Full Document Text
Guide to Corporate Ecosystem Valuation
A framework for
improving corporate
decision-making
About the World Business
Council for Sustainable
Development (WBCSD)
The WBCSD is a CEO-led, global coalition of some 200 companies advocating
for progress on sustainable development. Its mission is to be a catalyst
for innovation and sustainable growth in a world where resources are
increasingly limited. The Council provides a platform for companies to
share experiences and best practices on sustainable development issues
and advocate for their implementation, working with governments, non-
governmental and intergovernmental organizations. The membership
has annual revenues of USD 7 trillion, spans more than 35 countries and
represents 20 major industrial sectors. The Council also benefits from
a network of 60 national and regional business councils and partner
organizations, a majority of which are based in developing countries.
www.wbcsd.org
1
Boxes
1. Categories of ecosystem services
2. How valuable are ecosystem services?
3. Business decisions that CEV can help to make
4. How CEV can be used to evaluate business
risks and opportunities
5. The business benefits of undertaking CEV
6. Hierarchy of valuation approaches
7. Commonly-used ecosystem valuation
techniques
8. Stages of the CEV process
9. Key principles for CEV
10. Key supporting documents, guidelines
and databases
Figures
1. Business benefits of undertaking CEV
2. The five stages of CEV
3. The relationship between ecosystem services
and environmental externalities
4. Business benefits of undertaking CEV
5. Links between business sectors and
ecosystem service values
6. Screening questions for CEV
7. The five stages of CEV
Tables
1. Generic applications of CEV in business
decision-making
2. The scoping checklist
3 Contents of the plan
4. Valuation steps
5. Emphasis of steps depending on generic
application of valuation
6. Overview of strategic elements to consider
7. Linking CEV results with company analytic
approaches – internal focus
8. Linking CEV results with company analytic
approaches – external focus
9. Communicating results – how and to whom
10. Overview of strategies for embedding CEV
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30
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30
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Contents
Foreword
Message from Road Testers
Executive Summary
Acronyms
Key definitions
Introduction
Overview of CEV “Road Tests”
2
3
4
8
9
10
15
Next Steps
Resources
Acknowledgements
References
70
71
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30
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34
43
46
59
66
Screening “Do you need to
undertake a CEV?”
Methodology
“How to conduct a CEV?”
Overview of the CEV stages
Stage 1 – Scoping
Stage 2 – Planning
Stage 3 – Valuation
Stage 4 – Application
Stage 5 – Embedding
Part 1
Part 2
2 Guide to Corporate Ecosystem Valuation - A framework for improving corporate decision-making
The World Business Council for Sustainable
Development (WBCSD) recognizes the value of
biodiversity, including ecosystems and the services
they deliver. Our leading companies understand,
for example, that freshwater is a critical input for
most, if not all, major industrial process, and that
pollination and pest regulation are essential for food
production. Unfortunately, biodiversity loss and
ecosystem degradation are continuing to escalate,
thereby putting business at risk. These risks are real,
but if managed properly, can be transformed into
new opportunities.
The Economics of Ecosystems and Biodiversity
study (TEEB) – initiated by the G8+5 environment
ministers (2007-2010) – has emphasized the concept
of ecosystem valuation as a practical and influential
aid to decision-making. Companies must anticipate
that ecosystem valuation will be more consistently
incorporated into public policies, regulations, and
political decisions. The UN Convention on Biological
Diversity (CBD) meeting held in Nagoya, Japan in
October 2010 agreed that countries should adapt their
National Biodiversity Strategies and Action Plans by
2012 to support implementation of the CBD’s new
2020 biodiversity targets and other commitments.
This will put strong demands on business to measure
and report their actions to conserve as well as
sustainably use and share the benefits of ecosystems
and biodiversity. Ecosystem values will be increasingly
considered by the finance sector and business-to-
business customers as they assess the biodiversity
and ecosystem-related risks and opportunities of
investments and supply chains.
In response to these challenges, WBCSD has
developed this Guide to Corporate Ecosystem
Valuation (CEV). I believe it will become one of
WBCSD’s flagship tools, along with the Global Water
Tool, the GHG Protocol and the Corporate Ecosystem
Services Review. I also believe it will help companies
proactively respond to the changing expectations of
key stakeholders – including communities, regulators,
shareholders, NGOs and the media – about how
business measures, values, manages and reports
their ecosystem and biodiversity impacts by providing
a practical approach for effective CEV application at
a company level.
I encourage all businesses, large and small, to use
this Guide and integrate ecosystem values in their
decision-making. I encourage all NGOs, academia
and experts to help companies along this road,
where much complexity and jargon can present
obstacles in this emerging field. Finally, I encourage
governments and municipalities to include business in
their discussions around ecosystem-related policy and
regulation.
I would like to thank our Ecosystems Focus Area
Core Team for demonstrating such leadership in this
exciting field; the Road Testers and Partners, without
whom the Guide would not have been so robust;
and especially ERM for leading the writing of
the Guide itself.
Foreword
Björn Stigson
President, WBCSD
3
Message from Road Testers
Mainstreaming ecosystem considerations into
business is becoming increasingly important in order
to deal with the challenges of a resource-constrained
world. This Guide to Corporate Ecosystem Valuation
(CEV) is a valuable addition to the toolkit used by
business today. It can be used in relation to business
operations as well as to suppliers, customers and
other stakeholders.
This Guide has enabled us to, for example, value
the benefits of ecosystem services, choose among
alternative land and water management options,
and determine new sources of revenue. It will help
businesses explore how to adapt their current
accounting and finance systems to better reflect the full
value of the ecosystems they impact and depend on.
We see that CEV can strengthen business performance
by considering social benefits, sustaining revenues,
reducing costs, revaluing company assets and
determining levels of liability and compensation.
We see the value of ecosystem valuation.
António Mexia
CEO, EDP - Energias
de Portugal
Brian Dames
CEO, Eskom
David Hathorn
CEO, Mondi
Tom Albanese
CEO, Rio Tinto
Andrew Mangan
Executive Director,
US BCSD
Ian Shepherd
CEO, GHD
Markus Akermann
CEO, Holcim
Bruno Lafont
Chairman and CEO,
Lafarge
Hans Wijers
CEO and Chairman of the Board
of Management, AkzoNobel
Michael Mack
CEO, Syngenta
Jean-Michel Herrewyn
CEO, Veolia Water
Dan Fulton
President and CEO,
Weyerhaeuser
Paolo Scaroni
CEO, Eni
Hiroaki Nakanishi
President and Representative
Executive Officer, Hitachi
4 Guide to Corporate Ecosystem Valuation - A framework for improving corporate decision-making
Executive Summary
What is Corporate Ecosystem Valuation?
Corporate Ecosystem Valuation (CEV) can be defined
as a process to make better-informed business
decisions by explicitly valuing both ecosystem
degradation and the provided by ecosystem
services. By including ecosystem values, the
company’s aim is to improve corporate performance
in relation to social and environmental goals and the
financial bottom-line. Valuation can make decision-
making around ecosystems more compelling and
practical, thereby enhancing sustainable development
strategies and outcomes.
Ecosystem services are the benefits people gain from
the environment and biodiversity (i.e. the benefits that
flow from natural capital). They include, among many
others, water, crops, timber, flood protection, waste
assimilation, carbon sequestration, recreation and
spiritual benefits. All businesses depend and impact
upon ecosystem services in some way.
The ability to factor ecosystem values into business
decision-making is becoming an ever-more pressing
need because:
There is increasing evidence that ongoing
ecosystem degradation has a material impact on
companies – undermining performance, profits,
their license to operate and access to new markets.1
New opportunities are emerging that are linked in
some way to restoring and managing ecosystems.
For example, according to WBCSD’s Vision 2050
project, sustainability-related global business
opportunities in natural resources may be in the
order of US$ 2-6 trillion per annum by 2050.
Communities, NGOs, customers, consumers and
shareholders are becoming increasingly conscious
of the interrelationship between business operations
and the state of ecosystems, and are demanding
that these issues are addressed, reported and
accounted for.
Meanwhile, in many parts of the world, the
regulatory and legal requirements for companies
to minimize and mitigate their ecosystem impacts,
and to fully compensate any damages caused, are
becoming more stringent.
Understanding one’s ecosystem impacts and
dependencies is of key importance to companies,
and CEV offers a “value-based” lens through which
associated environmental, social, economic and
financial issues can be quantified, and the complex
trade-offs between them compared.
CEV can be applied to any aspect related to a business,
such as a product, a service, a project, an asset or an
incident and generally falls within one of the following
four generic applications:
1. Calculate the change in value of ecosystem services
associated with trade-offs between alternative
scenarios and their related impacts;
2. Value the
3. Assess the distribution of ecosystem service costs
across different stakeholder groups;
4. Determine sources of revenues and compensation
packages relating to ecosystem service benefits and
losses to stakeholders.
What is the business case for CEV?
The underlying business case for undertaking CEV
is that it enables companies to improve decision-
making and thereby increase revenue, save costs and
boost the value of their assets and potentially share
prices. As highlighted in Figure 1, this is achieved
through managing a range of ecosystem risks and
opportunities both internally and externally.
An underlying benefit of all CEV studies is that
decision-making is improved by informing mindsets,
behavior and actions among stakeholders and
employees. For example, raising awareness of
The fourteen company road testers applied CEV to:
???Compare the societal costs of atmospheric emissions for three alternative chemicals used in paper production – ???????????? Assess financial
and societal 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 – ????????Evaluate the cultural services associated with tourism at a conservation area associated with a pumped storage
scheme – Eskom ?
5
ecosystem values can help when negotiating prices
and costs – e.g. accounting for ecosystem values
might justify price premiums on products.
