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Assessing Risks and Opportunities Arising from

Ecosystem Change in Primary Industries Using
Ecosystem-Based Business Risk Analysis Tool

Harpinder Sandhu , Uday Nidumolu & Sukhbir Sandhu

To cite this article: Harpinder Sandhu , Uday Nidumolu & Sukhbir Sandhu (2012) Assessing Risks
and Opportunities Arising from Ecosystem Change in Primary Industries Using Ecosystem-Based
Business Risk Analysis Tool, Human and Ecological Risk Assessment: An International Journal,
18:1, 47-68, DOI: 10.1080/10807039.2012.631469

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Human and Ecological Risk Assessment, 18: 47–68, 2012
Copyright
C Taylor & Francis Group, LLC
ISSN: 1080-7039 print / 1549-7860 online
DOI: 10.1080/10807039.2012.631469

Assessing Risks and Opportunities Arising

from Ecosystem Change in Primary Industries Using
Ecosystem-Based Business Risk Analysis Tool

Harpinder Sandhu,1 Uday Nidumolu,1,2 and Sukhbir Sandhu3

1
CSIRO Ecosystem Sciences, Adelaide, Australia; 2SARDI, Adelaide, SA,
Australia; 3School of Management, University of South Australia, Adelaide,
SA, Australia

ABSTRACT
Land-based primary industries depend on the health of ecosystems that provide
ecosystem services (ES) such as fresh water, pollination, and natural hazard protec-
tion among others. Degradation of ES can pose a number of risks to businesses and
the well-being of rural populations. At the same time these ecosystem-based risks cre-
ate new business opportunities. In this work, three land-based organizations were
evaluated using case study approaches comprising a dairy processing company, a
grain company, and a wine-making company. In-depth interviews with environmen-
tal managers of these organizations were used to elicit the current organizational
approaches to identifying key environmental risks associated with ecosystem degra-
dation and the ways they deal with these risks. After initial analysis of the interview
data, the production component of these organizations was further examined us-
ing an Ecosystem Services Review (ESR) model with their respective environmental
management teams. This resulted in the development of an ecosystem-based im-
pact and dependence profile for each case study company. From these profiles,
risks and opportunities were identified by developing the Ecosystem Based Business
Risk Analysis Tool (EBBRAT). This can be used as an internal management tool
by organizations to improve profiles and evaluation of ecosystem-based risks and
opportunities.
Key Words: agribusiness, business risks and opportunities, ecological modeling,
ecosystem services.

INTRODUCTION
Ecosystems form the backbone of natural resource-based industries (Reid et al.
2005; FAO 2007; WEF 2009). Consequently, land-based food and fiber industries

Address correspondence to Harpinder Sandhu, CSIRO Ecosystem Sciences, PMB No. 2, Glen
Osmond, Adelaide SA 5064, Australia. E-mail: [email protected]

47
 H. Sandhu et al.

(such as cropping, dairy, horticulture, and pastoral) are dependent on the services
provided by healthy and functional ecosystems. However, at the landscape scale,
human activities have led to a decline in the ability of these ecosystems to supply
essential services (hereafter termed as ecosystem services; ES). ES are the benefits
that humans derive from natural and modified ecosystems (Daily 1997). ES related to
agriculture include such processes as biological control of pests, weeds and diseases,
pollination of crops, prevention of soil erosion, the hydro-geochemical cycle, capture
of carbon by plants and by soil, and cultural services (Sandhu et al. 2007, 2008). They
ensure the production of ecosystem goods, such as food, forage, and biofuels (Porter
et al. 2009).
However, the United Nations led Millennium Assessment (Reid et al. 2007) has
projected further declines in ES in the coming decades due to growing human
population, increasing food demand, and global climate change. While this has
serious implications for businesses and societal welfare in general, it poses a much
greater risk to the well-being of rural populations as they are highly dependent on
these land-based industries. Risk is the possibility that a hazard will cause damage.
Ecosystem degradation poses a number of operational, regulatory, market, finance,
and reputational risks to these largely rural land-based primary industries due to
their high dependence and high impact on ecosystems (Hanson et al. 2008). Market
and financial risks tends to be exogenous to a firm and are often driven by regional
or global markets. However, ecosystem degradation can result in a firm’s risk within
the market and their financial viability.
Business enterprises often fail to make the connection between the health of
ecosystems and the business bottom line (Earthwatch Institute 2006; Hanson et al.
2008; Grigg et al. 2009). For example, dairy processing companies are dependent
on a regular supply of milk, which is dependent on pasture availability to dairy
animals. Healthy land and availability of water and other natural resources are
required to produce quality pasture. Therefore, healthy and functional ecosystems
form the bottom line for the dairy industry. Many companies are not fully aware
of the extent of their dependence and impact on ecosystems and the possible
ramifications. Vittel (now a brand of Nestlé Waters), a mineral water company
in north-eastern France, faced a critical problem of nitrates and pesticides in the
company’s springs. Intensification of agricultural practices and clearing of native
vegetation by local farmers led to the contamination of springs. This threatened the
company’s right to use the “natural mineral water” label under French law. In order
to address this risk, Vittel developed a payment for ecosystem services (PES) scheme
that is financing farmers in the catchment to change their farming practices and
technology (Perrot-Maı̂tre 2006).
Businesses in general are one of the major contributors to environmental degra-
dation (Welford 1997). Thus they are being particularly targeted by stakeholders to
change the way they operate and to take action for cleaning up the environment
(Cairncross 1995; Sandhu et al. 2009, 2010). Agribusinesses being dependent on
natural resources face similar issues. This is being reflected in an increasing num-
ber of agribusinesses taking up the challenge and responding in environmentally
responsive ways (Jansen and Vellema 2004). We define businesses as environmen-
tally responsive when they recognize the importance of the natural environment

