International Symposium 2011Introducing the WBCSD Guide to Corporate

Ecosystem Valuation James Griffiths, Tokyo, 17th February 2011

1. World Business Council for Sustainable Development (WBCSD)

2. Biodiversity & Ecosystem Services – implications for business

3. Introduce the Guide to Corporate Ecosystem Valuation (CEV) Improving corporate decision-making

through valuing ecosystem services

Agenda

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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 Business leadership

Policy development

Best Practice

Global Outreach

1. What is the World Business Council for Sustainable Development (WBCSD)?

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WBCSD members collectively account for: 15 million employees; 7 USD trillion annual revenues; 5 USD trillion market capitalization (2009)

WBCSD - member companies from Japan

Executive Committee (WBCSD Board)• Masataka Shimizu, TEPCO (Vice Chair) • Fujio Cho, Toyota Motor Corporation• Dr Shoichiro Toyoda (Honorary Committee)Focus Area Core Teams (Policy Boards) Development – Toyota Motor Corporation Energy & Climate – TEPCO Ecosystems – Hitachi (Hiroaki Nakanishi, Co-Chair) Business Role – Sony CorporationBut also in major projects:Vision 2050, Mobility, Cement Sustainability Initiative, Tire Industry Project, Eco Patents Commons, Electrical UtilitiesAnd many WBCSD publications are in Japanese

Active leadership by Japan members

Why ecosystems at WBCSD?

Ecological balance is one of the three pillars of Sustainable Development

All businesses depend and impact on ecosystems and their services – either as part of their core operations or through their value chain

Why ecosystems at WBCSD?

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

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Co-chairs:

Storm protection systemA playground

Ecosystem services

• The benefits society and business obtain from ecosystems

• The “goods and services of nature”

Biodiversity • The variability among living organisms– Within species & populations– Between species– Between ecosystems

Ecosystem • A dynamic complex of plant, animal, and micro-organism communities and the non-living environment interacting as a functional unit

How can business “deal” with biodiversity?

ProvisioningGoods or products produced by ecosystems

RegulatingNatural processes regulated by ecosystems

CulturalNon-material benefits obtained from ecosystems

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SupportingFunctions that maintain all other services

Types of ecosystem services

Businesses impact on ecosystems and ecosystem services

Businesses rely and depend on ecosystems and ecosystem services

Ecosystem change creates business risks and

opportunities

The business case for action on ecosystems is based on…

The global public policy agenda on biodiversity and ecosystem services – implications for business

Agenda item 2

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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)

Drivers of ecosystem degradation – by 2050

Population size (7 billion now, reaching 9-10 billion people) Per capita income (growing 2-4 times) Land conversion (converting 10-20% of additional grassland and

forestland) Overexploitation incl. overfishing (increasing pressure) Invasive alien species (continuing spread) Reactive nitrogen flow (increasing by another 66% – already doubled

during the past 50 years) Climate change (continuing global warming – expected to become the

predominant global cause of ecosystem degradation and ecosystem service loss)

The Economics of Ecosystems and Biodiversity (TEEB) has changed the “value” of nature

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Urgent strategic priorities:Halt deforestation and forest degradationProtect tropical coral reefsSave and restore global fisheriesRecognize link between ecosystem degradation and the persistence of rural poverty

Policy solutions:Rewarding benefits through payments and marketsReforming environmentally harmful subsidiesAdding value through protected areasInvesting in ecological infrastructure

€ 1.35 trillion minimum estimate of annual natural capital loss, just from deforestation

US$ 3.7 trillion (NPV) avoided GHG emissions from conserving forests (by 2020)

US$ 190 billion p.a. contribution of insect pollination to agriculture output

Up to 50 % of the US$ 640 billion pharmaeucitical markets derived from genetic resources

Cost of ecological degradation in China in 2008 calculated at US$ 197 billion, up 75 % since 2004

Markets/payments for ecosystem services - growth estimates 2008/20 Certified agriculture – US$ 40 billion to US$ 210 billion

Certified forest products – US$ 5 billon to US$ 15 billion

Payments for watershed management (voluntary) – US$ 5 million to US$ 2 billion

Mandatory biodiversity offsets – from US$ 3.4 billion to US$ 10 billion

Source: TEEB, Forest Trends, China Environment Academy

The value of ecosystems and ecosystem services

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New Strategic Plan approved by 179 parties “Aichi” targets for biodiversity by 2020

Increase land Protected Area to 17%; marine to 10 %

Halve rate of habitat lost including forests

Nagoya Protocol on Access & Benefit Sharing Governments stewardship over genetic resources and traditional

knowledge in situ reconfirmed

New obligations - “Prior and informed” consultation and “Mutually Agreed Terms” for benefit sharing with resource owners, including Indigenous Peoples

Intergovernmental Platform on Biodiversity and Ecosystems Services (IPBES)