This inclusion of ecosystem values can give rise to
, which in turn helps companies
comply with external requirements, demands and
actions. These benefits can, for example, assess levels
of liability and compensation; quantify environmental
performance to better measure company value; and
allow more complete disclosure of environmental
issues and activities to assist with reporting upon
performance.
In turn these can also result in
which
directly enhance business performance and the
bottom line; for example, by helping to sustain and
enhance revenues, to reduce costs and revalue assets.
The need for the Guide
The concept of ecosystem valuation is new to many
businesses, even though it has developed significantly
as a discipline over the past fifty or so years. It exists
widely within numerous legal frameworks, including
its application in the establishment of environmental
liability and compensation. This is not, however,
the only application of CEV, as the fourteen WBCSD
member company road testers have demonstrated.
Ecosystem valuation is a complex topic with extensive
jargon and rapidly evolving techniques. Although a
multitude of related guidelines already exist, none
cater directly for the needs of business. As companies
start to show an interest in CEV, it is therefore essential
to provide an approach that they can follow and rely
upon, that is accepted by planners and decision-
makers, and which has been developed through
a process of close collaboration with businesses
themselves. This is what this Guide to Corporate
Ecosystem Valuation aims to do.
? 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 ? Inform land management planning for reclamation of a quarry – Lafarge ?
Operational
Regulatory and legal
Reputational
Market and product
Financing
Improving decision-makin
g
(valuing economic, environmental
& social issues
)
Internal:
Enhancing business
performance and
the bottom line
External:
Complying with
and informing
external requirements,
demands and actions
Employee
s
Stakeholder
s
Ecosystem-related
business risks and
opportunities
Benefits of Corporate Ecosystem Valuation
Informing mindsets,
behaviors and action
s
Sustaining &
enhancing revenues
Reducing costs & taxes
Revaluing assets
Assessing liability
& compensation
Measuring
company value
Reporting performance
Optimizing societal
benefits
Figure 1: Business benefits of undertaking CEV
6 Guide to Corporate Ecosystem Valuation - A framework for improving corporate decision-making
What is in the CEV Guide?
The Guide is divided into two parts.
Part 1: Screening, or “Do you need to undertake a CEV?”
answers some of the key questions that businesses
might ask in relation to CEV: what it covers, how
they might benefit from using the process, and
what techniques and information are used. It also
helps companies ascertain whether or not they
need to conduct a CEV through a set of screening
questions.
Part 2: CEV Methodology, or “How to conduct a CEV?”
outlines a 5-stage process and a set of 12
principles for businesses to undertake CEV.
The CEV methodology presented in Part 2 consists of
five stages, as illustrated in Figure 2 and explained below.
The first two stages are necessary to prepare for the
main valuation stage, and the final two stages assist
in optimizing the results and embedding CEV into
existing company processes.
Figure 2: The five stages of CEV
Preparation
1
Scoping
2
Planning
3
Valuation
4
Application
5
Embedding
Post valuationValuation
1. Scoping: This stage helps companies identify
specific business goals and an appropriate
analytical context for CEV. This stage also facilitates
the preparation of terms of reference for ecosystem
valuation and helps build a strong internal case
for any CEV project to be undertaken.
2. Planning: In this stage, the Guide explains
how to elaborate a plan for the implementation
of ecosystem valuation. This plan includes
determining the internal and external resources
required to conduct a CEV and developing
a suitable timeline.
3. Valuation: The Guide identifies nine steps that are
typically followed when undertaking ecosystem
valuation, and describes each step to help
companies conduct such valuations, or assess
valuations they have previously commissioned.
4. Application: The Guide provides advice on how
companies can use and communicate their
ecosystem valuation results in order to influence
internal and external change.
5. Embedding: In the final stage, the Guide
gives suggestions on how to embed the CEV
approach within existing company processes and
procedures which address environmental issues.
The fourteen company road testers applied CEV to:
???Map and value water dependencies among major water users in a South African watershed – Mondi ???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????
7
The valuation stage (stage 3) has been developed in
line with a typical Environmental and Social Impact
Assessment (ESIA) process. However, CEV can readily
link with many other existing company processes and
analytical techniques. For example, CEV can easily
be integrated into full cost accounting, life cycle
assessments, land management plans, economic
impact assessments, company reporting, and
sustainability appraisals, to name just a few.
However, before embarking on CEV, companies
should have a good understanding of the risks and
opportunities they face in relation to their ecosystem
impacts and dependencies. A reliable methodology
for this is the Corporate Ecosystem Services Review
(ESR), developed by the World Resources Institute
(WRI), the WBCSD and Meridian Institute.
It should also be noted that ecosystem valuation
should be “fit for purpose” – it does not need to
be highly accurate and expensive to undertake. A
number of valuation tools are being developed to
assist ecosystem valuation, but most are still in a
development stage and require a degree of technical
skill to use.
Ecosystem Valuation is coming –
are you ready for it?
The Economics of Ecosystems and Biodiversity
study (TEEB) – initiated by the G8+5 environment
ministers (2007-2010) – has emphasized the concept
of ecosystem valuation as a practical and influential
aid to decision-making. Companies must anticipate
that ecosystem valuation will be more consistently
incorporated into public policies, regulations,
and political decisions. Ecosystem values will be
increasingly considered by the finance sector and
business-to-business customers as they assess
the biodiversity and ecosystem-related risks and
opportunities of investments and supply chains.
In this respect, this Guide to Corporate Ecosystem
Valuation “operationalizes” TEEB’s key messages
and recommendations by providing a practical
approach for effective application at the company
level. There is, however, still work to be done and
areas that need improvement; for example, the
availability of ecosystem service values in databases,
standardization of values and valuation techniques,
and the development of more robust and user-friendly
valuation tools.
?? 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 Environnement? ?? Assess the economic value of ecosystem services produced under different management
scenarios for forested land – Weyerhaeuser???
8 Guide to Corporate Ecosystem Valuation - A framework for improving corporate decision-making
BAU Business as Usual
BCR Benefit Cost Ratio
BPS By Product Synergy
CCP Cook Composites and Polymers
CEV Corporate Ecosystem Valuation
EMS Environmental Management System
ES Ecosystem Services
ESIA Environmental and Social Impact Assessment
ESR Corporate Ecosystem Services Review
GDP Gross Domestic Product
GHG Greenhouse Gas
GIS Geographic Information System
IUCN International Union for Conservation of Nature
LCA Life Cycle Assessment
MCA Multi-Criteria Analysis
MA Millennium Ecosystem Assessment
NGO Non-Governmental Organization
NPV Net Present Value
OEE Other Environmental Externalities
SA Water South Australian Water
SMART Specific, Measurable, Attainable, Relevant and Time-bound
TEEB The Economics of Ecosystems and Biodiversity
TEV Total Economic Value
UNPRI United Nations Principles for Responsible Investment
US BCSD United States Business Council for Sustainable Development
VOC Volatile Organic Carbons
WBCSD World Business Council for Sustainable Development
WRI World Resources Institute
WTP Willingness to Pay
Acronyms
9
Key definitions
Biodiversity The variability among living organisms within species, between species,
and between ecosystems.
Business aspect A product, service, project, asset or incident associated with a business.
Corporate Ecosystem
Valuation (CEV)
A process to make better-informed business decisions by explicitly
valuing both ecosystem degradation and the benefits provided by
ecosystem services.
Ecosystem A dynamic complex of plant, animal and micro-organism communities
and their non living environment, interacting as a functional unit (MA,
2005). They make up the environment around us and are effectively
habitats for example, coral reefs, forests, grasslands, rivers, farmland and
urban parks, that support various species.
Ecosystem services The direct and indirect contributions of ecosystems to human well-
being. The concept “ecosystem goods and services” is synonymous with
ecosystem services. They include provisioning services such as crops, fish,
freshwater and timber; regulating services, such as climate regulation
through trees sequestering carbon; and cultural services such as tourism
and spiritual benefits.
Externality A consequence of an action that affects someone other than the agent
undertaking that action, and for which the agent is neither compensated
nor penalized through the markets. Externalities can be either positive or
negative.
Environmental externality Environmental externalities include externalities to ecosystems and
ecosystem services, but they also include impacts upon people, buildings
and infrastructure and other economic activities (e.g. from air emissions).
No net loss “No net loss” means that on balance the loss of biodiversity or ecosystem
services are at least matched by the gain elsewhere.
Non-use value The value individuals derive from knowing that environmental features
are maintained (e.g. pristine habitats and iconic species) even though
they do not directly or indirectly use them.
Offset (as in biodiversity
offset)
Sustainable conservation actions intended to compensate for the
residual, unavoidable harm to biodiversity caused by development
projects, so as to aspire to no net loss in biodiversity.
Other environmental
externalities (OEE)
For the purposes of this Guide, these are defined as “non-ecosystem
service-related environmental externalities”. They include externality
values associated with carbon and other air emissions, which comprise
impact upon health and buildings, etc.
Scenario In this document, “scenario” and “option” are used interchangeably.
Part 2Part 1
Key definitions
10 Guide to Corporate Ecosystem Valuation - A framework for improving corporate decision-making
Introduction
What is Corporate Ecosystem Valuation?
Corporate Ecosystem Valuation (CEV) can be
defined as a process to make better-informed
business decisions by explicitly valuing both
ecosystem degradation and the
provided by ecosystem services. By including
ecosystem values, the company’s aim is to
improve corporate performance in relation to
social and environmental goals and the financial
bottom-line. Valuation can make decision-
making around ecosystems more compelling
and practical, thereby enhancing sustainable
development strategies and outcomes.
How do businesses depend and impact on
ecosystem services?
It is important to take a step back and to consider
why CEV is necessary – how, exactly, are ecosystem
services linked to business performance? The simple
answer is that almost all businesses are directly or
indirectly linked to the status and functioning of
natural ecosystems. How ecosystem services are used
by businesses, and how business activities affect the
provision of ecosystem services, have a significant
potential bearing on corporate performance,
particularly if externalities are taken into account.
