Yes, Business Relies on Nature

SARAH GREEN: Welcome to the HBR IdeaCast from Harvard Business Review. I’m Sarah Green. I’m talking today with Mark Tercek, CEO of the Nature Conservancy and author of Nature’s Fortune, How Business and Society Thrive by Investing in Nature. Mark, thanks so much for joining us today.

MARK TERCEK: It’s great to be here.

SARAH GREEN: So Mark, before we dive into the book, you have a very interesting resume. Before becoming CEO of the Nature Conservancy, you were a managing director at Goldman Sachs. So why the big change, if I may ask?

MARK TERCEK: Well I had a great career at Golden Sachs, a very positive experience. I worked there for 24 years. I joined Goldman right after graduating from Harvard Business School. Two things happened. A lot of people are surprised that I’m an environmental organization leader today because in my background it probably doesn’t look like I’d end up here. I had a very urban upbringing. I grew up in the city of Cleveland, right in the city. It was a great place to grow up, but it wasn’t a place to really get introduced to the wonders of nature. So I’m a little bit of a late bloomer.

Two things happened. First, as parents, my wife Amy and I maybe because we were compensating for the fact that we didn’t spend as much time outdoors as kids as we thought we probably should have, in hindsight, we made a real effort to get our kids outdoors. First locally, then we even took some trips to places like Costa Rica and Belize and hung out with nature guides. And I think most people, if exposed to the wonders of nature, kind of fall in love with nature and become environmentalists. That’s what happened to me.

And then a second thing happened. As a business person, I’ve always been a believer that business can be a force for good. I know there are some bad actors out there, but broadly speaking, I’m very positive on capitalism and think business can be a good actor. And so I got very interested in how business could be a source for progress in the environmental movement.

And then, near the very end of my Goldman career, I had a mainstream career as an investment banker and then as a leader of investment banking units. Near the very end of my career, I was thinking about leaving the firm. Our CEO at the time, Hank Paulson, who is a committed environmentalist himself, he said Mark, instead of leaving Goldman Sachs, why don’t you build an environmental effort for Goldman Sachs?

So I did that for a few years. That confirmed my point of view that business and the environment had a lot to do together. And so I decided to kind of go whole hog and I was very fortunate to be named the CEO of the Nature Conservancy in mid-2008.

SARAH GREEN: It’s interesting and I’d like to talk a little bit more on the focus on businesses because that is something that I think a lot of people in the United States are trying to do, especially in the United States. And I have heard some business people say things like the government sets the rules and we just play by them. And if they change the rules on an environmental policy, we’ll change what we’re doing. But they don’t necessarily see that this is something that they’re going to buy into voluntarily.

At the same time, I’ve heard leaders, usually in other countries, say things like HBR is not covering this enough. It is the signature business issue of our age. So I’m getting very different impressions from people inside the United States and people outside the United States. So can you talk a little bit about how you hope to create a sense of urgency and get more of those business people in the United States to really buy into this?

MARK TERCEK: Yeah. That’s a great group of questions you’ve asked there. I’d like to talk about all of them. Business really relies on nature. You can think of the nature as a capital asset. Now our accounting is off. This asset doesn’t show up on the books, but it ought to. And that’s an argument we make in the book. And the argument is if you invest in nature, you can achieve very high returns. And business leaders can show the way.

One of the last chapters in the book is called something like “The Business Case for Nature” and it talks about our experience with Dow Chemical. So Dow Chemical’s CEO is Andrew Liveris. He is one of these leaders, in my view, who understands that leadership comes with a lot of responsibility. He was familiar with my argument, the natural capital argument, and so he challenged me.

He said, OK Mark, why don’t you put together a group of your scientists, I’ll put a group of our engineers together with your scientists. We’ll figure out how Dow depends on nature. If it depends on nature we’ll determine what that asset value is. If that assets in jeopardy because of environmental degradation, we’ll figure out what we can do about it. And let’s try to figure this out.