48 Hum. Ecol. Risk Assess. Vol. 18, No. 1, 2012

 Ecosystem Based Risks and Opportunities

and start integrating environmentally responsible behavior into their corporate

strategic decision-making processes (Hart 1995; Porter and Linde 1995, Sandhu
2010). This can lead to vast opportunities to generate profit and create social good
on a global scale (Morse and O’Connell 2007).
Business organizations, until now, have mostly been generally reactive rather
than proactive in managing environmental issues (Reagan 2006). They respond
to out-of-the-ordinary issues (e.g., oil spills, chemical contamination) and assign
the day-to-day management of natural resources to government agencies. In the
context of the land-based food and fiber industry, they have so far used environment
management systems (EMS; such as ISO 14001) in an attempt to control their
impact on the environment. However, the adoption of EMS had minimal effect
on environmental improvements (Bansal and Hunter 2003). Furthermore, EMS do
not take into account that land-based food and fiber value chains are distinct from
traditional manufacturing supply chains. Unlike manufacturing supply chains, the
dependence of land-based supply chains on ES is twofold. While food and fiber
value chains pose risks to ES (as a consequence of their dependence) they can also
significantly protect or restore the health of ES with proper management of their
environmental impacts. As a case in this point, consider water flows and aquifer
recharge as a valuable example of ES. Agricultural production is closely associated
with water availability. However, this is a two-way relationship; growers can negatively
impact water flow quantity (through irrigation) and quality (through fertilizers and
agrochemical runoff). This has potential to deliteriously impact production and
processing.
At the farm level, tools have been developed to assist farmers in reducing nitrogen
pollution and to bridge the gap between on-farm action and off-farm environmental
response (Hill 2008). This approach showed that significant environmental and eco-
nomic benefits may be obtained through better-informed, spatially explicit nitrogen
management at the sub-farm scale. Biophysical models such as Agricultural Produc-
tion Systems Simulator (APSIM; Keating et al. 2003) and GRAZPLAN (Donnelly
et al. 2002) have also been used to provide relationships between NRM (Natural Re-
source Management) targets and economic performances (Robertson et al. 2009;
Hacker et al. 2009). These models work at the farm level, and they are designed to
assist in decision-making at farm enterprise level. However, they are not designed to
assist business organizations that have to make decisions for the whole supply chain
management including procurement of raw material, processing, distribution, and
retailing of the finished products (Walton et al. 1998; Sarkis 2003).
Thus there exists a unique opportunity to develop a model that can assist land-
based businesses to proactively manage ES. Such a model can assist land-based
industries to both account for the risks they pose to the ES, and also provide a
method for valuing their positive impacts on ES.
The current study was designed to develop a model that enables identification
of specific risks and opportunities (as a consequence of valuing potential positive
impacts) arising from ecosystem change for the land-based industries. This model, in
consultation with various stakeholders, helps focus on strategies to reduce ecological
footprints (Wackernagel and Rees 1996) in food and fiber industries. The objectives
of this study are:

Hum. Ecol. Risk Assess. Vol. 18, No. 1, 2012 49

 H. Sandhu et al.

1. Understand risks and opportunities arising from ecosystem change in the grain,
wine and dairy industries; and
2. In partnership with the grain, wine, and dairy companies, develop a structured
methodology that helps managers: (1) proactively develop strategies to manage
business risks and opportunities arising from their company’s dependence and
impact on ecosystems and (2) reduce their impact on ecosystems.

METHODS
Case Study
A case study method (Yin 2003) was used taking one example each from the
dairy processing (named Dairy Company), grain (Grains Company), and wine-making
(Wine Company) industries. This study focused on the production component of
the value chain. In-depth interviews with the environmental managers of these
organizations were used to elicit the organizational approach used to identify and
manage ecosystem-based risks in value chains.
For the purpose of gaining an insight into these largely unexplored issues, in-
depth interviews were conducted with managers responsible for environmental af-
fairs in three Australian organizations. These organizations were theoretically sam-
pled from among the 100 top Australian agribusinesses.
The criterion for further selection of the organizations from among the top
organizations was an established reputation for environmental responsiveness. To
shortlist the organizations on the basis of being environmentally responsive, a de-
tailed content analysis (Malhotra et al. 2006) of organizational websites, annual
reports, and environmental/sustainability reports of the top organizations was con-
ducted. Initial evidence of environmental responsiveness was determined through
the existence of environmental measures (environmental policy, environmental
management systems, environmental reporting, environmental auditing, etc.).
Evidences of environmental responsiveness however, do not provide sufficient
information on the key issues at individual organizations. Therefore, semi-structured
interviews were used to identify key environmental issues at each organization.
Interviews are regarded as a highly efficient way to gather rich empirical data,
especially about sensitive issues (Yin 2003; Eisenhardt and Graebner 2007). All
the respondents in this study were promised confidentiality as regards both the
organizational name and the name of the managers being interviewed.