According to the Millennium Ecosystem Assessment
(MA), there are four basic categories of ecosystem
services: provisioning, regulating, cultural and
supporting services – see Box 1 below. Together,
these generate not only products and raw materials,
but also the primary productivity and vital life-support
services that are critical to human wellbeing and to
the functioning of the economy.
Box 1: Categories of ecosystem services
Provisioning services
Products or goods such
as water, fish & timber.
Regulating services
Ecosystem functions
such as flood control
& climate regulation.
Cultural services
Non-material benefits such
as recreational, aesthetic
& spiritual benefits.
Supporting services
Fundamental processes such as nutrient cycling & photosynthesis
that support the other three categories.
Source: Based on WRI materials.
11
The first and most important thing to recognize is
that all businesses depend upon, and in some way
impact, the ecosystem services that are provided by
the natural ecosystems and biodiversity that make up
planet Earth.
Water, for instance, is a critical input for most, if not
all, major industrial processes. The pharmaceutical
industry benefits from nature’s genetic resources.
Agribusiness and the food sector depend on nature’s
pollination, pest control, water, and erosion regulation
services. Forest industries – and downstream
construction, communications and packaging sectors
– rely on continued supplies of timber and wood fiber.
All extractive industries inevitably cause some level
of ecosystem disturbance, while tourism increasingly
builds on nature’s cultural services and aesthetic
values. All building owners and plant operators
benefit from the natural hazard protections that
some ecosystems provide. In fact, it is hard to think
of any economic activity that does not benefit from
ecosystem services, or in some way impact the natural
ecosystems around it.
However, very little is known about the actual
value of these services for business, or the specific
opportunities that they present in business terms.
Such values have not, conventionally, formed a part
of business planning and financial analysis.
What are the business consequences
of ecosystem degradation?
Valuable services are being compromised because
of the severe ecosystem degradation that has been
taking place across the globe. The MA found that 60%
of the world’s ecosystem services have been degraded
over the past 50 years.2 Land use change, resource
overexploitation, pollution, invasive species and
climate change have all undermined the functioning
of natural ecosystems.3 These changes are being
exacerbated further through factors such as rapid
population growth and escalating consumption.
Ecosystem degradation presents a real, and
increasingly pressing, risk to business operations.
A number of global initiatives have highlighted these
issues over recent years, and are beginning to shed
light on the value of ecosystem services and the cost
of their degradation and loss (Box 2). Information
is starting to come to light which underlines the
financial and economic consequences of ecosystem
degradation and loss. This affects businesses and
impacts on corporate profits, production and market
opportunities. The clear message to business is
that the status and functioning of ecosystems is not
just a biological or ecological concern. It has major
implications for economic growth, human wellbeing
and business performance.
Through deforestation alone, the world loses ecosystem
services worth between US$ 2-5 trillion each year.4
The global carbon market grew from virtually nothing
in 2004 to over US$ 140 billion in 2009.5
The current global biodiversity offset market is worth a
minimum US$ 3 billion and is expected to grow rapidly.6
Sustainability-related global business opportunities in
natural resources may be in the order of US$ 2-6 trillion
by 2050.7
The cost of global environmental externalities was nearly
US$ 7 trillion (11% of the value of the global economy)
in 2008, with the largest 3,000 companies causing
around 35% of them.8
55% of corporate executives believe biodiversity should
be among the top ten items on the corporate agenda, and
59% believe biodiversity is more of an opportunity than
a risk for their companies.9
Box 2: How valuable are ecosystem services?
Part 2Part 1
Introduction
12 Guide to Corporate Ecosystem Valuation - A framework for improving corporate decision-making
Various reports and studies – such as The Economics
of Ecosystems and Biodiversity (TEEB) report – now
reveal that the costs of ecosystem degradation
are immense. We are, for example, losing US$ 2-5
trillion of ecosystem services each year just from
deforestation, and the costs to the global economy
associated with environmental externalities are
estimated at nearly US$ 7 trillion per year.
Meanwhile, ecosystem services are also presenting
a growing number of opportunities to build and
strengthen businesses. The international market in
biodiversity offsets is, for example, now worth a few
billion dollars, while global trade in carbon is worth
over a hundred billion dollars a year, and sustainable
natural resource-based business opportunities are
counted in trillions of dollars.
The overriding consensus is that an essential part of
the solution for a more sustainable planet is to take
better account of the true value of nature’s wealth.
At the same time, new market-based mechanisms
that can capture these values need to be developed,
as well as the smart regulation that reflects them.
Why Corporate Ecosystem Valuation?
Clearly, understanding ecosystem service
dependencies and impacts is of key importance
to almost all companies – if only we had the tools
to measure these values and integrate them into
business decision-making. CEV is targeted specifically
at meeting these challenges. It provides a process to
explicitly value and account for ecosystem costs and
benefits in business decision-making.
The business benefit of using CEV is that it offers
a “value-based” lens through which associated
environmental, social, economic and financial
issues can be quantified, and the complex trade-offs
between them compared. It often achieves this by
converting ecosystem dependencies and impacts into
a single (and influential) metric – money. However,
even if money is not always used in a CEV, the
quantitative assessment a CEV study provides will be
valuable input into any decision-making process. It
generates information in a form that can be integrated
with other aspects of business decision-making.
As illustrated in Box 3, CEV can potentially assist
companies address a wide range of decision-making
issues and topics more effectively.
?? How significant are environmental risks from our
operations?
?? Which capital investment scheme provides the best
combination of financial and societal outcome?
?? What is the best mitigation measure that will avoid us
incurring disproportionate costs?
?? What are the best long term economic uses of our land
holdings?
??How much should we pay stakeholders to change their
behavior to save us incurring major capital investments?
?? How can we convince regulators to change policies in
order to improve management of natural resources that
our business depends on?
?? What potential revenues could we make from emerging
environmental markets such as carbon, water and
biodiversity?
?? Which stakeholders should we compensate and at
what price?
Box 3: Business decisions that CEV can help to make
13
The ability to factor ecosystem values into business
decision-making is becoming an ever-more pressing
need because:
There is increasing evidence that ongoing
ecosystem degradation has a material impact on
companies – undermining performance, profits,
their license to operate and access to new markets.10
New opportunities are emerging that are linked in
some way to restoring and managing ecosystems.
For example, according to WBCSD’s Vision 2050
project, sustainability-related global business
opportunities in natural resources may be in the
order of US$ 2-6 trillion per annum by 2050.
Communities, NGOs, customers, consumers and
shareholders are becoming increasingly conscious
of the interrelationship between business operations
and the state of ecosystems, and are demanding
that these issues are addressed, reported and
accounted for.
Meanwhile, in many parts of the world, the
regulatory and legal requirements for companies
to minimize and mitigate their ecosystem impacts,
and to fully compensate any damages caused,
are becoming more stringent.
All of these changing circumstances point to the
conclusion that the time has come to find ways of
integrating ecosystem values into business decision-
making. CEV provides companies with a strategic
advantage, because it offers a process for dealing
with these external and internal demands. It allows
businesses to recognize, manage and capture the
value of ecosystem service risks and opportunities
through understanding more fully the nature and
magnitude of the values, and incorporating those
values within business decisions.
Why the Guide?
The concept of ecosystem valuation is new to many
businesses. With it comes a myriad of new jargon
and approaches, and concerns over the implications
of potential applications (and misapplications) for
businesses. CEV is a process which is just emerging as
a part of business planning.
As companies start to show an interest in CEV, it
is essential to provide an approach that they can
follow and rely upon, that is widely accepted
by planners and decision-makers, and has been
developed through a process of close collaboration
with businesses themselves. This is what this Guide to
Corporate Ecosystem Valuation aims to do.
Objectives of the Guide
This Guide explains how CEV can be used to improve
corporate performance and decision-making. The
aim is to provide a consistent and robust ecosystem
valuation framework for business managers, to link
corporate ecosystem service risks and opportunities
more directly to the company bottom-line.
In addition, the Guide will:
Explain the basic concepts around ecosystem
valuation;
Outline business case arguments to support CEV;
Assist businesses to determine whether or not to
undertake a CEV;
Present a 5-stage methodology for
undertaking CEV;
Provide a set of valuation principles to follow;
Illustrate the range of potential CEV applications
using the road testers;
Provide useful hints drawing upon the experience
of road testers;
Highlight how companies can incorporate CEV
results;
Offer guidance on embedding CEV within
company systems.
Part 2Part 1
Introduction
14 Guide to Corporate Ecosystem Valuation - A framework for improving corporate decision-making
What the Guide covers
The Guide outlines four generic applications for CEV
that can help to answer a range of business decisions:
1. Calculate the change in value of ecosystem services
associated with trade-offs between alternative
scenarios and their related impacts;
2. Value the
;
3. Assess the distribution of ecosystem service costs
across different stakeholder groups;
4. Determine sources of revenues and compensation
packages relating to ecosystem service benefits
and losses to stakeholders.
The focus of the Guide is upon valuing ecosystem
services. This includes ecosystem services which
have a clear market price (such as timber, fish or
crops), those for which market prices are emerging
(for example, carbon) as well as those which do
or “Do you need to undertake a CEV?”
answers some of the key questions that
businesses might ask in relation to CEV: what it
covers, how they might benefit from using the
process, and what techniques and information
are used. It also helps companies ascertain
whether or not they need to conduct a CEV
through a set of screening questions.
Part 1: Screening
Structure of the Guide
The Guide is divided into two parts.