So now this won’t happen overnight. The project is a five year project, but we’re learning really exciting things. And we’re sharing everything we learn as we go. A lot of people are critical of environmental organizations when they partner with companies like Dow and they’re not wrong. We should be very careful about how we do this.

So we’re publishing everything in peer reviewed science journals. If we make mistakes, and perhaps we will, we’ll want that brought to our attention. But what we really hope is we’ll show that there’s an opportunity for business here to make smart investments, improve their overall bottom line or shareholder value. And the great thing about business is good ideas are replicated fast so I hope this is a way to really scale up environmental progress.

SARAH GREEN: So it seems like part of the challenge to move forward is setting some priorities because you’ve got this whole network of different environmental organizations, some are preserving wildlife and wildlife refuges, others are focused entirely on climate change, some are focused on waste management. So what are the key priorities because it’s a basic tenant of project management or change management that you can’t change everything all at once?

MARK TERCEK: Yes.

SARAH GREEN: So what are the key priorities you would like to see people really focusing on?

MARK TERCEK: Right. There are an enormous number of environmental challenges. The good news is we have an enormous number of really worthy, very good environmental organizations, many of whom have different strategies. I think that’s a good thing. I think all of us in the environmental movement should be a little bit humble about our own strategy. We should respect one another’s strategies and we should steal what works the best.

At the Nature Conservancy, we’re a little bit bigger than everybody else. We’ve really grown tremendously over the last 60 years. We have some financial clout. We have a double A credit rating. We issue our own bonds. We have a knack for doing deals. We’ve had a knack for doing business with strange bedfellows, if you will. We’re pretty good at getting folks who don’t think of themselves as environmentalists interested in the practical reasons to be environmental supporters and then taking it from there.

So today, given the size of the environmental challenges we face, at the Nature Conservancy, and speaking personally, we want to broaden support for protecting the environment. We need more people on our side. So all environmentalists have done a very good job preaching to the choir, if you will. And we love our choir. These are the passionate, generous people who have allowed the environmental business to grow and to accomplish everything we’ve already accomplished. So those are great people, but there aren’t enough of them. And there aren’t enough financial resources.

So in the book, I make the argument let’s also think about the practical reasons to invest in nature. And as we talk about it that way, there’s a change in dialogue. So sometimes environmentalists make the mistake of saying you should do this or you shouldn’t do that and it’s not that well received. People don’t like being told what they should or shouldn’t do.

But when you talk about opportunities in nature as an investment opportunity, your dialogue changes. And you put yourself in the other person’s shoes as an environmentalist. And you say OK, what are you trying to obtain? And here’s how nature might provide it for you. I think it’s a healthier dialogue. I think you can get more people on our side and it can also bring more financial resources. The private sector is one great place to build those alliances, but ultimately, we can use the same kind of arguments and persuasiveness with our government leaders around the world.

SARAH GREEN: And can you give a couple of examples of what that might look like an action?

MARK TERCEK: Yeah. All your listeners will all remember the financial crisis well and they’ll all remember President Obama’s Stimulus Plan. Not everybody likes it, but you’ll remember in the Stimulus Plan they were looking for shovel ready jobs. So the Nature Conservancy got some funding for the shovel ready job of rebuilding oyster reefs in the Gulf. It’s really a good thing that we did this work.

So before the BP oil spill, we demonstrated for $1 million we can build a one mile of oyster reef in the Gulf. Now the Gulf region needs sea walls. They need protection from storms and they need to reduce beach erosion. So the old fashioned way to do that would be to build a man-made infrastructure. Now we have really solid evidence that for a $1 million, about the same cost, you can build an oyster reef. It’s just as good at protecting from storms and reducing erosion. There’s no deficiency there.

But unlike the mandate wall, the natural seawall, the oyster reef well, it doesn’t depreciate over time. It holds its value. It might even appreciate in value. So it has financial advantages. And then it has all the co-benefits that a man-made seawall does not have. Obviously, an oyster reef is habitat for oysters. That’s good for the local fishing community. The oysters also clean the water. Oyster shells ultimately crumble. The shells wash to the shoreline and nourish the beach. The oyster reef also provides habitat for other fish and birds. And so there are these win-win-wins.