The Research Question Was:

What are the risks and opportunities arising from ecosystem change in primary
industries? To address this research question we asked the following questions:

1. What are the environmental issues in your organization?

2. What impacts/dependence does your organization have on ecosystems?
3. What are the risks and opportunities available to effectively deal with the envi-
ronmental issues at your organization?

50 Hum. Ecol. Risk Assess. Vol. 18, No. 1, 2012

 Ecosystem Based Risks and Opportunities

Environmental managers in these organizations were first telephoned and requested

to participate in the study. A list of questions was then faxed to them. They were then
interviewed in person or over the telephone. Environmental issues were classified
into three categories—foremost, secondary, and tertiary based on their importance
in relevant industry as judged by individual respondents. Impacts/dependence pro-
files were generated by using an Ecosystem Services Review Tool (ESR) tool that
is a standardized methodology for developing such profiles. Risks and opportuni-
ties were identified by developing an Ecosystem Based Business Risk Analysis Tool
(EBBRAT) in this study.

Analysis of Data
The digitally recorded interviews of the managers were transcribed verbatim and
significant statements extracted from these transcripts were used as the raw data
for analysis. The significant statements were identified from the analysis of the tran-
scripts. NVIVO 8 qualitative analysis software was used for identifying the significant
statements to assist with developing individual case histories. In accordance with the
methodology suggested by Riemen (1986), meanings were then formulated from
the significant statements. These formulated meanings were arrived at by reading,
re-reading, and reflecting on the significant statements in the original transcription
to get the meaning of the statements in the original context.

Ecosystem Services Review Tool (ESR)

After initial analysis of the data from the interviews, the production component
of the value chain of each organization was further examined by using an Ecosys-
tem Services Review Tool (ESR) (Hanson et al. 2008) with the environment teams
of grain, wine, and dairy companies. In the ESR, 31 ecosystem goods and services
are evaluated for each organization and their dependence and impacts are also
recorded. These ES relevant to land-based industries in general are adapted from
the framework of ES used in the Millennium Assessment (Reid et al. 2005), which
is an accepted form of framework to study ES. Each of the ES was explained to
the concerned participant and definitions are provided in Appendix 1. The re-
sponses were solicited under their own production environment. Although many
stakeholders could be involved, their dependence and impacts were not recorded
in this study. A dependence scale of 0–10 is used to identify relevance of each ES to
business organization where 0 is “not relevant” and 10 is “highly relevant.” Impacts
of organization are evaluated on a scale of −10 to +10, where a positive impact
indicates that the company increases the quantity or quality of the ES and a negative
impact occurs when a company decreases the quantity or quality of ES. For example,
disease regulation is an ES on which an organic wine-maker is highly dependent as
organic practices prohibit chemical control of disease, so a wine-maker would be
relying on natural disease regulation at the production side of their value chain. Also
management activities do have impacts on this particular ES that could be positive
or negative. In this case it would be a high positive impact as they would implement
those decisions that will make conditions favorable for high natural disease regu-
lation, such as implementation of ecological engineering techniques (Gurr et al.
2004). On the other hand, a conventional wine producer would not be dependent

Hum. Ecol. Risk Assess. Vol. 18, No. 1, 2012 51

 H. Sandhu et al.

on this ES as they are dependent on chemical control and could also be having
negative impact depending on the operation. This resulted in the development of
ecosystem-based impact and dependence profiles for each organization. From these
impact and dependence profiles, an Ecosystem Based Business Risks Analysis Tool
(EBBRAT) was developed that identifies ecosystem-based risks and opportunities.

Ecosystem Based Business Risk Analysis Tool (EBBRAT)

The model was developed using a MS Excel spreadsheet. The tool consists of
data entry and output worksheets. Data on dependence and impact is entered by
the relevant organization into a data entry sheet. Dependence data are used to
quantify a particular ES relevant to a company’s performance on a scale ranging
from 0, which indicates no relevance, to 10, which is highly relevant. Impact data
quantifies the company’s impact on an ES as either positive, negative, or no impact.
A positive impact indicates that the company increases the quantity or quality of this
ES, whereas a negative impact indicates that the company decreases the quantity
or quality of this ES, rated on a scale of −10 to +10. Responses are automatically
generated in the output worksheet, and data are automatically organized in the
analysis sheet into different dependence categories and different impact categories
with different color schemes.
A graph is generated showing the risks and opportunities based on ES. Risks
increase towards the bottom right corner. ES that are in this area are at risk due to
company operations and also tend to lower production as a company is dependent
on it. Opportunities increase toward the top right corner. A company’s operations
are dependent on these ES, and also positively impacting on these ES. This infor-
mation is useful for environmental managers to focus on risks and opportunities at
the same time in each of the case study organizations.

