Biodiversity and Ethical Business

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Location of the Inambari Hydro Project
Map taken from The Economist - November 19th, 2009

On joint initiative of Presidents Alan Garcia (Peru) and Luis Inacio Lula da Silva (Brazil), negotiations are underway for the construction of six hydroelectric power plants in the Peruvian Amazon. The power plants would supply a total 6,000 Mw, 80% of which would go to the neighboring country Brazil (see e.g., The Economist, "Messing around with dams", 19 Nov. 2009)..

The first selected project is located on the Inambari River - at the confluence of three regions - Madre de Dios, Cuzco and Puno. It is estimated to cost US$4 billion and to supply 2,000 MW. The Inambari dam would be the largest in Peru and the fifth largest in Latin America in terms of generation of energy. Lead by the state-run energy giant Eletrobras, a consortium of Brazilian companies called EGASUR has received preliminary concession for preparing feasibility studies. By March 2010, it is still unclear how the social and environmental impacts would be dealt with. At present, it is estimated that the project would involve the flooding of an area of 46,000 hectares of rainforest, inhabited by approximately 10.000 people and by a rich flora and fauna.

It is well recognized that biodiversity loss is an urgent challenge for a sustainable development. For instance, the Millenium Ecosystem Assessment (2005) has shown that securing the provision of ecosystem services plays a major role for fighting poverty , the TEEB initiative demonstrates the value of ecosystems and biodiversity to the economy and society , and the Copenhagen Accord (December 2009) has confirmed halting deforestation and forest degradation as an important pillar for fighting climate change . As will become clear for the Inambari case, the corporate sector interacts strongly with biodiversity, both through the benefits it derives from its resources and services and through the biodiversity impacts of business operations.

Several international initiatives are investigating ways to improve business valuation of biodiversity. For instance, the Corporate Ecosystem Services Review (World Resources Institute, 2009) provides a methodology for corporate managers to proactively develop strategies for managing business risks and opportunities arising from their company’s dependence and impact on ecosystems. In a complementary approach, the present study shows how an ethical analysis can contribute to a more comprehensive understanding and better integration of biodiversity into business decisions. The Inambari project serves as a timely and relevant show case.

After presenting the context (Section 2), we introduce the main business actor and explain why we decided to focus our analysis at this stage on the company’s choice of which type of Environmental Impact Assessment (EIA) to deliver (Section 3). The analysis then first determines the choice of EIA that is in the company’s prima facie business interest (Section 4) and in continuation provides an ethical analysis that systematically identifies the potential ethical issues pertaining to that choice (Section 5). We argue that unethical dimensions of the decision may not be enough considered and think that this may entail a risk for an escalating controversy between the company and its stakeholders. Although we still need to gather more evidence, based on our investigations on recent developments in Peru (Chapter 6), we suspect that 1) EGASUR may have chosen an EIA that is in its prima facie business interests without enough consciousness of its unethical dimensions and 2) that the failure to proactively analyze, communicate, and tackle ethical issues may cause increasing difficulties for the company.

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A view of the Inambari landscape
District of San Gaban, Puno region.