conservation, plus, because of the wetlands’ filtering capacity, you will need half as many dams, going forward. 

Q: The Nature Conservancy is described as a bottom-up organization, where much of the idea generation and project implementation happens at the local offices around the world. What does it mean to manage at the head of that structure?
That's a really interesting question, and probably deserves its own interview. It reminds me a little bit of working with Goldman Sachs, in that both organizations are global, entrepreneurial, and very ambitious. 

We try to have a decentralized entrepreneurial organization that is rigorously managed. Proposals for projects come from the local and regional offices. Headquarters didn't think of the water funds; that came from the field. But we don't have unlimited resources. We will never have enough money available to pursue all the conservation objectives we want to pursue. It's critical that we be very disciplined in choosing projects, and you can't do that exclusively on a bottom-up basis. 

In the business world we have sophisticated financial instruments to do analyses — returns on investment, IRRs, net present values, market shares — that can let you be very confident about where your highest-return opportunities are. In conservation, it's a little bit murkier. What are the criteria you use to determine the highest return on your conservation investment? We don't have the answer we need yet. We are pushing our scientists very hard on this. We call this our measures program. We want to be as smart as we can be about identifying where we get our biggest return.

Interview conducted and edited by Ted O'Callahan.