In 2008, the World Resources Institute (WRI), World Business Council for Sustainable Development (WBCSD), and Meridian Institute developed The Corporate Ecosystem Services Review (ESR) to provide corporate managers with a proactive approach to making the connection between ecosystem change and their business goals. The ESR is a tool for corporate strategy and can augment existing environmental management systems. WBCSD member companies Akzo Nobel, Rio Tinto, Mondi, BC Hydro, and Syngenta road-tested the ESR and provided feedback during its development. The ESR has been used by an estimated 300 firms.
This is the NYC Catskills. It is also a water filtration plant for the residents of New York City, providing them with clean drinking water. New York City’s tap water has never passed through a filtration plant. The Catskill/Delaware watershed provides NY city and surrounding areas with 90 percent of their water supply (an average 1.3 billion gallons of drinking water per day) - filtered naturally through the ecosystem’s wetlands and waterways. In the late 1980s when the watershed was severely degraded by development, NYC considered building a filtration plant. Instead of building a US$6–8 billion plant (doesn’t include operating costs) as initially proposed, however, they decided to spend $1.5 billion to restore and conserve the Catskill Mountains watershed. This example highlights how economic and financial incentives can be aligned with goals that support both development and ecosystems. In the case of the Catskill/Delaware watershed, the payment for the natural water purification services also provides other services - carbon storage and recreational and cultural services at no additional cost.
U.S. federal law mandates that developers who destroy wetlands must replace them by purchasing credits or shares in wetland mitigation banks—typically located in the same watershed—to offset ecological damage. Recognizing an opportunity, ChevronTexaco received approval in 2005 to convert a tapped-out drilling site in Louisiana into a 2,800-hectare wetland to generate credits for the U.S. wetland mitigation banking market. At an expected market price of $50,000 to $62,000 per hectare, the company could earn more than $150 million selling the credits to developers. Source: Kenny, A. “Chevron Opens Mitigation Bank in Paradis(e).” Katoomba Group. Available at: http://ecosystemmarketplace.com/pages/article.news.php?component_id=4255&component_version_id=6132&language_id=12
Stage 1 – Scoping: This stage helps a company define the scope for the valuation exercise, using a checklist of questions. Only brief responses are required, and the process may involve numerous iterations. Stage 2 – Planning: This stage develops a suitable plan to undertake the valuation effectively. The plan should be more specific in terms of detail as compared to stage 1. Stage 3 – Valuation: This stage involves the actual valuation, which may be qualitative, quantitative and/or monetary. It begins by fully defining the company aspect to be valued, and ends up with subjecting the results to a sensitivity analysis. Stage 4 – Application: This stage involves companies using and communicating the valuation results to influence internal and external decision-making. Stage 5 – Embedding: The final stage is to embed the CEV approach within company processes and procedures.
Outlining the business response and actions that can be taken to better understand ones impact and dependence on ecosystems and their services, as well as reduce risks and engage new opportunities. The list also captures the main areas of work of the WBCSD Ecosystems Focus Area.
International Symposium 2011 Introducing the WBCSD Guide to Corporate Ecosystem Valuation James Griffiths, Tokyo, 17 th February 2011
Global CEO-led coalition of some 200 international companies, from 35 countries and 22 sectors, with a shared commitment to sustainable development – economic growth, ecological balance and social progress
Support the business license to operate, innovate and grow in a world increasingly shaped by sustainable development issues