RESULTS
Environmental Issues
Environmental issues that are important to these organizations were classified into
three categories based on their relevance—foremost, secondary, and tertiary issues
(Table 1). Each organization has different issues with varying degree of importance
and relevance to their operations.

Dairy company
Results indicate that waste water and salinity are the foremost environmental
issues at this organization. Being one of the largest operations in the region, this
organization produces large amounts of waste water during processing of milk. Soil
salinity is another issue that is considered as a major issue at the production farms.
Energy was the secondary issue at the processing plant. It was evident from the
responses that the management does not consider energy supply as an environmen-
tal issue in the near future. Some of the issues of tertiary importance were water
availability, climate change, biodiversity, waste management, water efficiency, soil
health, carbon emissions, and soil carbon. It was not surprising that land and most

52 Hum. Ecol. Risk Assess. Vol. 18, No. 1, 2012

 Ecosystem Based Risks and Opportunities

Table 1. Important environmental issues at the organization level.

Dairy company Wine company Grain company
Foremost issues • Waste water • Energy • Salinity
• Salinity • Water availability • Water availability
• Climate change
Secondary issues • Energy • Biodiversity • Soil carbon
• Waste management
• Water efficiency
• Inter-row management
Tertiary issues • Water availability • Waste water • Waste water
• Climate change • Salinity • Energy
• Biodiversity • Soil health • Climate change
• Waste management • Carbon emissions • Biodiversity
• Water efficiency • Soil carbon • Waste management
• Inter-row management • Water efficiency
• Soil health • Carbon emissions
• Carbon emissions
• Soil carbon

of the natural resources (ES) were considered of tertiary importance as current

management does not relate these issues with the positive business outcomes.

Wine company
This wine company has three major issues: energy, water availability, and climate
change. Secondary environmental issues were found to be biodiversity, waste man-
agement, water efficiency, and row management. Some issues of tertiary importance
were recognized by this organization as mentioned in Table 1. In contrast to the
dairy company, the wine company considers energy as a major issue. It also consid-
ered natural resources to be of great importance due to the image of wine, which is
considered as a fine product of nature.

Grain company
The grain company recognized salinity and water availability as issues of primary
importance. Soil carbon was considered a secondary issue while tertiary issues are
listed in Table 1. Due to the rain fed nature of grain production, this company
recognizes the importance of water availability and salinity issues. There is also
increasing interest among grain producers and industry to explore carbon markets
and the industry considers it as an issue and also an opportunity in the near future.
In summary, the findings reveal that the environmental issues that emerged after
our analysis are directly related to the production in each of the organization.
Sustainability of these organizations is likely to be jeopardised if the issues are not
addressed.
However, several of these issues were turned into opportunities by respective
organizations.
As quoted by the manager at Dairy company:

Hum. Ecol. Risk Assess. Vol. 18, No. 1, 2012 53

 H. Sandhu et al.

. . . we have a lot of sludge and all the sludge that comes off actually goes to
a compost facility, so it’s all composted. It gets sold, and used for horticultural
purposes. That is probably one of our biggest issues; the sludge and disposing of
that, so we have to be very careful like trying to reduce the volume that we have
and disposing because it’s a fairly fatty substance as well, the compost facility has
been able to cope with that.

Another example from Wine company illustrates how an environmental issue was
turned into an opportunity, as quoted:

. . . we have a fair amount of winery waste water which we have to deal with and
I guess the opportunity there was to give that water to the local golf club for
irrigation. So I guess there is a win-win for the two parties, the company won
because it was able to dispose of its waste water and the golf course sort of won
because they were able to get some water that they need. So I think that is a good
example of an opportunity.

Impact/Dependence on Ecosystems
After initial screening of these cases, each organization was further contacted
to run the Ecosystem Services Review Tool (ESR; Hanson et al. 2008) with their
environment teams. Each of the respondents gave scores based on the scale for both
dependence and impacts on ES. Responses of each organization are presented in
Tables 2–4.
Each organization was analyzed for its dependence and impact on each of the
31 listed ecosystem goods and services (Appendix 1). The dairy company has high
dependence on 12 ES with positive impact on 8 ES, whereas it has negative impact
on 5 ES (Table 2). The wine company has high dependence on 16 ES with positive
impact on 9 ES and negative impact on 8 ES (Table 3). The grain company has
high dependence on 6 ES with positive impact on 9 ES and negative impact on 6 ES
(Table 4).

Risks Due to Ecosystem Change

From the ESR of the respective organization, impact, and dependence profiles
were created. This information was used to develop an EBBRAT. It provides informa-
tion on risks and opportunities in different organizations based on characteristics of
the ecosystems on that they depend. Risks and opportunities of the three case study
organizations are presented in Figures 1–3. Risks increase toward the bottom right
side of the graph as each company becomes dependent on these ES while impacting
negatively on them. Whereas, opportunities increase toward the upper right corner
of the graph as a company’s operations are positively impacting on the ES involved.
The dairy and wine organizations identified four ES that present a risk to each
organization (Figures 1 and 2, respectively). The grain company identified one ES
that is of high risk and three ES that are of low risk (Figure 3).

