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1
Making the business case:
classic challenges and new horizons
Ian Gambles
(Director, Forestry Commission England)
(Autho...
2
What I’ll be talking about
• A few key forest facts
• Old problems
• New horizons
• Staying relevant
• Questions and dis...
3
Forest facts
• Forestry Commission manages the public
forest estate in England on behalf of the
Secretary of State
• 250...
4
Classic challenges
• Selection of familiar problems
– Important issues in their own right
– Raise wider questions of rel...
5
Negative NPV
6
Negative NPV?
7
Negative NPVs – key points
• Some things just have to be done
• Never appraise against a static
background
• Non-monetar...
8
Future costs - predictable
9
Future costs - unpredictable
10
Future costs – hard to quantify
11
Future costs – key points
• Business case must consider:
– Operating costs
– Decommissioning costs
– Risk-adjusted futu...
12
Decision momentum
13
Decision momentum
14
Decision momentum – key points
• Sometimes the business case is irrelevant
to the main decision
• Shun the post hoc bus...
15
Casting about for relevance?
• Are we wasting our time?
• Is decision making in reality so irrational
that all our rigo...
16
New horizons – Natural Capital
17
What is natural capital?
• Natural capital refers to the elements of
nature that produce value to people, such
as the s...
18
Stocks, flows and benefits
19
This is no longer a sideshow
• Natural Capital Committee – independent
advisor to Government
• Office of National Stati...
20
Role of Environmental Accounts
• To quantify the value of benefits flowing from
the natural capital that we have in ord...
21
Impact on the business case
• Challenges the definition of capital
• Gives structure to a vast category of
non-monetary...
22
NCC example: where to plant woods
• Hypothesis: 250,000ha of
new woodland in GB
• Scenario A: chosen to
optimise market...
23
NCC example: where to plant woods
• Hypothesis: 250,000ha of
new woodland in GB
• Scenario B: chosen to
optimise social...
24
A rather different decision!
25
Piloting PES in the public forest
• How much should the Public Forest Estate cost?
• By investing in our natural capita...
26
Staying relevant
• The business case is a tool for decision
makers
• Analysing the impacts of decisions matters
– even ...
27
Sources
• The following sources are acknowledged.
Anyone wishing to reproduce text or images from
these sources is resp...
This presentation was delivered
at an APM event
To find out more about
upcoming events please visit our
website www.apm.or...
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Making the business case: classic challenges and new horizons

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Business case challenges, with reference to the Forestry Commission and other examples, new business case horizons, and the enduring role of the business case.

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Making the business case: classic challenges and new horizons

  1. 1. 1 Making the business case: classic challenges and new horizons Ian Gambles (Director, Forestry Commission England) (Author, “Making the Business Case”)
  2. 2. 2 What I’ll be talking about • A few key forest facts • Old problems • New horizons • Staying relevant • Questions and discussion
  3. 3. 3 Forest facts • Forestry Commission manages the public forest estate in England on behalf of the Secretary of State • 250,000 hectares - 2% of the land area • More than 25% SSSI • 40 million visitors each year • Cost to taxpayer c.£20m • Timber and visitor income c.£50m
  4. 4. 4 Classic challenges • Selection of familiar problems – Important issues in their own right – Raise wider questions of relevance • Negative NPV • Future costs • Decision momentum
  5. 5. 5 Negative NPV
  6. 6. 6 Negative NPV?
  7. 7. 7 Negative NPVs – key points • Some things just have to be done • Never appraise against a static background • Non-monetary benefits can outweigh a negative NPV – eg social capital • To ignore or to manipulate – is that the question?
  8. 8. 8 Future costs - predictable
  9. 9. 9 Future costs - unpredictable
  10. 10. 10 Future costs – hard to quantify
  11. 11. 11 Future costs – key points • Business case must consider: – Operating costs – Decommissioning costs – Risk-adjusted future costs • Neglecting future costs will: – Pass costs on to future years or generations – Restrict the choices of future decision makers • But should they change the decision?
  12. 12. 12 Decision momentum
  13. 13. 13 Decision momentum
  14. 14. 14 Decision momentum – key points • Sometimes the business case is irrelevant to the main decision • Shun the post hoc business case • Find the decision not yet made and the factors which can and should shape it • But does that push the business case into the margins?
  15. 15. 15 Casting about for relevance? • Are we wasting our time? • Is decision making in reality so irrational that all our rigorous calculations are beside the point? We must continually strive for relevance, innovate, and reflect changing ideas
  16. 16. 16 New horizons – Natural Capital
  17. 17. 17 What is natural capital? • Natural capital refers to the elements of nature that produce value to people, such as the stock of forests, water, land, minerals and oceans. • These benefit us in many ways, by providing us with food, clean air, wildlife, energy, wood, recreation and protection from hazards.
  18. 18. 18 Stocks, flows and benefits
  19. 19. 19 This is no longer a sideshow • Natural Capital Committee – independent advisor to Government • Office of National Statistics - Roadmap for development of Natural Capital Accounts published December 2012 • Defra - formal environmental accounts to be complete before 2020. • United Nations - the UN System of Environmental-Economic Accounting (SEEA) sets the relevant International Standard • Increasing relevance in corporate reporting
  20. 20. 20 Role of Environmental Accounts • To quantify the value of benefits flowing from the natural capital that we have in order to inform and prioritise investment in its protection and enhancement • To extend economic accounts to include environmental considerations, specifically to include depletion of non market natural capital assets (and to quantify any expenditure needed for maintenance and/or restoration).
  21. 21. 21 Impact on the business case • Challenges the definition of capital • Gives structure to a vast category of non-monetary benefits • Helps to identify future costs • Provides a language for factors which will – and should – increasingly influence decisions
  22. 22. 22 NCC example: where to plant woods • Hypothesis: 250,000ha of new woodland in GB • Scenario A: chosen to optimise market values only • Annual cost to taxpayer: £134m • Non-market benefits: £68m • So annual net social value = (£66m)
  23. 23. 23 NCC example: where to plant woods • Hypothesis: 250,000ha of new woodland in GB • Scenario B: chosen to optimise social value • Annual cost to taxpayer: £287m • Non-market benefits: £833m • So annual net social value = £546m
  24. 24. 24 A rather different decision!
  25. 25. 25 Piloting PES in the public forest • How much should the Public Forest Estate cost? • By investing in our natural capital, we generate many ecosystem services. Just a few examples: – Restoring Ancient Woodland – Creating and maintaining Open Habitat – Promoting biodiversity and species conservation – Providing community woodland – Improving water quality and mitigating floods • These services produce benefits, but not income. Indeed they can displace income generating activity. • Do they belong in a business case? Who should pay for them?
  26. 26. 26 Staying relevant • The business case is a tool for decision makers • Analysing the impacts of decisions matters – even if actual decisions differ • If a factor is important to decision makers, and to the economy and society within which they operate, it belongs in the business case • Keep your tools sharp!
  27. 27. 27 Sources • The following sources are acknowledged. Anyone wishing to reproduce text or images from these sources is responsible for checking and respecting copyright: – Slides 5, 8, 9, 13 – Forestry Commission – Slide 6 – Library of Birmingham – Slide 10 – Guardian News and Media Ltd – Slide 12 – Scottish Parliamentary Corporate Body – Slides 16-18, 22-24 – Natural Capital Committee
  28. 28. This presentation was delivered at an APM event To find out more about upcoming events please visit our website www.apm.org.uk/events

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