Part 2: Methodology
or “How to conduct a CEV?”
outlines a 5-stage process and a set of 12
principles for businesses to undertake CEV.
not currently have either a clear market or price but
where this might change in the future (for example,
watershed protection). In addition, the Guide provides
some guidance on valuing “other environmental
externalities” (OEEs) which are important to business,
such as greenhouse gas (GHG) emissions and impacts
of other pollutants.
The Guide has been developed to apply to the
management of any business “aspect”, including
products, services, projects, processes, assets and
incidents. It features fifteen pilot studies (by fourteen
road testers, one of which carried out two studies)
which report upon how businesses have actually
“road tested” CEV. The Guide is relevant to all
business sectors, although the “road test” examples
are confined to applications from mining, oil and gas,
chemicals, manufacturing, forestry, paper, energy and
water sectors.
Part 2Part 1
15
Company
Secto
r
Count
ry
Case Summa
ry
CEV value adde
d
AkzoNobe
l
[AkzoNobel
Pulp & Paper
Chemicals (Eka
Chemicals)
]
Chemical
s
Global, head
-
quartered in
Europ
e
AkzoNobel compared the societal costs of atmospheric
emissions for three alternative chemicals used in paper
production. Benefit transfer was used to assess the value of
externalities caused by greenhouse gases, S
O
2,
N
O
X, VOC,
dust and ammonia released in the life cycle from cradle to
delive
ry at paper mill.
Sustaining & enhancing revenue
s – by assessing potential future regulato
ry
costs, AkzoNobel can inform supply chain decisions. The results can also
help manage reputational risks and opportunities so that the company
can maintain and add to its current customer base, and also demonstrate
company values supporting long term business.
ED
P [Energias
de Portugal
]
Energ
y
Portuga
l
EDP assessed private and social costs and benefits of
maintaining higher water levels in the canals and rese
rvoirs
associated with several hydropower facilities in a 7,200 ha
watershed. Ecosystem se
rvices assessed include recreational
uses, soil protection and water use (for consumption,
irrigation, etc.) among others.
Sustaining & enhancing revenue
s – EDP could add customers and charge an
appropriate price for energy by marketing the value of ecosystem se
rvices
generated through sound management of their water network
.
Assessing liability and compensatio
n – the valuation results will be useful for
future
renegotiation
of
mandato
ry
financial
liabilities
as
required
under
the
EU
Environmental Liability Directive.
En
i
Oil and ga
s
Ital
y
Eni evaluated the ecosystem se
rvices impacts and
dependencies relating to an existing oil operation and to a
new development in a sensitive area near a national park
.
Sustaining & enhancing revenue
s – Eni could maintain a license to operate
and identify potential new income streams from carbon sequestration and
ecotourism
.
Avoiding cost
s – Eni could avoid costs associated with project delays by
developing a good relationship with local authorities and stakeholders
.
Esko
m
[Eskom
Holdings
Limited
]
Energ
y
South Afric
a
Eskom evaluated the cultural se
rvices associated with
tourism (specifically birding) at the conse
rvation area
associated with their Ingula pumped storage scheme
.
Sustaining & enhancing revenue
s – Eskom could create an additional revenue
stream and local jobs to manage the conse
rvation area
.
Avoiding cost
s – costs associated with the management of a large
conse
rvation area could be avoided
.
GH
D
/ S
A
W
ate
r
[GHD and
South
Australia
W
ater
Corporation]
W
ater
Australi
a
SA
W
ater assessed the value of ecosystem se
rvices
provided under several catchment management options.
The ecosystem se
rvices evaluated included aesthetic and
recreational values, erosion reduction, carbon sequestration
and clean wate
r.
Saving cost
s – improved management of catchment areas reduces the
amount of treatment required prior to the distribution of water to customers
.
Optimizing societal benefit
s – the CEV helps make the case for investment
in catchment management activities which will benefit a large and diffuse
population that has been unde
rvalued in the past
.
Hitach
i
Chemica
l
[Hitachi
Chemical Co.
Ltd
]
Manufacturin
g
Japa
n
Hitachi Chemical evaluated the costs associated with
carbon emissions for alternative manufacturing processes
for multi-layer CCL (Copper-Clad Laminates) used in
electronic products
.
Avoiding cost
s – future costs could be avoided by managing C
O
2 emissions
and influencing internal behavio
r. The CEV helped to determine the
“switching point” at which the company would change decisions around
CO
2 management
.
Ove
rview of CEV “Road
Tests
”
Helpful hint
: f
o
u
r-
pa
ge
su
m
m
ar
ies
o
f e
ac
h o
f t
he
ro
a
d
te
st
er
s’
e
xp
er
ien
ce
s
a
re
a
va
ila
bl
e o
n
ww
w
.wbcsd.o
rg/
web/c
ev
.ht
m
Part 2Part 1
Overview of CEV “Road Tests“
16 Guide to Corporate Ecosystem Valuation - A framework for improving corporate decision-making
Company
Secto
r
Count
ry
Case Summa
ry
CEV value adde
d
Holci
m
[Aggregate
Industries UK,
(a subsidia
ry of
Holcim)]
Minin
g
UK
Aggregate Industries applied a CEV to better inform
the rehabilitation plan for proposed extensions to
a sand and gravel pit as part of the UK permitting
process. The study examined the value of ecosystem
se
rvices including wildlife habitat, flood control,
recreation and carbon sequestration, generated
for local communities and the wider region under
several alternative restoration scenarios, including
restoration of agricultural land and establishing a mix
of wetlands, as well as an artificial lake
.
Sustaining revenue
s – by enhancing relationships with authorities and
communities, Holcim hopes the CEV process will complement national
and regional biodiversity planning requirements, helping them develop
a holistic plan for new extraction sites
.
Optimizing societal benefit
s – by informing stakeholder negotiations,
it is hoped that the process of CEV will strengthen decision-making in
the process of compensation for damage, and by rehabilitating quar
ry
sites, particularly when there is disagreement among stakeholders
.
Lafarg
e
[Lafarge North
America Inc.
(LNA)]
Minin
g
US
A
Lafarge assessed the value of ecosystem se
rvices to
inform land management planning for reclamation
of a quar
ry in Presque Isle, Michigan. The se
rvices
evaluated included erosion regulation, water
purification and recreation/ecotourism
.
Saving cost
s and
optimizing societal benefits
– through better decision
-
making, the CEV results can be used to inform land management best
practice for mining and rehabilitation plans.
Mond
i
Pape
r
South Afric
a
The ESR identified freshwate
r, and the growing
water stress in the Mhlatuze catchment, as a critical
ecosystem se
rvice. Mondi used GIS-based analysis to
map land use and value water dependencies among
major water users in this South African catchment.
The results form a base for predicting future water
constraints and opportunities for forest plantations
and mills owned by the compan
y.
Resou
rce efficienc
y – collating valuable data sets into a GIS framework
for managing impacts and opportunities within constrained resou
rces
.
Sustaining revenue
s – reducing operational risk from potential water
shortages in the future.
Optimizing societal benefit
s – improving decision-making at local
and catchment level. The CEV will facilitate better coordination and
planning with other resou
rce users (municipal areas, farmers, etc.) to
address efficiency of use in the context of a constrained resou
rce
.
Ove
rview of CEV “Road
Tests
”
Helpful hint:
fo
u
r-
pa
ge
su
m
m
ar
ies
o
f e
ac
h o
f t
he
ro
a
d
te
st
er
s’
e
xp
er
ien
ce
s
a
re
a
va
ila
bl
e o
n
ww
w
.wbcsd.o
rg/
web/c
ev
.ht
m
17
Ri
o
Tint
o
Minin
g
Madagasca
r
Rio
Tinto assessed the financial and social costs and benefits
of conse
rving areas of rainforest as part of the company
’s
policy of Net Positive Impact (NPI) on biodiversity at an
operational level. Ecosystem se
rvices examined include
carbon sequestration, ecotourism, habitat conse
rvation and
hydrological regulation
.
Optimizing societal benefits and assessing compensatio
n – positive outcomes
are necessa
ry for local communities affected by operations or conse
rvation
activities
.
Sustaining busines
s – Rio
Tinto
’s access to resou
rces, capital and markets
is increasingly dependent on its reputation, its biodiversity record and
biodiversity policies, as well as its management practices
.
Enhancing revenue
s – Rio
Tinto could explore current and potential markets
for ecosystem se
rvices and biodiversity offsets to reduce costs of biodiversity
programs and to generate sustainable income streams for local communities
.
Fuller cost accountin
g – the company is working towards more transparent
and complete accounting of its use of, and investments in, natural capital.
As a large landholde
r, the company is exploring how to improve information
regarding the value of ecosystem se
rvices produced on its non operational
and operational landholdings
.
Syngent
a
Agricultur
e
US
A
Syngenta assessed the value of pollination se
rvices provided
by wild bees to blueber
ry farms in Michigan USA and the
value of providing habitat buffer strips for native bees.
Sustaining revenue
s – the results of the CEV accentuated the case for farmers
to invest in native bee habitat adjacent to farmland, in order to sustain
agricultural outputs.
US
BCS
D
/ BP
S
[US BCSD
- Houston
By-Product
Synergy
]
Manufacturin
g
US
A
Houston BPS utilized Eco-LCA, an ecological life cycle
assessment tool, to quantify physical ecosystem benefits
realized through the process of matching unde
rvalued
or waste materials from one company with the needs of
anothe
r. The value of ecosystem impacts and dependencies
was assessed for tires, asphalt, acetic acid, aluminum oxide,
and other materials
.
Sustaining revenue
s – CEV enables companies participating in a BPS scheme
to market the additional value of ecosystem se
rvices prese
rved to customers.
It also presents a more complete accounting for the benefits of BPS to
internal decision-makers.
US
BCS
D
/
CC
P
[US BCSD
- Cook
Composites
and Polymers
]
Manufacturin
g
US
A
Cook Composites assessed the financial and ecological
benefits associated with replacing the storm water
management system for a manufacturing facility in Houston
with a constructed wetland for on-site flood control and
water treatment
.