54 Hum. Ecol. Risk Assess. Vol. 18, No. 1, 2012

 Table 2. ESR for the dairy company.
Is the company’s impact positive/
negative/no impact?
- Positive: The company increases the
quantity or quality of this ecosystem service
Relevance to company’s - Negative: The company decreases
performance. Scale (0–10); the quantity or quality of this
(0: not relevant, ecosystem service
10: highly relevant) - No impact Scale (−10 to +10)

Ecosystem services Dependence Positive impact Negative impact

1 Crops 10 4 0
2 Livestock 10 5 0
3 Capture fisheries 0 0 0
4 Aquaculture 0 0 0
5 Wild foods 0 0 0
6 Timber and other wood fiber 0 0 0
7 Other fibers (e.g., cotton, hemp, silk) 0 0 0
8 Biomass fuel 0 0 0
9 Freshwater 9 0 −4
10 Genetic resources 3 1 0
11 Biochemicals, natural medicines, etc. 0 0 0
12 Air quality regulation 10 0 −4
13 Global climate regulation 5 0 −2
14 Regional/local climate regulation 6 0 0
15 Water regulation 7 0 −2
16 Erosion regulation 8 0 −3
17 Water purification and waste treatment 10 7 0
18 Natural hazard regulation 0 0 0
19 Disease regulation 10 7 0
(Continued on next page)

55
56
Table 2. ESR for the dairy company (Continued).
Is the company’s impact positive/
negative/no impact?
- Positive: The company increases the
quantity or quality of this ecosystem service
Relevance to company’s - Negative: The company decreases
performance. Scale (0–10); the quantity or quality of this
(0: not relevant, ecosystem service
10: highly relevant) - No impact Scale (−10 to +10)

Ecosystem services Dependence Positive impact Negative impact

20 Pest regulation 0 0 0
21 Pollination 0 0 0
22 Mineralization of plant nutrients 6 5 0
23 Soil formation 6 0 0
24 Nitrogen fixation 3 0 0
25 Recreation and ecotourism 0 0 0
26 Ethical values 0 0 0
27 Aesthetic information 0 0 0
28 Cultural and artistic values 0 0 0
29 Historical values 0 0 0
30 Science and education values 5 5 0
31 Employment 6 3 0

High dependence (6–10) Medium dependence (1–5)

High positive impact (6–10) Medium positive impact (1–5)
High negative impact (–6 to –10) Medium negative impact (–1 to –5)
 Table 3. ESR for the wine company.
Is the company’s impact positive/
Relevance to negative/no impact?
company’s - Positive: The company increases the quantity or
performance. Scale quality of this ecosystem service
(0–10); (0: not - Negative: The company decreases the quantity
relevant, 10: highly or quality of this ecosystem service
relevant) - No impact Scale (−10 to +10)

Ecosystem services Dependence Positive impact Negative impact

1 Crops 10 9 0
2 Livestock 0 0 0
3 Capture fisheries 0 0 0
4 Aquaculture 0 0 0
5 Wild foods 0 0 0
6 Timber and other wood fiber 8 0 0
7 Other fibers (e.g., cotton, hemp, silk) 0 0 0
8 Biomass fuel 2 0 0
9 Freshwater 10 0 −2
10 Genetic resources 7 2 0
11 Biochemicals, natural medicines, etc. 2 0 0
12 Air quality regulation 8 0 −1
13 Global climate regulation 8 0 −1
14 Regional/local climate regulation 10 0 0
15 Water regulation 9 0 −2
16 Erosion regulation 6 5 0
17 Water purification and waste treatment 7 2 0
18 Natural hazard regulation 8 0 0
19 Disease regulation 5 0 −3
(Continued on next page)

57
58
Table 3. ESR for the wine company (Continued).
Is the company’s impact positive/
Relevance to negative/no impact?
company’s - Positive: The company increases the quantity or
performance. Scale quality of this ecosystem service
(0–10); (0: not - Negative: The company decreases the quantity
relevant, 10: highly or quality of this ecosystem service
relevant) - No impact Scale (−10 to +10)

Ecosystem services Dependence Positive impact Negative impact

20 Pest regulation 5 0 −3
21 Pollination 0 0 0
22 Mineralization of plant nutrients 2 0 −1
23 Soil formation 3 0 −3
24 Nitrogen fixation 0 0 0
25 Recreation and ecotourism 8 5 0
26 Ethical values 7 6 0
27 Aesthetic information 0 0 0
28 Cultural and artistic values 0 0 0
29 Historical values 9 10 0
30 Science and education values 7 3 0
31 Employment 9 8 0

High dependence (6–10) Medium dependence (1–5)

High positive impact (6–10) Medium positive impact (1–5)
High negative impact (–6 to –10) Medium negative impact (–1 to –5)
 Table 4. ESR for the grain company.
Is the company’s impact positive/
Relevance to negative/no impact?
company’s - Positive: The company increases the quantity or
performance. Scale quality of this ecosystem service
(0–10); (0: not - Negative: The company decreases the quantity
relevant, 10: highly or quality of this ecosystem service
relevant) - No impact Scale (−10 to +10)

