“Nature Belongs on Corporate Balance Sheets”

The business community recognizes the loss of biodiversity as a major threat, yet continues to put off addressing the problem. André Hoffmann, Co-Director of the World Economic Forum (WEF), proposes incorporating the true value of nature into corporate balance sheets. Dive into our conversation about opportunities and obstacles.

Interview by Nathalie Cadot and Rebecca Vermot

What does biodiversity mean to you?

To me, biodiversity is life on our planet. If we destroy it to the point where it can no longer recover, we humans will disappear along with it. Biodiversity is all of us. It is a common good that we must preserve together. The idea of a natural resource called biodiversity that is available to everyone to make money from is too simplistic. It has its value and its price, because it provides services for us, and we must factor these in.

Why are you so connected to it?

It’s my story. My father was a great nature lover and a famous ornithologist. From a young age, I had the opportunity to immerse myself in the world of nature conservation. Later, I entered the world of business. I realized that we are all swimming in the same pond. Nature should unite us, not divide us. There are no environmentalists on one side and users on the other.

What role should the economy play in protecting biodiversity?

The economy has brought prosperity to society. But it also has negative effects, not only on biodiversity, but also on our social behavior, our relationships and our happiness. If we want to create a sustainable future, we must change our current economic model. Companies must use resources more wisely. We use nature because it seems “free” and inexhaustible. But it not only has a price; it also has limits. For a sustainable tomorrow, we must respect planetary boundaries. Companies should fully integrate nature into their profit and loss statements and balance sheets, rather than dismissing it as negligible.

Can you give us an example?

In our economic system, we calculate the value of a tree based on the weight of the wood we sell. But a living tree has more value. It is part of a community, in a forest where I find solace; it produces oxygen and is home to countless plant and animal species. There are a whole range of living aspects to which today’s economic model assigns no value. Why? Because we focus on profit maximization. It is blind to the consequences for the planet and nature. This is where the limits of the system become apparent. Nature must once again become an integral part of value creation. To stick with my example: The tree must be given true value.

How can we change the current economic model?

Today, the economy tends to view nature as a cost rather than an opportunity. We could use the entire range of business tools to invest in it and revitalize it, rather than exploiting it for immediate profit without giving anything back. We have no choice but to give something back to nature, because we have already abused it too much. Every investor knows that without reinvestment, profits decline. What matters is how we value nature in our profit and loss statements and describe its worth. So how do we invest in nature in a way that also benefits shareholders? That is the big question. We are making progress, but we still have a long way to go.

What makes this path so long?

We focus on short-term profit maximization. Milton Friedman, who received the Nobel Prize in Economics in 1976, described the role of companies as follows: They must make money and pass it on to society in the form of wages and taxes. Society, he argued, is responsible for solving the problems that companies have created through their value creation.

Honestly, that’s absurd. But that’s the model we’re currently operating under. Board members are compensated for rising profits without regard for the impact of this profit maximization on the planet, nature and biodiversity. This highlights the limitations of the current system. Take CO2 credits, for example, which companies use to buy the right to do what they shouldn’t be doing. They buy the right to invest in forests. One should never be hasty, but in my opinion, that’s not the solution. We need to bring nature back into the picture.

So how can we convince companies to adopt a more sustainable approach?

We all share responsibility for this. We need to make it clear to companies that their purpose isn’t profit, but rather to contribute to society. This would allow companies to redefine themselves. And they would be rewarded for doing the right thing and reinvesting in sustainability. Then there are us, the citizens, who are all part of the economic system. Why do we tolerate things we know are wrong? It’s a matter of values. As citizens, we have a choice and also tools we can use as consumers and voters. We must live by our values, and so must companies.

How can greenwashing be prevented?

When society came to understand the far-reaching consequences of corporate actions, Corporate Social Responsibility (CSR) was first introduced, followed later by the ESG sustainability criteria: Environmental, Social, and Corporate Governance. Now the idea is emerging that nature is our next source of investment. But we must not make it too easy on ourselves and already view it as an investment opportunity. We need to be more specific, more granular — just as nature itself is. The goal is for companies to be guided by the right information. Around sixty companies are already following the guidelines of the International Sustainability Standards Board (ISSB) for impact reporting. Eventually, we will reach a consensus. But back to greenwashing. In Davos, we talked a lot about sustainability. There is agreement that biodiversity loss and climate change are the greatest risks of the next ten years. But first, people want to address geopolitics. I’m not convinced that’s the solution. We need to think more long-term. Today’s risk management ignores climate change and biodiversity loss. That’s not entrepreneurial; it’s short-sighted and piecemeal.

Can we save biodiversity within the current capitalist system?

The rule applies both here and in nature: Species that do not adapt disappear. If we steer the economy in the right direction, yes, then I think we can save biodiversity. We manage what we measure, and right now that’s mostly financial consequences. We need to introduce an impact assessment that examines the effects of business activities on society and nature and aim to better understand the interdependencies and consequences. But the real question is: How do we move from “I” to “we” to the common good? To do that, we must redefine success. Success is not the Ferrari, the Maserati or the Louis Vuitton bag, but the ability to be happy.

How do you stay positive?

Through encounters with committed people. That’s where the solutions lie. It’s people who make the difference — together. I actively practice charity, saying “Hello” on the street, asking how people are doing. These micro-conversations last 30 seconds, but they make a difference; they motivate us to keep going. For 140 years, we have lived with the lie that materialism alone matters. That is hard to change. I want less materialism, more “we.”