Sustaining revenue
s – CCP could maintain a social license to operate and a
good reputation with consumers and regulators
.
Saving cost
s – CCP could save costs associated with updating and
maintaining an aging storm water management system; potential additional
supply chain cost savings due to C
O
2 emission reductions
.
Veoli
a
Environnemen
t
W
ate
r
German
y
Veolia used CEV to help prioritize water use and land
management options for a pa
rcel of land owned by Berlin
W
asserbetriebe (BWB). Ecosystem se
rvices evaluated
included recreation and non-use values, biofuel production
and other crop production
.
Saving cost
s – the CEV results help to make the case for growing biofuels on
areas of the site, a scenario which would reduce the water company
’s tax and
maintenance costs
.
Sustain and enhance revenue
s – the results demonstrate the potential for
Veolia Environnement to capture additional revenue from water use and
visitors at sites they manage
.
W
eyerhaeuse
r
Timbe
r
USA,
Urugua
y
W
eyerhaeuser assessed the economic value of ecosystem
se
rvices produced under different management scenarios
for forested land owned by the compan
y. The scenarios
included different mixes of tree species, biofuel crops, and
other land uses
.
Sustain and enhance revenue
s – the CEV results may help
W
eyerhaeuser
capture new income streams by adjusting management regimes to take
advantage of markets for ecosystem se
rvices as they emerge
.
Part 2Part 1
Overview of CEV “Road Tests“
18 Guide to Corporate Ecosystem Valuation - A framework for improving corporate decision-making
The main focus is valuing ecosystem services
As the name suggests, CEV is focused on valuing
ecosystem services. This includes both the benefits
arising from their use or enjoyment, as well as the
costs and losses associated with their degradation.
CEV looks at the stocks and flows of ecosystem
services, as well as any changes to their quantity
and/or quality.
Biodiversity is not valued separately
Biodiversity is defined by the Convention on Biological
Diversity as “the variability among living organisms
from all sources”, including “diversity within species,
between species and of ecosystems”. Biodiversity is
therefore not an ecosystem service, but is rather an
attribute of the natural world. It underpins the supply
of all ecosystem services; greater biodiversity tends to
support a broader range of ecosystem services and
to enhance their productivity and resilience and, in
some cases, the presence of biodiversity enables or
stimulates certain ecosystem services (for example,
tourism and cultural values). The value associated
with the conservation of biodiversity commonly
goes under the title of “cultural service” through
recreational use value, and non-use values whereby
individuals may be willing to pay for the maintenance
of biodiversity, with no intended practical use.
How are environmental externalities dealt
with in CEV?
Environmental externalities are defined as any impact
on the environment that a company’s actions cause
(or that impact on a company as a result of others’
actions), that is not compensated (in the case of
a negative externality) or rewarded (in the case of
a positive externality). An example of a positive
environmental externality is when one landholder’s
investment in upper catchment conservation benefits
other downstream users. An example of a negative
externality is when the abstraction of water upstream
leaves insufficient flow or quality for human and
natural systems downstream.
The concept of externalities can apply to ecosystem
services when they do not have a market which would
enable this reward or compensation to be paid. In this
sense, a company’s impacts and dependencies on all
non-marketed ecosystem services are environmental
externalities, and can be assessed by CEV. However,
CEV also provides the means of including the
externalities associated with marketed ecosystem
services, but which would not normally be included in
a financial analysis – for example, because they occur
indirectly, they are felt at quite a distance off-site, or
accrue to stakeholders who are excluded from
a company’s calculations.
The following pages provide clarity on what the Guide covers,
and answer a number of questions which might be relevant
when considering whether or not to undertake a CEV.
Part 1: Screening
“Do you need to undertake a CEV?”
19
CEV covers both financial and societal values
Any financial values that are associated with
ecosystem services (for example, the purchase of
land, payments for water, sales of timber or trading
in carbon credits) should already be captured in
conventional business analysis techniques, in so far
as they affect the company’s bottom-line. The added
value of CEV is that it also measures the broader
economic or societal, marketed and non-marketed
values that are affected by a company’s dependencies
and impacts on ecosystem services (for example,
the loss of forest ecosystem services when timber
clear-felling takes place, or the improvements in
downstream water quality that result from cleaner
production). In other words, CEV measures the
broader positive and negative externalities associated
with a company’s effects on ecosystem services.
The results of CEV therefore lend themselves well
to feeding into both financial (from the viewpoint
of the company concerned) and economic (from
the viewpoint of society or the broader economy)
analyses.
CEV is based on the total economic value of
ecosystem services
Ecosystem services provide four categories of
economic value that make up the “Total Economic
Value” of an ecosystem:
Direct use values (timber, recreation or food, etc.);
Indirect use values (flood control, watershed
protection, etc.);
Option values (the “premium” placed on
maintaining ecosystem services for future possible
uses);
Non-use values (values gained without any physical
use of ecosystems).
These categories are broadly in line with the scheme
of provisioning services (direct use values), regulating
services (indirect use values) and cultural services
(non-use and direct use). In addition, it must be noted
that ecosystems and species have their own “intrinsic”
value, irrespective of human values. For more
information, please see the on-line resource notes
(www.wbcsd.org/web/cev.htm).
Part 2Part 1
Part 1: Screening “Do you need to undertake a CEV?“
In addition, a variety of “other environmental
externalities” (OEEs) that are not directly related
to ecosystem services, but that are relevant to
businesses, might sometimes be included in CEV.
These include, for example, the costs associated with
emissions such as greenhouse gases, NOX and SO2.
There are advantages in including OEEs into a CEV,
as they provide a more holistic perspective of the
company’s impacts, potentially resulting in more
sustainable decision-making.
Figure 3: The relationship between ecosystem services and environmental externalities
Ecosystem services
Environmental externalities
Marketed ecosystem services Non-marketed
ecosystem
services
Other
non-marketed
environmental
impacts
Impacts
accounted for
by business
Typically impacts (positive
or negative) occurring
on-site e.g. timber,
purchased water
Impacts
not accounted for
by business
Typically impacts
(positive or negative)
occurring off-site
e.g. fisheries
Unpriced water
Flood control
of wetlands
Spiritual enjoyment
Untraded
carbon emissions
Untraded
NOX emissions
20 Guide to Corporate Ecosystem Valuation - A framework for improving corporate decision-making
Ecosystem costs and benefits can be measured
in many different ways
The Guide is concerned with measuring ecosystem
dependencies and impacts in terms of economic
(societal) and financial values. The broader “economic
impacts” of business activities affect different groups
in different ways. Examples include gains and losses
in tax revenue, investment flow, jobs and foreign
exchange earnings. The measurement of these
economic indicators is not dealt with directly in this
Guide. This is because they represent a different way
of measuring the market-based values covered in
CEV, and are covered by other guidelines, such as
the WBCSD’s Measuring Impact Framework (2008).
Providing both types of information can be useful for
decision-making, as long as caveats are made with
respect to potential double-counting.
Operational risks relate to a company’s day-to-day
activities, expenditures and processes. CEV can be used
to inform operational risks along the whole value chain.
Similarly, companies can use CEV to investigate the risk
of paying more for ecosystem dependencies such as
water, and for environmental externalities. In terms of
operational opportunities, CEV can help improve
operational efficiencies and save costs, for example, by
finding lower-cost ways of securing clean water supplies
and flood control through maintaining ecosystems rather
than investing in expensive technological solutions.
Regulatory and legal risks include government
policies, laws, and court actions. CEV is commonly applied
to assess the value of environmental damage to inform
compensation payments. It is also used to inform risk
assessment and to prioritize when dealing with risks. In
terms of regulatory and legal opportunities, CEV can
be used to demonstrate the value of improving ecosystem
management policies, regulations and incentives to
stakeholders and regulators. For example, companies
dependent on ecosystem services, such as water or
storm protection, could benefit from more sustainable
catchment management practices.
Reputational risks affect a company’s brand, image,
“goodwill” and relationships with their customers and
other stakeholders. In some cases, CEV can help to
inform the assessment of reputational risks, if perceived
impacts to ecosystems are a cause of the problem.
Reputational opportunities could involve using CEV to
help justify implementing and communicating sustainable
purchasing, operating or investment practices in order to
differentiate corporate brands.
Market and product risks relate to product and
service offerings, consumer preferences, and other
market factors that affect corporate performance. CEV
can help to identify and evaluate products that rely on
resources with high environmental costs, or give rise
to pollutants with high externality costs. Market and
product opportunities include using CEV to identify
opportunities and to estimate potential new revenue
streams when participating in emerging environmental
markets.
Financing risks affect the cost and availability of capital
to companies. CEV can be used to identify cost-effective
“no net loss” scenarios for major developments. This
can help, for example, receive project finance loans
for complying with the ‘Equator Principles’ and the
underlying IFC biodiversity performance standards
or a bank’s own biodiversity policies. Financing
opportunities could potentially include companies
obtaining more favorable lending terms, or access to new
green funds. This could be facilitated through using CEV
to quantify, and systematically reduce, company impacts
to ecosystems services and negative environmental
externalities.
Box 4: How CEV can be used to evaluate business risks and opportunities
Which business risks and opportunities
can CEV evaluate?
The ESR identified five categories of business risks
and opportunities associated with the degradation
and enhancement of ecosystem services. As shown
in Box 4, CEV can help evaluate these risks and
opportunities by quantifying ecosystem service
impacts and dependencies in monetary terms. In
addition, the actual process of undertaking CEV
can also help to improve the degree to which
these risks and opportunities are managed, in
order to enhance business values.
