Biodiversity, Natural Capital, Ecosystem Services, and their connections and importance to our Socioeconomic System




Biodiversity is declining. Thousands of plant and animal species are facing extinction, and the extension of terrestrial natural habitats is being reduced every year.

While global GDP per capita increased by more than 60% between 1992 and 2014, natural capital stocks per capita declined by nearly 40%. Governments incentivize unsustainable production across multiple sectors by providing environmentally harmful support, including through budgetary and fiscal transfers, which results in the destruction of nature. (OEDC, 2021)

The World Economic Forum (WEF)[1] estimated that 44 trillion USD (more than half the World’s GDP) is moderately or highly dependent on nature and its services. A significant portion of the services provided by nature are intrinsically linked to Biodiversity.

Biodiversity at the heart of Ecosystem Services and Natural Capital

Biodiversity has become a common word in many forums; however, its linkages with other elements are not fully understood and therefore not properly valued.

The most simplistic definition of Biodiversity is the variability amongst living organisms, which would not appear to be highly important in principle. To understand why the variability in living organisms is important for humans and/or our socioeconomic systems, it is important to understand how Biodiversity is at the core of Ecosystem Services, which provide more than half of the World’s GDP. This correlation alone prominently places Biodiversity in our daily lives, although we might not be aware of it.

Different angles to understand Biodiversity include:

  1. Information, Genetic Pool or Adaptability,
  2. Ecological Succession,
  3. Ecosystem Energy Flows, and
  4. Ecosystem Stability.

Information, Genetic Pool or Adaptability

Information, particularly genetic information (DNA), is essential for organism formation. A closed system containing the right proportions of oxygen, carbon, hydrogen, nitrogen, calcium, and phosphorus, and a few other elements that is undisturbed for millions of years will not result in the formation of a human being, despite gathering all the necessary components. The required information that connects each atom with all others to form a human being is DNA.

Biodiversity and Genetic Pool

In essence, Biodiversity is genetic variety, since a species is the result of gene expression (e.g., shape, size, physiology). Each individual of a species contains a different genetic pool that contributes to the genetic diversity of the population of that species. This diversity is transferred to the subsequent levels of organization, community, ecosystem, biome, and biosphere, comprising the greater genetic pool, i.e., the information that defines organisms and how they will respond in the environmental setting in which they live. However, not all genes provide a function that leads to a significant competitive advantage at a certain point in time. Genes that do not provide that significant competitive advantage in certain environmental settings may provide a competitive advantage if the environmental setting changes, enabling Adaptability. The genetic pool, provided that it does not consume more energy than required for the living organism within it, is an unpredictable variable when facing significant or small changes in the environmental setting and an intrinsic value of biodiversity that enables Adaptability for individuals, populations, communities, ecosystems, biomes, and the biosphere.

Ecological Succession

Ecological succession is the process by which natural communities replace (or “succeed”) one another over time. Each community creates conditions that subsequently allow other communities to thrive and substitute the former. A short example of succession is the progressive colonization of a sand dune, which starts with grasses that are gradually substituted by shrubs and ultimately by trees and a forest.

Biodiversity and Ecological Succession

Biodiversity is an expression or a descriptor of that succession, because the colonizer communities (which are less mature) present very low diversity, while the more mature communities present very high diversity. The more mature an ecosystem, the less dependent it is on external elements, and the interactions that occur among the individuals and communities that form the ecosystem are increased. This ecological succession / ecosystem maturity leads to Ecosystem Energy Flows.

Ecosystem Energy Flows

Currently, nearly all energy flowing through ecosystems is obtained from the Sun. Only a very small portion of ecosystem energy is derived from chemical reactions as it was before photosynthesis appeared. Solar energy is captured by “producers” in the entire food chain/web, which feed the “consumers”, i.e., the remainder of the organisms that are part of the ecosystem. The food chain is a simplified description of the food web because most organisms consume more than one other species. A monoculture system, like a pine forest in high latitudes (cold climate), has significantly reduced energy flows that connect the producers with the final consumer of that ecosystem, which takes the last step of the process before becoming nutrients for the producers to reinitiate the cycle.

Biodiversity and Ecosystem Energy Flows

Conversely, a pristine forest at the equator (warm climate) has many more energy flows connecting the organisms within that ecosystem. The more diverse an ecosystem, the greater number of energy connections exist between the organisms that form the ecosystem, which leads to Ecosystem Stability.

Ecosystem Stability

The stability or reliability of a system is based on the number of redundancies or elements available to maintain a system depending on the probability of system failure. A plane that can fly using one engine but is equipped with four is more reliable than a plane equipped with only two engines (redundancy). The probability of all 4 engines failing (at the same time) is much lower than the probability of 2 engines failing, which is much lower than 1 engine failing. Similarly, an ecosystem that is sustained by a great number of energy flows, many of which are redundant due to the competency between species for using the same resource, is more reliable and more stable when facing disturbances than other ecosystem sustained by fewer energy flows with less redundancy. This implies that a higher biodiversity score reflects greater regulating services provision.