Now why is that so important? Well we now have that evidence, so the Restore Act, the case of the government doing the right thing. Environmentalists all worked hard together to push for the Restore Act and the outcome is as follows. The BP oil fines will largely be reinvested in restoring the Gulf ecosystem. And now the government will have the evidence that rather than build seawalls, restore oyster reefs, build oyster reefs. And have the benefits of the man-made seawall, but also have all the eco benefits that go with that. That’s exciting progress, in my view.

SARAH GREEN: As an oyster lover, it is also exciting in my view.

MARK TERCEK: Great.

SARAH GREEN: So just to wrap up, let’s assume that people who’ve made it this far in the podcast have bought in to your argument. They’re ready to take action. They tend to be senior executives in their firms to listen to the podcast. So talk a little bit to those people and let them know how they can get started.

MARK TERCEK: Let’s start with the CEOs who pay attention to the Harvard Business Review. I think every CEO who is forward thinking ought to think about his or her business. How does it interact with nature? How does it depends on nature? And I think the CEO ought to be personally involved. This is important stuff. And it’s important to signal the organization that you’re taking this opportunity very seriously.

I would encourage a CEO to look around his team and see who in the commercial ranks has some interest in this and create a team of people to brainstorm about this. Begin to think about it, but then reach out to the external community to learn more. I did this at Goldman Sachs when I became the firm’s environmental guy. I didn’t really know that much about the environmental NGOs. I reached out to organizations like the Nature Conservancy, where I am today, but also the World Resources Institute, the Wildlife Conservation Society. Resources for the Future.

My colleagues and I at Goldman Sachs were blown away by how much we learned from these environmental leaders. And I think the environmental leaders learned from us too. It was a great dialogue. But we came out of that with a bunch of really good ideas about how the business of Goldman Sachs intersected with nature and how we might harness our business capabilities to do the right thing for the environment as well and also improve our business.

And a bunch of things happened from that. Those kinds of initiatives– I remember at the time we always paid attention at the firm to recruiting and our standing on business school campuses. Suddenly, we were more highly regarded than ever before. So we did some surveys to find out what happened. And students were really excited to learn about Goldman Sachs’ environmental initiatives.

The same kind of thing happened with the high net worth customers of Goldman Sachs. There were all kinds of paybacks that come from this. But my advice is the CEO should take it seriously. The CEO should form a team of commercial leaders to brainstorm with him or her about this. They should reach out to environmental organizations like the Nature Conservancy, but there are many other good ones too. And you should come up with a plan that makes sense.

Once you’ve got a plan, you should tell people what you’re doing. You should resist bragging because you might make some mistakes and bragging is never well-received. You should be open to criticism.

Again, at Goldman Sachs there was a guy named Mike Brune. Today he runs the Sierra Club, but then he ran the Rainforest Action Network. The Rainforest Action Network was campaigning against financial institutions. Once they had a little protest in front of Goldman Sachs, which at the time I thought was a little bit annoying, to be honest. But we always learned a lot from our dialogue with Mike. He’s a serious guy. He’s smart. His input to Goldman Sachs was very helpful.

So have a dialogue, form a team, the CEO should be engaged. Ultimately, you need someone in charge. When Hank asked me to lead the environmental effort for Goldman Sachs, I said why me? I don’t really know what I’m doing. And he said well, you’re a quick learner. You can figure out the environmental stuff and get the help you need, but I want somebody who has a commercial standing at the firm so that the firm understands these are commercial based initiatives, not philanthropic or corporate social responsibility.

Those would be some of my ideas.

SARAH GREEN: Well, Mark, that’s great advice. Thank you so much for talking with us today.

MARK TERCEK: Thank you very much.

SARAH GREEN: That was Mark Tercek, CEO of the Nature Conservancy. The book is Nature’s Fortune. For more, visit hbr.org.