21
There are many benefits to be gained from
undertaking CEV. Perhaps most importantly, it
enables companies to improve their decision-making
by pointing to ecosystem service-related risks and
opportunities that might not normally be included in
conventional approaches to planning and analysis.
The aim is to generate internal benefits by enhancing
business performance and the bottom-line, and also
help companies to comply with and inform external
requirements, demands and actions (Figure 4).
What are the business benefits
of undertaking CEV?
Operational
Regulatory and legal
Reputational
Market and product
Financing
Improving decision-makin
g
(valuing economic, environmental
& social issues
)
Internal:
Enhancing business
performance and
the bottom line
External:
Complying with
and informing
external requirements,
demands and actions
Employee
s
Stakeholder
s
Ecosystem-related
business risks and
opportunities
Benefits of Corporate Ecosystem Valuation
Informing mindsets,
behaviors and action
s
Sustaining &
enhancing revenues
Reducing costs & taxes
Revaluing assets
Assessing liability
& compensation
Measuring
company value
Reporting performance
Optimizing societal
benefits
Figure 4: Business benefits of undertaking CEV
In turn, a company using CEV would expect to
see these benefits manifested in concrete gains in
performance. As shown in Box 5, the application of
CEV aims to demonstrate ways of increasing revenue,
saving costs and boosting the value of assets and
potentially share prices, as well as improving company
reporting and accountability.
Part 2Part 1
Part 1: Screening “Do you need to undertake a CEV?“
22 Guide to Corporate Ecosystem Valuation - A framework for improving corporate decision-making
Box 5: The business benefits of undertaking CEV
Improving decision-making
A core underlying benefit of all CEV studies is that they
help to strengthen decision-making around a company’s
environmental impacts, use of natural resources,
profitability and equitability. They provide an additional
“value-based” lens that allows risk and opportunities to
be quantified, and complex trade-offs to be compared,
often using the single metric of money. CEV thus
contributes towards assessing sustainability, because it
allows economic, environmental and social issues to be
dealt with in terms of a common metric. In addition,
CEV provides a process which helps prioritize and add
urgency to important environmental issues, and can often
contribute positively towards building trust with external
stakeholders and regulators, as well as demonstrating
leadership in corporate sustainability issues.
Informing mindsets, behaviors and actions
In many cases, CEV benefits businesses because it informs
the mindsets, behavior and actions of company staff
and external stakeholders. For example, CEV will often
contribute towards raised awareness and increased
understanding concerning environmental issues, and
inform company staff, shareholders and consumers about
the true value of different ecosystem impacts and options.
The impact of these changes in attitude can be wide-
ranging – CEV results can, for instance, influence broader
company policy, and even inform government regulations
and policies. In addition, CEV can directly benefit business
because it provides information which can be used to
better negotiate costs and prices, both internally and
externally.
Sustaining and enhancing revenues
CEV can help to justify investing in natural capital as
a key input to production. Using CEV can also improve
a company’s reputation for sustainability, and help to
sustain future revenues through preferential access to
new raw materials. CEV can help to scope out and plan
for a company’s involvement in new ecosystem markets
and revenue streams (e.g. biodiversity offsets, carbon
credits and watershed payments). It can assist with setting
more appropriate prices (including “green premiums”)
that fully reflect ecosystem service values and/or reduced
externalities. CEV can also determine and verify the
environmental benefits associated with new products and
services such as new technologies and business solutions,
thereby helping to market and sell them.
Reducing costs and taxes
CEV can be used to demonstrate cost savings from
maintaining or creating ecosystems, for example, to
provide more cost-effective flood control and water
treatment than alternative technological measures.
It can be used to help to prioritize the use of limited
natural resources, such as water, within a catchment
area. CEV can also identify areas of focus when reducing
pollutants, such as modifying manufacturing processes,
to avoid increased costs from evolving environmental
markets (e.g. carbon and NOX). Companies may also be
eligible for reduced taxes for managing assets to generate
ecosystem services which yield broader social benefits.
Revaluing assets
CEV can allow companies to quantify the true value of the
natural assets that they own or have access to, through
determining the broader benefits they provide and
identifying ways to capture that value.
Assessing liability and compensation
As environmental regulation becomes ever-more
stringent, companies are facing an increasing array of
penalties, fines and compensation claims when their
operations damage ecosystems. CEV can help to inform
project appraisal and risk assessment to minimize such
threats, and gauge the cost of ecosystem damage if
claims are made against companies.
Measuring company value
CEV provides a means to quantify environmental
performance improvement and allow external sources to
factor this in their evaluation of company and theoretical
share values.
Reporting performance
CEV can help measure a company’s environmental
performance, and facilitate more complete reporting and
disclosure. CEV can also be used to indicate the value of
externalities or to form the basis of case studies outlining
how a company may lead the way in accounting for wider
environmental and social impacts.
CEV can help inform stakeholder negotiations and
strengthen the decision-making process by facilitating
better coordination and planning with other stakeholders.
CEV can be used to help select alternatives that provide
a net positive or maximum benefit to society.
23
CEV is relevant to almost all businesses, either directly
or indirectly. It is particularly important for companies
that depend or impact directly on ecosystem services
– the “biodiversity dependent”, “large footprint”,
“manufacturing” and “green enterprise” business
sectors illustrated in Figure 5. Such companies face
obvious risks and opportunities associated with
ecosystem services. However, even companies that do
not depend or impact directly on ecosystem services
How relevant is CEV to my business?
stand to benefit from the use of CEV. Financial service
organizations, for example, may fund or insure
companies with significant exposure to ecosystem
service risks and opportunities – and need to be able
to gauge ecosystem-related monetary impacts and
the probability that these might affect the company
bottom-line.
Part 2Part 1
Part 1: Screening “Do you need to undertake a CEV?“
Biodiversity
dependent
industries
(e.g. fishing,
agriculture, forestry)
Large ‘footprint‘
industries
(e.g. mining, oil and
gas, construction)
Manufacturing &
processing
(e.g. chemicals, ICT,
consumer products)
‘Green‘
enterprises
(e.g. organic
farming, ecotourism)
Financial services
(e.g. banking,
insurance &
other financial
intermediaries)
Key Ecosystem
Services DEPEND IMPACT DEPEND IMPACT DEPEND IMPACT DEPEND IMPACT DEPEND IMPACT
Provisioning
Food ? ? ? ? ? ? ? ?
Timber & fibers ? ? ? ? ? ? ? ? ?
Freshwater ? ? ? ? ? ? ? ? ?
Genetic /
Pharmaceutical
resources
? ? ? ? ? ? ?
Regulating
Climate & air quality
regulation ? ? ? ? ? ? ? ? ?
Water regulation
& purification ? ? ? ? ? ? ? ? ?
Pollination ? ? - ? ? ? ?
Natural hazard
regulation ? ? ? ? ? ? ?
Cultural
Recreation & tourism ? - ? - ? ? ? ?
Aesthetic / non-use
values ? - ? - ? ? ?
Spiritual values ? - ? - ? ? ?
? Moderate to Major relevance Minor relevance - Not relevant (typically)
Figure 5: Links between business sectors and ecosystem service values
Note: “Supporting services” are not included in this table as they are already captured within provisioning,
regulating and cultural services.
24 Guide to Corporate Ecosystem Valuation - A framework for improving corporate decision-making
What can CEV be used for?
There are four generic applications of CEV in business decision-making
(summarized in Table 1) which have, in turn, been used in different ways
by the CEV road testers. They can also be used in combination.
Table 1: Generic applications of CEV in business decision-making11
The most common application is known as trade-off
analysis. This can be used to value ecosystem changes
associated with single company aspects (such as
a project or an oil spill) or to compare outcomes
from alternative options (for example, in capital
expenditure investment analyses). CEV is used to value
and compare the trade-offs between different impacts
(e.g. relating to carbon, water, food, biodiversity,
landscape, etc.). All road testers drew upon this
application.
An alternative application, known as total valuation,
uses CEV to estimate the full range of values
associated with an ecosystem. This can be used to
determine the total value of natural assets and land
owned by a company or others. In this case, CEV
involves measuring the annual flow of different
ecosystem services, and converting them into an
aggregated monetary value.
The two remaining applications are often undertaken
in conjunction with one of the applications described
above, and are commonly applied together.
Distributional analysis identifies the winners and
losers from a particular course of action that results
in a change in the supply of ecosystem services.
It can be applied to a specific company aspect, or
more generally to land and activities over a wider area.
The fourth application is referred to as sustainable
. It identifies the
sources of revenue that can potentially be captured
from the people who gain from a positive change in
ecosystem services, or the potential compensation
packages that might be offered to those who lose out.
The third and fourth applications are ideal for dealing
with equity issues, and were commonly applied by
the road testers.
What business decision is needed? How can CEV help?
What is the best option from a range of alternatives?
What is the full company and societal cost/benefit from
a particular company aspect?
Trade-off analysis can assess the net financial and economic
costs and benefits associated with different impacts to
ecosystems caused by an intervention. This application is
useful for impact assessments, option appraisals, pricing
products, etc.
What is the true total value of a landholding or natural asset? Total valuation can determine the total value in terms of
the flow of financial and economic benefits that ecosystems
contribute to a business and society. This application is
useful for asset revaluations, land management and risk
assessments.
Which stakeholders are affected by different company impacts,
and by how much?
Which stakeholders depend and impact upon ecosystem
services, and by how much?
Distributional analysis can identify the extent to which
stakeholders depend and impact upon ecosystem services.
This application is useful for determining winners and
losers from any intervention, and for equitability, liability/
compensation, practical and incentive-related reasons.
Which stakeholders could contribute to the ecosystem services
they benefit from, and how much?
Which stakeholders deserve compensation and how much?
Sustainable financing and compensation analysis can help
identify ways a business can develop new or enhanced
revenue streams and best compensate stakeholders in
relation to ecosystem service dependencies and impacts.