Convention on Biological Diversity COP 10, October 2010, Nagoya – key outcomes (1/2)

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TEEB – final reports delivered Valuation of biodiversity and ecosystems endorsed as an enhanced

public policy tool

Positive business decision – a solution provider International dialogue hosted by WBCSD, IUCN and Nippon

Keidanren (October 26th) - formal business day at next COP 11

Encouraged establishment of Business & Biodiversity platforms e.g. Japan Business & Biodiversity platform

Biodiversity offsets noted as an option for incorporating biodiversity and ecosystems into company operations

Precautionary principle on GM technology cont…

De facto moratorium on geo-engineering adopted

CBD COP 10, October 2010, Nagoya – key outcomes (2/2)

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CBD parties will adjust National Biodiversity Strategies for new targets and commitments by COP 11, in New Delhi, Oct 2012 – requested to consult business on: Impacts on biodiversity, ecosystems and ecosystem services

Policy frameworks to support sustainable use

Removal harmful subsidies & introduction of positive incentives

Ecosystem valuation as an enhanced public policy tool but also anticipate uptake by finance sector and major business –to-business

customers to help manage biodiversity and ecosystem risks of investments and supply chains

ABS Protocol new obligations and costs for pharmaceutical and parts of the food additives,

personal care and chemicals industries

IPBES – more frequent global assessments & data

COP 10 Business implications

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UNFCCC - Forests & Climate

Kyoto Protocol significantly under leveraged forests and sustainable forest management as climate change mitigation and adaptation options

Bali COP 13 introduced the concept of payments to developing countries for reducing emissions from deforestation and degradation (REDD) Fungible market for carbon sequestration services

Linked to global price of carbon and any increase in forest carbon storage

Limited to developing countries (non Annex 1)

From REDD to REDD + = global payments for BES “experiment”

Subsequent formal and informal processes further developed consensus on the scope, framework, finance and implementation

Expanded concept to REDD + to support forest conservation and sustainable management of forests and enhancement of forest carbon stocks REDD + Partnership launched May 2009 (Norway/Indonesia co-

chairs)

World Bank (FIP, FCPF) & UN REDD working on early implementation

Bilateral ODA investments with a REDD + focus (e.g. UK/Ghana)

Ongoing voluntary market innovation on forest carbon offsets

The Forests Dialogue (TFD) multi-stakeholder process developed REDD + recommendations based on 10 policy & field dialogues

UNFCCC, Cancun COP 16 (December 2010)

Cancun Decision strong focus on role of forests as mitigation & adaptation strategies in developing countries

Section C, LCA WG decision + Annex 1 on safeguards + Annex II SBSTA work program Reducing emissions from deforestation & forest degradation +

conservation & enhancement of forest carbon stocks + sustainable management of forests in developing countries

Preparation of National level strategy/action plans including

National forests/emissions reference level

Safeguards and national policy change

Addressing external drivers , land tenure and effective involvement of Indigenous Peoples and local communities

SBSTA work program elements

Mobilization of finance to support these decisions

Anticipate significant changes in Government policy and regulation of business

Impacts on biodiversity

Access to and use of ecosystem services – fresh water availability & quality are “leading edge” ecosystem provisioning and regulating service challenges

Measurement, valuation, accounting, verification & reporting on impacts, use & management

Stakeholders expectations about impacts and use levels – from customers, investors, governance boards, communities & employees

Smart companies with material ecosystem “footprints” need to be proactive:

Introducing the WBCSD Guide to Corporate Ecosystems Valuation (CEV) Improving corporate decision-

making through valuing ecosystem services

Agenda item 3 – the business response

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1. Measure, manage and mitigate risks and impacts

2. Improve decision-making by undertaking corporate ecosystem valuation to quantify business risks and opportunities

3. Innovate and help develop new markets for ecosystem services and eco-efficient goods, services & technologies

4. Encourage suppliers & purchasers to adopt best practices

5. Enter into local partnerships to address on-the-ground issues

6. Promote “smart” ecosystem regulation that leverages market forces and business solutions that halt degradation and “levels the playing field” for all

How can business respond to their biodiversity and ecosystems issues?

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WBCSD develops practical decision-making tools to help business deal with the dynamic sustainable development agenda……including

Structured method to develop strategies to manage risks and opportunities arising from impact and dependence on ecosystems

WRI/ WBCSD/ Meridian Institute

Approx. 300 companies using tool since March 2008 launch

Available in Japanese (& more)

Corporate Ecosystem Services Review (ESR) guidelines

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ESR helps companies assess ecosystem impacts and dependence priorities and develop response strategies

Outline strategies for minimizing risks and maximizing opportunities through:

• Internal changes• Sector or stakeholder engagement• Policy-maker engagement

Develop strategies

Key activity

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

Step

Helps focus on opportunities

$ 4.5 billion saving

$ 150 million income from selling wetland credits

Can help revalue ecosystem assets and identify new revenue streams

Introducing the WBCSD Guide to Corporate Ecosystem Valuation (CEV)

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CEV Partners:

OUT in April incl Japanese

translation

CEV developed based on road testing by these 15 companies

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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

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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

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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

1. Manage risk – operational, regulatory, reputational, market/product & financing

2. Achieve cost efficiencies – save costs, reduce taxes, sustain revenues

3. 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!!