Ecosystem services Dependence Positive impact Negative impact

1 Crops 5 8 0
2 Livestock 5 6 0
3 Capture fisheries 0 0 0
4 Aquaculture 0 0 0
5 Wild foods 0 0 0
6 Timber and other wood fiber 0 0 0
7 Other fibers (e.g., cotton, hemp, silk) 2 2 0
8 Biomass fuel 0 0 0
9 Freshwater 8 0 −8
10 Genetic resources 8 3 0
11 Biochemicals, natural medicines, etc. 1 1 0
12 Air quality regulation 1 0 −4
13 Global climate regulation 5 0 −3
14 Regional/local climate regulation 6 0 −4
15 Water regulation 5 0 −2
16 Erosion regulation 1 0 −2
17 Water purification and waste 0 0 0
treatment
18 Natural hazard regulation 1 0 0
19 Disease regulation 2 0 0
(Continued on next page)

59
60
Table 4. ESR for the grain company (continued).
Is the company’s impact positive/
Relevance to negative/no impact?
company’s - Positive: The company increases the quantity or
performance. Scale quality of this ecosystem service
(0–10); (0: not - Negative: The company decreases the quantity
relevant, 10: highly or quality of this ecosystem service
relevant) - No impact Scale (−10 to +10)

Ecosystem services Dependence Positive impact Negative impact

20 Pest regulation 2 0 0
21 Pollination 0 0 0
22 Mineralization of plant nutrients 8 8 0
23 Soil formation 0 0 0
24 Nitrogen fixation 0 0 0
25 Recreation and ecotourism 0 0 0
26 Ethical values 0 0 0
27 Aesthetic information 0 0 0
28 Cultural and artistic values 0 0 0
29 Historical values 8 6 0
30 Science and education values 1 6 0
31 Employment 8 6 0

High dependence (6–10) Medium dependence (1–5)

High positive impact (6–10) Medium positive impact (1–5)
High negative impact (–6 to –10) Medium negative impact (–1 to –5)
 Ecosystem Based Risks and Opportunities

Figure 1. Ecosystem-based risks and opportunities in the dairy company (color

figure available online).

DISCUSSION
The emergence of environmentalism in land-based primary industries in the late
20th century is primarily due to reliance of these industries on natural resources
(Hart 1995; Srivastava 1995). There has been a decline in the health of natural
ecosystems and the ES they provide (Reid et al. 2005). Since these industries de-
pend heavily on ES, degradation of these flows or services poses a number of risks
to businesses and the well-being of rural populations. This work highlights the po-
tential utility and challenges in linking land-based industries to ecosystem-based
risks management (Kiker et al. 2008). One principal objective of this study was

Figure 2. Ecosystem-based risks and opportunities in the wine company (color

figure available online).

Hum. Ecol. Risk Assess. Vol. 18, No. 1, 2012 61

 H. Sandhu et al.

Figure 3. Ecosystem-based risks and opportunities in the grain company (color

figure available online).
to explore ecosystem-based risks and opportunities to primary industries. In-depth
interviews with the environmental managers of three organizations were used to
elicit the current status of organizational approaches to identifying environmen-
tal issues (Table 1). Waste water, salinity, energy, water availability, climate change,
water efficiency, soil health, carbon emissions, and biodiversity are the foremost en-
vironmental issues confronted by the case study organizations. These environmental
issues pose great risks to these organizations depending on the nature of operations
of indivual organizations. Identification of environmental issues helps management
to focus on remedial measures in the future to avoid any regulatory or reputational
risks as well as financial risks associated with them.
The first major limitation of this study is that although case study organizations
provide a very suitable context for examining the environmental issues at these or-
ganizations, we recognize that a single organization cannot be representative of an
entire industry. However, organizations in each group share key similarities, such
as GHG (greenhouse gas) emissions, ability to adapt to climate change, sources
of emissions, and with the other organizations in the same group. Furthermore,
organizations in the same group share other factors such as enforcement of envi-
ronmental regulations, and societal involvement with environmental issues (Jeswani
et al. 2008; Sandhu et al. 2009). Therefore, while each of the case study organi-
zations cannot be fully representative of the whole industry, it shares underlying
similarities with others and should thus be seen in light of being indicative and
evocative of conditions in other organizations. Consequently the knowledge gained
about the environmental issues from this research can be used to inform senior
management about factors that could motivate land-based business organizations to
be environmentally responsive.
This study is also limited by the fact that although interviews are regarded as a
highly efficient way to gather rich empirical data, especially about sensitive issues
(Yin 2003; Eisenhardt and Graebner 2007), they remain subject to criticism on the
grounds of social desirability bias (Podsakoff and Organ 1986). Social desirability