This application is useful for enhancing revenues and
evaluating compensation claims.
25
Can CEV support existing company analytical
approaches?
CEV aims to generate information that can be
integrated into existing corporate planning and
analysis processes. It essentially provides businesses
with a more complete set of information (on
ecosystem costs and benefits).
Financial methods (for example, management
accounting analyses) can draw on CEV results,
especially when evaluating cost savings and revenue-
generation schemes. Some companies are beginning
to undertake full-cost accounting exercises, economic
impact assessments and
analyses which have the explicit aim of incorporating
environmental costs and benefits; CEV is an ideal way
of generating information to feed into these analyses.
Liability and compensation claims, and the
environmental and natural resource damage
assessment procedures that guide them, lend
themselves naturally to the use of CEV. These are
often backed-up by specific regulations and guidelines
that require, or are compatible with, CEV. Along the
same lines, some heavily-regulated industries and
public companies (for example, water utilities and oil
companies) are increasingly expected to demonstrate
that they are
. CEV provides
valuable information to demonstrate that this is
the case.
In addition, CEV can support many other analytic
approaches that are routinely used by companies,
and which can benefit from information on
ecosystem costs and benefits. Examples include
Environmental and Social Impact Assessments (ESIAs),
risk assessments, life cycle assessments (LCAs),
environmental management systems (EMS), and land
management plans.
Should CEV involve qualitative, quantitative
or monetary valuation?
In principle, it is possible to value ecosystems in
qualitative, quantitative or monetary terms (Box 6),
each involving a different level of detail. It is desirable,
however, to use a combination of these approaches
in CEV.
Monetary valuation provides a particularly important
means of aggregating, comparing and communicating
different ecosystem service values. Nevertheless, to
limit CEV to monetary indicators alone would run the
risk of excluding important ecosystem benefits and
costs as it is rarely possible to quantify or monetize
each and every ecosystem value. Incorporating some
level of qualitative analysis ensures that even when
key ecosystem costs and benefits cannot be expressed
in numerical or monetary terms, they are given some
weight in analysis.
As suggested in the methodology, CEV should
generally begin with a qualitative assessment to
identify priority ecosystem services. Based on this
information, a quantitative assessment can be
undertaken, and finally a monetary valuation may be
carried out for some or all of the ecosystem costs and
benefits identified. There will, however, sometimes
be situations where qualitative or quantitative
assessments will suffice to inform the business
decision to be made.
Part 2Part 1
Part 1: Screening “Do you need to undertake a CEV?“
26 Guide to Corporate Ecosystem Valuation - A framework for improving corporate decision-making
Box 6: Hierarchy of valuation approaches
Qualitative review:
This approach involves describing the value and
ideally indicating the relative scale of value, for
example, in terms of high, medium or low.
The scaling needs to be relative in terms of all the
ecosystem services being assessed at a specified
geographical level (e.g. site or global level etc.). Thus
a business impact may reduce the productivity of a
lake fishery affecting the revenues (and livelihoods)
of a number of local people from several villages,
representing a “medium” loss of value.
Quantitative assessment:
This approach involves describing the nature of the
value in terms of relevant quantitative information.
For example, the above mentioned fishery impact
may cause an estimated 25% decline in fish caught
by 40 fishermen from 4 villages who catch an average
of 2 tons of fish per year.
Monetary valuation:
This approach involves placing a “monetary” value
on the impact. It translates quantitative valuation into
a single common currency, so as to enable aggregation
and comparison. For example, the fishery impact in this
case may result in a loss in net profits of US$ 50,000/
year, with two villages losing US$ 20,000 each and
the other two losing US$ 5,000 each.
Monetary:
e.g. avoided water purification costs,
value of food provision, value of carbon storage
Quantitative:
e.g. cubic meters of water purified, tons of carbon stored,
share of population affected by loss of food provisioning
Qualitative:
e.g. range of materiality of various ecosystem and
biodiversity benefits provided by the ecosystem
instance being evaluated, and knowledge gaps
Monetary valuation
Quantitative assessment
Qualitative review
Full range of ecosystem services underpinned by biodiversity
Source: P. ten Brink as cited in TEEB – an interim report (2008)
27
How accurate do CEVs need to be?
There is, to some extent, a trade-off between
conducting a very detailed and time-consuming
exercise and the need for rapidly generated decision-
support information based on available data and
knowledge. As with any research or analytical work,
CEVs can range from rapid “back of the envelope”
calculations to complex scientific studies. In practical
terms, most CEV exercises lie somewhere in the
middle of this spectrum. A company must balance
the time, money and expertise they have available to
spend on a CEV against the complexity of the issue
with which they are dealing, and the need to generate
timely decision-support information.
It is, however, important to emphasize that
undertaking a CEV is not the same as commissioning
academic research, and that rapid studies do not
automatically translate into a compromise on quality
or detail. In most cases, ecosystem service valuation
does not need to be lengthy or expensive. While a
CEV should always generate credible information,
the key point is that it should be fit for purpose. In
other words, the techniques used, and level of detail
provided, should be commensurate with the purpose
for which the CEV is being used. For example, when
CEV is being used for initial screening or feasibility
assessment, broad ballpark values will generally
suffice. When justifying major investments, assessing
significant compensation claims or reporting to the
general public, more accurate and robust valuations
are usually required.
The credibility of a CEV is also highly dependent
on the basic scientific parameters and assumptions
that are used in the analysis. Accurate ecosystem
valuation always requires a good understanding of the
relationship between ecosystem change, ecosystem
service provision, and economic or human wellbeing
indicators. This almost always requires input from
scientists and technical specialists. Valuation of the
downstream impacts of afforestation, for example,
must be based on sound data concerning the link
between land cover and hydrology, and economic
quantification of the externalities arising from the
release of SO2 and NOX relies upon good information
on the resulting human health impacts.
This is a key point, as many ecosystem valuation
exercises do not pay sufficient attention to
establishing credible or well-informed biophysical
and dose-response relationships before imputing
benefits or costs. It is also important because scientific
uncertainty or lack of knowledge concerning the links
between cause and effect is a common limitation.
Lack of full information should not, however, prevent
a CEV exercise from taking place. Best practice in
CEV involves setting out the assumptions that have
been used to ascertain a particular figure, making it
explicit when background information is lacking, and
justifying why the resulting estimates are reasonable
and realistic.
Which techniques does CEV use to value
ecosystem services?
CEV uses a standard suite of valuation techniques
to put a monetary value on ecosystem services.
These go beyond the use of market prices (the
conventional way economists measure the value of
goods and services), and include a range of methods
that enable the valuation on non-market benefits
and costs. Although not without limitations, some
are already commonly used and widely accepted in
environmental economics.
When undertaking a CEV, it is necessary to decide
which method to use to value a given ecosystem
benefit or cost. While some of the techniques in
the standard environmental valuation toolbox lend
themselves more readily to certain types of ecosystem
service (Box 7), the selection of valuation methods
is typically also determined by the data, time and
resources available to carry out the CEV. Further
guidance is provided at www.wbcsd.org/web/
cev.htm on selecting and applying ecosystem
valuation techniques.
Part 2Part 1
Part 1: Screening “Do you need to undertake a CEV?“
28 Guide to Corporate Ecosystem Valuation - A framework for improving corporate decision-making
Revealed preference techniques: These techniques
rely on people’s behavior to reveal their preferences.
This includes using market prices where they exist and
estimating changes in yield associated with altered
ecosystems (change in productivity). Other examples
include inferring the value of visitor trips based on
time and costs incurred getting to a site (travel cost
method), and establishing a price premium associated
with environmental attributes, such as the fact
that houses near clean rivers are worth 10% more
(hedonic pricing).
Cost-based approaches: These rely on market costs
to provide a proxy for the true value. For example,
the value of wetland flood control can be estimated
based on the cost of building a man-made equivalent
(replacement cost). Alternatively, its value can be
estimated based on predicted flood damage it
prevents (damage costs avoided). These approaches
are well suited for valuing regulating services, and the
costs are readily determined.
Stated preference approaches: These involve
questionnaire surveys that ask individuals about their
preferences. For example, “contingent valuation”
asks an individual their “willingness to pay” (WTP)
to secure their preferred environmental option,
while “choice experiments” ask people to select their
preferred option from a set of costed alternatives.
These techniques are good for valuing recreational
visits and are the only primary techniques available to
estimate non-use values. Detailed stated preference
surveys can be expensive and time consuming to
undertake, but low cost versions can still provide
valuable information if conducted carefully. Due
to the many potential biases involved, expert
involvement in their design and analysis is essential.
This involves applying
values estimated from studies elsewhere to the study
site in question, with appropriate adjustments.
This can be relatively inexpensive and quick to
implement, and databases of values are becoming
freely available. However, it must be applied carefully
and transparently to avoid significant errors.
Box 7: Commonly-used ecosystem valuation techniques
Fish
Timber
Water
Provisioning
services
Market prices
Change in production
Substitute prices
! "
(increasingly accepted
low cost approach)
Regulating
services
Damage costs avoided
Replacement costs
Change in productivity
Hedonic pricing
Flood protection
Carbon sequestration
Water filtration
Waste assimilation
Cultural
services
Stated preference surveys
(e.g. contingent valuation)
Travel cost method
Recreation
Aesthetics
Landscape values
Non-use values
Benefits
(examples)
Valuation techniques
(examples)
29
How to carry out screening
Before initiating CEV, it is usual to carry out a
screening exercise to establish whether, and in what
way, it would be useful for a particular company, in
a given situation. An ideal methodology to assist this
screening process is the Corporate Ecosystem Services
Review, or ESR (WRI, WBCSD and Meridian Institute,
2008). A decision tree is provided in Figure 6.
What tools are available to help
undertake a CEV?