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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

• Main focus = ecosystem services– Includes underpinning biodiversity

• Some coverage of wider ‘environmental externalities’– E.g. non-traded carbon and NOx impacts

• Broader socio-economic impacts excluded– E.g. jobs, taxes, expenditures etc

CEV guide - what is covered?

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Hierarchy of valuation approaches

41Source: P. ten Brink as cited in TEEB – an interim report (2008)

Selected Ecosystem Valuation Concepts and Issues Ecosystem Services and

Total Economic Valuation

Other related CEV concepts and issues

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)

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Selection & Application of Ecosystem Valuation Techniques for CEV The main categories of ecosystem valuation techniques available

E.g. Revealed preference techniques, market prices, substitute prices, travel cost method, Willingness To Pay, benefit (value) transfer

Selecting the most suitable techniques Incl. table comparing techniques incl. data required,

time / budget, skills required, (dis)advantages

Applying the techniques Incl. steps for how to use: Effect on production, replacement costs, stated

preference surveys and benefit (value) transfer

Approaches for valuing other environmental externalities E.g. Carbon related greenhouse gas (GHG) externalities, water quality related

environmental externality impacts

References (incl. databases)

Additional notes B (will be available on web from April)

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Compare the societal costs of atmospheric emissions for three alternative chemicals used in paper production – AkzoNobel

Assess community costs and benefits of maintaining higher water levels in the canals and reservoirs associated with several hydropower facilities – EDP

Evaluate the ecosystem services impacts and dependencies relating to an existing oil operation and to a new development in a sensitive area near a national park – Eni

Evaluate the cultural services associated with tourism at a conservation area associated with a pumped storage scheme – Eskom

Assess the value of ecosystem services provided under several catchment management options – GHD / SA Water

Evaluate the costs associated with carbon emissions for alternative manufacturing processes for multi-layer CCL (Copper-Clad Laminates) used in electronic products – Hitachi Chemical

Inform a rehabilitation plan for proposed extensions to a sand and gravel pit, and examine the net value of ecosystem services under several alternative scenarios – Holcim

CEV road test examples (1/2)

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Inform land management planning for reclamation of a quarry – Lafarge

Map and value water dependencies among major water users in a South African watershed – Mondi

Highlight differences in the processes used to estimate compensation values for past projects – Repsol

Assess the financial and social costs and benefits of conserving areas of rainforest as part of a policy of Net Positive Impact (NPI) on biodiversity – Rio Tinto

Assess the value of natural pollination, and the value of providing habitat buffer strips for native bees – Syngenta

Quantify physical ecosystem benefits realized through the process of matching undervalued or waste materials from one company with the needs of another – US BCSD / Houston By-Product Synergy

Assess the financial and ecological benefits associated with replacing a storm-water management system with a constructed wetland – US BCSD / CCP

Prioritize water use and land management options relating to biofuel production in an ecologically and culturally important location – Veolia Environment

Assess the economic value of ecosystem services produced under different management scenarios for forested land – Weyerhaeuser

CEV road test examples (2/2)

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Highlights financial & societal values of ecosystems and ecosystem services

Makes decision making around ecosystems more tangible, practical, compelling and impactful

Has internal and external applications

Conforms to best international practice

Based on extensive applied experience

Monetary values not always required

Is just one input to decision-making that can be linked to other business tools and planning processes

Concluding remarks on CEV

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CBD parties to adjust National Biodiversity Strategies for new targets and commitments by 2012 – will consult business on: Impacts on biodiversity

Policy frameworks to support sustainable use

Removal harmful subsidies & intro positive incentives

WBCSD Guide “operationalizing” the TEEB framework at the corporate level

CBD, TEEB and CEV

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1. Measure, manage and mitigate impacts and dependence; proactively address risks and explore opportunities

2. Improve decision-making by undertaking corporate ecosystem valuation to quantify business risks and opportunities

3. Innovate and help develop new:– Markets for ecosystem services

– Eco-efficient goods, services & technologies

4. Encourage suppliers & purchasers to adopt best practices

5. Enter into creative partnerships with municipalities and governments, NGOs, scientific community, sectors associations to address on-the-ground issues

6. Promote “smart” ecosystem regulation that reverses degradation, leverages markets/business solutions & “levels the playing field”

CEV can enhance the business response to biodiversity and ecosystem service challenges

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Thank you for your attentionwww.wbcsd.org

griffiths@wbcsd.org