Biodiversity and Ecosystem Stability

Summary on Biodiversity

Biodiversity is at the heart of ecosystem functions and therefore of the services provided. Although not a feature of ecosystems, biodiversity is a conceptual descriptor that is positively correlated with ecosystem features or products of interests in the following ways:

  • Biodiversity is the variation in the genetic pool that provides adaptability at all ecological organizational levels,
  • Biodiversity is a good measure of the ecological succession and the maturity of the ecosystem, and therefore of the ecosystem services delivered in the form of supporting services, and
  • Biodiversity is a good measure of the stability of the ecosystem and thus the regulating services it provides.

Natural Capital and Biodiversity

Natural Capital assessments include the assessment of impacts (and dependencies) on Biodiversity, but Natural Capital and Biodiversity are different concepts. Biodiversity (understood as the variability among living organisms: within and between species and ecosystems) underpins Natural Capital (stocks of biotic and abiotic resources), and Natural Capital generates benefits to society through the flows of ecosystem services. Natural Capital can be valued through the valuation of generated flows (Ecosystem Services), but it is unclear how to value Biodiversity.

Ecosystem services can be measured and valuated through the quantification and monetary valuation of benefits to society. There are thousands of valuation studies for ecosystem services and OECD countries are developing Natural Capital accounting systems, but quantifying and valuating Biodiversity is challenging.

Some institutions do not differentiate between the terms Natural Capital and Biodiversity, mainly to encourage the protection of both Biodiversity and ecosystem services, but these concepts need to be delineated when assessing impacts on Biodiversity only.

Natural Capital includes abiotic stocks, which are not directly related to Biodiversity, and ecosystems with low Biodiversity (e.g., monospecific cultivated crops or monospecific secondary forests) provide ecosystem services that are not necessarily related to Biodiversity values. Therefore, Natural Capital includes more values than stocks related to Biodiversity.

The Cambridge Conservation Institute considers three aspects of Biodiversity: a) Biodiversity as provider of ecosystem services, b) Biodiversity maintaining ecological functions, and c) the non-use (nature as nature) value of Biodiversity[2]:

  1. Biodiversity can supply direct and indirect services to wellbeing. The presence of pollinators generates a direct regulating ecosystem service to crops and supports food production. Biodiversity also provides food as wild plants (fruits) and animals (hunting and fishing) for local communities, but the inherent value of Biodiversity goes beyond the provision of ecosystem services.
  2. Populations, species, or groups of species combine to be a component of Biodiversity that is quite difficult to value, but it can be considered a contributing factor in an ecosystems inability to enhance regulating services and improve resilience to external pressures. Losses in this component by an ecosystem can disrupt its normal function and thus disrupt ecological services. This component of Biodiversity could be assessed as a potential risk for the ecosystems provision of ecosystem services or ability to exist. These functions are related to Genetic Pool, Ecological Succession, Ecosystem Energy Flows and Stability.
  3. The intrinsic value of Biodiversity (nature as nature or existing value) means that every living organism has a genetic value in the form of genetic information, which is generated by natural evolution. Each species (or ecosystem) has the right to exist, and the extinction of any species must be avoided as a basic principle of sustainability.

The three potential values of Biodiversity are illustrated below.

Natural Capital and Biodiversity Potential Values (Graphic from the Natural Capital Coalition)

Applying this Natural Capital perspective, Biodiversity (understood as the biotic stock of ecosystems) could be valuated through the generated flow of benefits (ecosystem services). The three components of Biodiversity (direct provision of benefits, supporting functions, and non-use values) can also be reflected as part of ecosystem services.

The direct provision of services is reflected in several provisioning services (food and materials from wild animal and plants), supporting functions are reflected in several regulating services (gene pool or pollination), and non-use value (also called bequest and existence services) can be considered as part of cultural services.

The third group of services (non-use values) is usually missing in valuation databases and is inherently difficult to value for technical and ethical reasons: applying an economic value to the existence of any species is difficult and might lead to ethical issues when considering Biodiversity as a commodity that can be traded.

Applying an economic value to Biodiversity (considering the inherent technical and ethical challenges of this methodological approach) would enable quantitative assessments of environmental impacts on Biodiversity due to industrial projects.

Based on this approach, the magnitude of environmental impacts on ecosystems could be quantified. This approach is of particular interest for quantifying residual impacts (impacts that remain after applying the mitigation hierarchy to avoid, mitigate and restore ecosystems). Quantifying residual impacts would be a first step to define the requirements for an industrial project to identify potential Biodiversity offset requirements.

In subsequent posts, compensation by industrial projects for residual impacts on Biodiversity will be discussed along with compliance with the target of No Net Loss of Biodiversity. This approach to compensation and compliance would be of particular interest for assessing impacts with partial effects on ecosystems, for example disturbances due to environmental aspects, such as air pollutant emissions, and airborne or underwater noise.

[1] World Economic Forum (2020). Nature Risk Rising: Why the Crisis Engulfing Nature Matters for Business and the Economy. January 2020.

[2] Biodiversity at the heart of accounting for natural capital: the key to credibility, Cambridge Conservation Institute 2016.

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