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 Ecosystem Based Risks and Opportunities

bias is the tendency of respondent to present one’s self in a favorable position

with regard to social norms (Nunnally 1978). Information gained from self-reports
on socially sensitive issues can be distorted by social desirability bias (Sudman and
Bradburn 1974). Respondents may under report (over report) socially undesirable
(desirable) characteristics, putting themselves in a more socially acceptable position
(Jo 1999). However, it was not a problem in this research because respondents were
assured of confidentiality as regards both the organizational name and the name of
the managers being interviewed in order to overcome the risk of social desirability
bias (Konrad and Linnehan 1995). Thus, the fact that self-reporting in this research
did not appear to be biased toward enhancing the corporate image indicates a low
degree of social desirability bias. Nevertheless, social desirability bias as a result of
self-reported data remains a methodological weakness for much of the research
examining corporate strategies (Sharma and Vredenburg 1998). However, EBBRAT
might reduce the bias, which can be used as an internal management tool to improve
profiles and subsequent evaluation of organizational risks and opportunities.
After initial analysis of the data from the interviews, impact and dependence
profiles for these industries were developed using ESR (Tables 2–4). This helped
to generate profiles of individual organizations with respect to their dependence
and impacts on ES and the health of ecosystems on which their business depends.
This information is vital to strengthen the links between the health of ecosystems
and the business bottom line. Business organizations are increasing investments in
projects related to ecosytems and biodiversity to minimize associated risks and for
the sustainability of their own supply chains.
Although these tools are available to identify the dependence and impacts on ES
by an organization (Hanson et al. 2008; Grigg et al. 2009), these tools do not identify
risks and opportunities. Therefore current work used these impact and dependence
profiles to develop EBBRAT and identify risks and opportunities. Identification of
risks does not result in a better outcome in itself, but it provides information useful
for developing strategies to reduce impacts on ecosystems for varying industries.
Information generated using EBBRAT can help managers to prioritize strategies for
responding to natural resources and ES (Hanson et al. 2008). These strategies often
fall into three different categories—internal changes, stakeholder engagement, and
policy-maker engagement. Case study organizations were not evaluated for these
strategies but results of ESR profiles and EBBRAT can be used to evaluate risks
and opportunities and to improve their own profiles. A bigger effort is required to
validate this tool with a large number of organizations to generalize the results. This
study is also limited by the fact that the sample size was small (three companies), as
it was designed to be an initial exploratory analysis. This was primarily planned to
develop EBBRAT. This study used a case-study method, which used small numbers of
cases to build theory and tools that can be tested by a large number of organizations.
This tool proposes an ES management approach that is comprehensive and sys-
tematic, based on ecological knowledge and ES values related to decision-making. It
considers the interaction between the natural environment and business opportuni-
ties. As documented here, such an approach can enable environment managers to
achieve workable solutions and to avoid or reduce environmental issues at both lo-
cal and regional scales (Hart 1997). This approach is transferable across boundaries
and can be extended to other manufacturing industries at all scales. This tool does

Hum. Ecol. Risk Assess. Vol. 18, No. 1, 2012 63

 H. Sandhu et al.

not evaluate the value of ES as compared to other tools discussed in literature such
as Net Environmental Benefit Analysis (NEBA; Friant 2007). However, it takes into
consideration social, cultural, environmental, and production aspects to identify
and manage risks to the land-based industries (Pittinger and Bishop 1999).

CONCLUSION
This study identified relevant ES for three case study organizations and used
EBBRAT to identify risks and opportunities. Risks are where firms need to take action
to minimize impacts on their business and ecosystems. Individual organizations can
invest to create more business outcomes for the opportunities identified in this study.
For example, the grain company identified air quality regulation as an opportunity.
This can be translated into managing soils and vegetation to store carbon and enter
carbon markets for more profitable business.
There is high potential for the adoption of this tool (EBBRAT) as land-based
industries seek to reduce risks and find competitive advantage in a warming, carbon-
constrained world. As more environmental regulatory mechanisms come into force
in the future, the food industry will be directly affected and this may increase the
production cost. This research tool can help industry to identify risks and opportuni-
ties available for further investment. This can also be used to provide awareness and
strategies business leaders relating to management of natural resources to adapt to
the changing environment. This tool can be used to identify business risks and oppor-
tunities, strengthen existing approaches to environmental management, improve
stakeholder relationships and demonstrate leadership in corporate sustainability.

ACKNOWLEDGMENTS
The authors acknowledge the contribution of participants in the interviews and
organizations for providing necessary information. Thanks go to the Sustainable
Agriculture Flagship of CSIRO for providing financial support to carry out this
research.

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APPENDIX 1 Definitions of ecosystem services.

Ecosystem services Definition
1 Crops Cultivated plants or agricultural produce that are harvested by
people for human or animal consumption as food.
Examples: grains, vegetables, fruit
2 Livestock Animals raised for domestic or commercial consumption or use.
Examples: chicken, pigs, cattle
3 Capture fisheries Wild fish captured through trawling and other non-farming
methods.
Examples: cod, crabs, tuna

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APPENDIX 1 Definitions of ecosystem services. (Continued).