1. What is the World Business Council for Sustainable Development (WBCSD)?
WBCSD members collectively account for: 15 million employees; 7 USD trillion annual revenues; 5 USD trillion market capitalization (2009)
Ecosystem degradation can undermine the business license to operate by posing significant risks to companies, their suppliers, customers and investors
Eco-efficient goods, services & technologies and sustainable ecosystem management and service use represent new business opportunities and markets
WBCSD member company “policy board” on ecosystems Co-chairs:
How can business “deal” with biodiversity? Storm protection system A playground Ecosystem services
The benefits society and business obtain from ecosystems
The “goods and services of nature”
The variability among living organisms
Within species & populations
A dynamic complex of plant, animal, and micro-organism communities and the non-living environment interacting as a functional unit
Types of ecosystem services Provisioning Goods or products produced by ecosystems Regulating Natural processes regulated by ecosystems Cultural Non-material benefits obtained from ecosystems Supporting Functions that maintain all other services
Ecosystem change creates business risks and opportunities The business case for action on ecosystems is based on… Businesses impact on ecosystems and ecosystem services Businesses rely and depend on ecosystems and ecosystem services
The global public policy agenda on biodiversity and ecosystem services – implications for business
Agenda item 2
Introducing the Millennium Ecosystem Assessment (MA) 2001-04 Photo courtesy of USDA NRCS Largest assessment of health of ecosystems ever undertaken Scientifically credible and politically legitimate source of information Photo courtesy of USDA NRCS Photo courtesy of USDA NRCS Photo courtesy of USDA NRCS 1,360 experts from 95 countries over 4 years Partnership of UN agencies, five conventions, business, and NGOs VNU <www.vnu.com> Examined links between ecosystems and human well-being World Resources Institute
Ecosystems balance sheet – 60 % are being degraded (MA 2005)
ESR helps companies assess ecosystem impacts and dependence priorities and develop response strategies Key activity Step
Outline strategies for minimizing risks and maximizing opportunities through:
Sector or stakeholder engagement
Develop strategies Identify and evaluate business risks and opportunities that might arise due to the trends in these priority ecosystem services Identify business risks and opportunities Research and evaluate conditions and trends in the priority ecosystem services, and drivers of these trends Analyze trends in priority services Systematically evaluate the degree of a company’s dependence and impact on 20+ ecosystem services Identify priority ecosystem services Choose boundary within which to conduct ESR Select the scope
Helps focus on opportunities $ 4.5 billion saving
Can help revalue ecosystem assets and identify new revenue streams $ 150 million income from selling wetland credits
Introducing the WBCSD Guide to Corporate Ecosystem Valuation (CEV) CEV Partners: OUT in April incl Japanese translation
CEV developed based on road testing by these 15 companies
Provide a framework and step by step approach to ecosystem valuation which is relevant to companies by:
Explicitly accounting for the full value of ecosystem impacts and inputs, including costs associated with ecosystem loss (next step after ESR)
Linking ecosystem service risks and opportunities more directly to the bottom line
Providing clarity, consistency and guidance in approaches and techniques used
Facilitating more objective decision-making to that better align financial, ecological and societal benefits
Objectives of CEV
Pre screening – do you even need to conduct a CEV exercise
How “material” are your impacts & dependence?
How will valuation help?
5 steps to undertake a CEV exercise 5) 5) Embedding embed the CEV approach within company processes & procedures Post valuation 4) 4) Application use & communicate valuation results to influence internal & external decision-making Valuation 3) Valuation 3) Valuation actual valuation: may be qualitative, quantitative and/or monetary 2) Planning 2) Planning develop suitable plan to undertake valuation effectively Preparation 1) Scoping 1) Scoping define scope for valuation exercise, using checklist of questions
Achieve cost efficiencies – save costs, reduce taxes, sustain revenues
Develop new business opportunities- revalue your natural assets, identify new revenue streams, explore new products and markets
Why conduct a CEV? To improve business decision-making around ecosystems!!
Applications of CEV within a business What business decision is needed? How can CEV help? What is the best option from a range of alternatives? Trade-off analysis What is the true total value of a landholding or natural asset? Total valuation Which stakeholders are affected by different company impacts, and by how much? Distributional analysis Which stakeholders deserve compensation and how much? Sustainable financing and compensation analysis
E.g. Cumulative effects, discounting, environmental thresholds, intrinsic values…
Business approaches that CEV can be linked to
E.g. Financial accounting, full (environ-mental) cost accounting , economic cost-benefit analysis, company reporting, environmental management systems, environmental and Social Impact Assessment, Ecosystem Services Review, Life Cycle Analysis
Additional notes A (will be available on web from April)