Ecosystem services Definition
4 Aquaculture Fish, shellfish, and/or plants that are bred and reared in ponds,
enclosures, and other forms of fresh- or salt-water
confinement for purposes of harvesting.
Examples: shrimp, oysters, salmon
5 Wild foods Edible plant and animal species gathered or captured in the wild.
Examples: fruit and nuts, fungi, bush meat
6 Timber and other wood Products made from trees harvested from natural forest
fiber ecosystems, plantations, or non-forested lands.
Examples: industrial round wood, wood pulp, paper
7 Other fibers (e.g., Nonwood and nonfuel fibers extracted from the natural
cotton, hemp, silk) environment for a variety of uses.
Examples: textiles (clothing, linen, accessories), cordage (twine,
rope)
8 Biomass fuel Biological material derived from living or recently living
organisms—both plant and animal—that serves as a source of
energy.
Examples: fuel wood, charcoal, grain for ethanol production,
dung
9 Freshwater Inland bodies of water, groundwater, rainwater, and surface
waters for household, industrial, and agricultural uses.
Examples: freshwater for drinking, cleaning, cooling, industrial
processes, electricity generation, or mode of transportation
10 Genetic resources Genes and genetic information used for animal breeding, plant
improvement, and biotechnology.
Example: genes used to increase crop resistance
11 Biochemicals, natural Medicines, biocides, food additives, and other biological
medicines, and materials derived from ecosystems for commercial or domestic
pharmaceuticals use.
Examples: echinacea, ginseng, garlic; paclitaxel as basis for
cancer drugs; tree extracts used for pest control
12 Air quality regulation Influence ecosystems have on air quality by emitting chemicals
to the atmosphere (i.e., serving as a “source”) or extracting
chemicals from the atmosphere (i.e., serving as a “sink”).
Examples: lakes serve as a sink for industrial emissions of sulfur
compounds; vegetation fires emit particulates, ground-level
ozone, and volatile organic compounds
13 Global climate Influence ecosystems have on the global climate by emitting
regulation greenhouse gases or aerosols to the atmosphere or by
absorbing greenhouse gases or aerosols from the atmosphere.
Examples: forests capture and store carbon dioxide; cattle and
rice paddies emit methane
14 Regional/local climate Influence ecosystems have on local or regional temperature,
regulation precipitation, and other climatic factors.
Example: forests can impact regional rainfall levels
15 Water regulation Influence ecosystems have on the timing and magnitude of water
runoff, flooding, and aquifer recharge, particularly in terms of
the water storage potential of the ecosystem or landscape.
Examples: permeable soil facilitates aquifer recharge; river
floodplains and wetlands retain water that can decrease
flooding during runoff peaks—reducing the need for
engineered flood control infrastructure
(Continued on next page)

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APPENDIX 1 Definitions of ecosystem services (Continued).

Ecosystem services Definition
16 Erosion regulation Role vegetative cover plays in soil retention.
Examples: vegetation such as grass and trees prevents soil loss
due to wind and rain; forests on slopes hold soil in place,
thereby preventing landslides
17 Water purification and Role ecosystems play in the filtration and decomposition of
waste treatment organic wastes and pollutants in water; assimilation and
detoxification of compounds through soil and subsoil
processes.
Examples: wetlands remove harmful pollutants from water by
trapping metals and organic materials; soil microbes degrade
organic waste rendering it less harmful
18 Natural hazard Capacity for ecosystems to reduce the damage caused by natural
regulation disasters such as hurricanes and to maintain natural fire
frequency and intensity
Examples: mangrove forests and coral reefs protect coastlines
from storm surges; biological decomposition processes reduce
potential fuel for wildfires
19 Disease regulation Influence ecosystems have on the incidence and abundance of
human pathogens.
Example: some intact forests reduce the occurrence of standing
water–a breeding area for mosquitoes, which can lower the
prevalence of malaria
20 Pest regulation Influence ecosystems have on the prevalence of crop and
livestock pests and diseases.
Example: predators from nearby forests such as bats, toads,
snakes consume crop pests
21 Pollination Role ecosystems play in transferring pollen from male to female
flower parts.
Example: bees from nearby forests pollinate crops
22 Mineralization of plant Storage, internal cycling, processing and acquisition of nutrients.
nutrients Example: Nitrogen fixation
23 Soil formation Soil formation processes. (turning over of soil by earthworms)
(maintenance of soil Example: Accumulation of organic material, weathering of rocks
health)
24 Nitrogen fixation Storage and cycling.
Example: Legumes fixing N
25 Recreation and Recreational pleasure people derive from natural or cultivated
ecotourism ecosystems.
Examples: hiking, camping, bird watching, scuba diving, going
on safari
26 Ethical values Spiritual, religious, aesthetic, intrinsic, “existence” or other
values people attach to ecosystems, landscapes, or species.
Examples: spiritual fulfilment derived from sacred lands and
rivers; belief that all species are worth protecting regardless of
their utility to people—“biodiversity for biodiversity’s sake”
(Continued on next page)
27 Aesthetic information Landscape feature (scenery, scenic route, etc.)
28 Cultural and artistic Providing opportunities for non-commercial uses
values
29 Historical values Heritage values
30 Science and education Opportunities for scientific research
values
31 Employment Livelihood oportunities

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