The majority of ecosystem valuation studies use
simple, tailor-made spreadsheet models. By their very
nature, such tools are highly flexible, readily aligning
with business objectives and processes. They can
draw upon valuation databases and can link to other
tools such as Geographic Information System (GIS).
The latter is particularly useful for ecosystem service
mapping and calculations.
Various web-based tools, data models and GIS based
approaches used to value ecosystem services have
recently begun to be developed.12 Most involve input
of user key data on the specific site, ecosystem service
or sector that they are concerned with, and combine
this information to generate valuation results.
Many use aggregated or averaged information on
ecosystem values taken from other sites and contexts,
or are based on the application of national, regional
or global estimates concerning the value of key
ecosystem services. As such, they should be treated
with great caution. Most are still in a developmental
stage, dependent on doubtful data, and are often
cumbersome and inflexible to use.
Part 2Part 1
Part 1: Screening “Do you need to undertake a CEV?“
don’t
know
don’t
know
1. Is there a mandatory requirement
for your company to value its
ecosystem impacts or dependencies,
or environmental externalities?
2. Does your company depend or
impact upon any ecosystem services or
cause environmental externalities?
3. Might the ecosystem service impacts
or dependencies, or environmental
externalities result in significant business
risks or opportunities?
4. Would knowing the value of
these impacts, dependencies
and externalities to you company and
stakeholders aid your
decision-making?
Go to Part 2
(p. 30)
No need for a CEV
Undertake step 2
of the ESR
Look at Box 4 (p. 20)
& step 4 of the ESR
Look at Figure 5
(p. 23) & the ESR
yes
no
no
no
no
yes
yes
yes
No need for a CEV
Go to Part 2
(p. 30)Figure 6: Screening questions for CEV
30 Guide to Corporate Ecosystem Valuation - A framework for improving corporate decision-making
Summary of the methodology
CEV comprises a five-stage process of scoping,
planning, valuation, application and embedding.
In addition, 12 principles are proposed to enhance
credibility of results. As CEV is a new methodology, it
is continuously evolving. There is great flexibility in
how the approach can be applied. It can be modified
and adapted according to the needs of the company
that is using it. What ultimately matters is that it is
applied in a way that generates useful and credible
results. In time, further guidance and standardization
of approaches are likely.
Stages in the CEV process
CEV follows a logical five-stage process (Figure 7, Box
8). First of all, it is necessary to prepare for the CEV
through scoping and planning. This is followed by
the actual valuation exercise. Post-valuation involves
applying the results of the CEV in decision-making
and, for some companies, embedding the CEV
approach in its business practices.
Figure 7: The five stages of CEV
Preparation
1
Scoping
2
Planning
3
Valuation
4
Application
5
Embedding
Post valuationValuation
Bo
x 8
: S
ta
ge
s o
f t
he
C
EV
p
ro
ce
ss
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
by 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.
Part 2:
Methodology “How to conduct a CEV”
31
Ove
rview of the CEV stage
s
Helpful hint
: f
o
u
r-
pa
ge
su
m
m
ar
ies
o
f e
ac
h o
f t
he
ro
a
d
te
st
er
s’
e
xp
er
ien
ce
s
a
re
a
va
ila
bl
e o
n
ww
w
.wbcsd.o
rg/
web/c
ev
.ht
m
Stag
e
1. Scopin
g
2. Plannin
g
3.
Valuatio
n
4. Applicatio
n
5. Embeddin
g
Activit
y
Use 10 guiding questions to
define the scop
e
Plan the valuatio
n
Follow a 9-step valuation
proces
s
Communicate and apply
the result
s
Embed CEV within
company processe
s
Key
component
s
Ecosystem se
rvice
s
Contex
t
Business aspec
t
Internal use
s
Company buy-i
n
Business cas
e
Methodolog
y
Environmental baselin
e
External use
s
Link to processe
s
Business aspec
t
Reporting output
s
Physico-chemical change
s
Communicatio
n
Build capacit
y
Objectiv
e
Team detail
s
Environmental change
s
Confidentialit
y
Study boundarie
s
Detailed timelin
e
Qualitative assessmen
t
Verificatio
n
Conformanc
e
Detailed budge
t
Monetize selected
ecosystem se
rvice
s
Information availabl
e
Identify benefits & cost
s
Stakeholder
s
Compare benefits & cost
s
Valuation technique
s
Sensitivity analysi
s
Implementation constraint
s
Who is
involved
?
Environmental manage
r
Executive manager
s
Operational staf
f
Environmental staf
f
Environmental economis
t
Finance departmen
t
(
)
Stakeholder
s
(
)
Sou
rces of
input and dat
a
In-house business manager
s
Existing internal analyse
s
Local stakeholder
s
(
)
Operational staf
f
Expert stakeholder
s
(
)
Published resea
rc
h
Other resou
rces & tool
s
(
)
End produc
t
Defined scope for CEV
analysi
s
Detailed plan for
undertaking valuatio
n
Comparison of benefits
and cost
s
Various reports and output
s
Integrated operational
approac
h
Estimated tim
e
1 to 4+ week
s
1 to 4+ week
s
2 to 20+ week
s
1 to 10+ week
s
5 to 100+ week
s
For details see
:
p. 3
4
p. 4
3
p. 4
6
p. 5
9
p. 6
6
Part 2Part 1
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32 Guide to Corporate Ecosystem Valuation - A framework for improving corporate decision-making
Key principles
There are twelve key principles that should underpin all CEV studies (see Box 9), regardless of their nature and
size. These draw upon accepted financial and environmental accounting and reporting principles, as well as best
practice in ecosystem valuation. Adhering to them will improve the credibility and consistency of CEV results.
They should also guide decisions where ambiguity exists over a particular methodological approach or issue.
Box 9 describes the key principles in brief.
1. Relevance:
Use data, methods, criteria and assumptions
appropriate for the intended valuation and that meet
the expectations and requirements of its intended users.
2. Completeness:
Consider all potential ecosystem services affected in
terms of both dependencies and impacts. The CEV
should focus on the most significant and readily
monetized values, and highlight other ecosystem
services not monetized.
3. Consistency:
Use data, methods, criteria and assumptions that allow
for meaningful and valid comparisons. If monetary
values are drawn from previous studies, they should be
updated to current values using appropriate conversion
factors.
4. Transparency:
Provide clear and sufficient information for reviewers
to assess the credibility and reliability of the valuations,
particularly in relation to values and assumptions used.
5. Accuracy:
Identify and reduce potential biases wherever possible.
Do not give a false impression of accuracy by stating
values at an unwarranted level of precision. Apply
sensitivity analysis to illustrate residual uncertainty
in values, and ensure that data and assumptions
(especially bio-physical relationships) are “fit for
purpose”.
6. Conservativeness:
Use conservative assumptions, values, and
methodologies when uncertainty is high and the cost of
overcoming the uncertainty is disproportionately high.
7. Compliance:
Ensure, where appropriate, that relevant national and
international legislation and guidelines are adhered to.
8.
Where possible, use participatory processes to elicit
stakeholder values and preferences. If the results are to
be relied upon externally, formal independent external
verification of the process and values is advisable.
9. Avoid double-counting:
Ensure that no values are included more than once,
for example, as a result of applying multiple valuation
techniques.
10. Assess distributional aspects:
Identify who the winners and losers are in terms of
different stakeholders affected. Where appropriate,
highlight where the values arise on a spatial and
temporal basis.
11. Landscape-level assessment:
CEV should be conducted at a “landscape level”.
This means issues of “connectivity” (i.e. interactions)
between surrounding ecosystems, habitats and species,
as well as landscape level impacts, should be taken into
account.
12. Engage with stakeholders:
Some degree of stakeholder engagement should ideally
be undertaken throughout the CEV process, especially
where external buy-in is essential for the intended
outcome. Where the CEV may be sensitive, for internal
purposes only or just used at a high level, stakeholder
engagement may be more limited.
Box 9: Key principles for CEV
33
Getting started
Thinking through the business case
It is a good idea to think through the business case
for applying CEV even before starting to embark on
the CEV process itself. This, after all, is the basic aim
of CEV – to improve corporate decision-making. This
rationale should be articulated to company leadership
as early as possible, so as to establish buy-in from senior
management.
Unless somebody in your company already has
sound knowledge and experience in environmental
economics, it is recommended that external advice is
sought to help with developing the business case for
a CEV. Potential sources of technical expertise include
universities, research institutions, governments,
non-governmental organizations and consultants.
Advisors should be experienced in applying ecosystem
valuation, and ideally understand business issues too.
Who should be involved?
An early step is to decide who will participate in
the study. While different people will be involved at
different stages, some kind of core team should be
formed that will be responsible for overseeing the CEV
process from start to finish.
The overview of the CEV process highlights key
participants in the CEV process. It is, for example,
desirable to find an influential senior manager who
can “champion” CEV, to ensure that the finance
department is supportive of the process from its early
stages, and to include people with knowledge in the
following areas:
Details of the company aspect from a technical
perspective;
Details of the environment and key stakeholders;
Relevant company analytical approaches,
procedures and policies;
How to assess ecosystem and environmental
impacts;
Applied environmental economics (both valuation
and markets).
These participants may come from within the company
or from outside. Depending on the issues and
complexity of the CEV that is being undertaken, further
specialist expertise might be needed – for example
scientists (such as those specialized in hydrology, air
quality, water quality or biology), engineers, GIS and
remote sensing specialists.
Part 2Part 1
Part 2: Methodology “How to conduct a CEV?“
34 Guide to Corporate Ecosystem Valuation - A framework for improving corporate decision-making
Helpful hints:
The scoping stage is often an iterative process
which involves several meetings and brainstorming
sessions among a group of people.
Involve someone with experience undertaking
similar applied ecosystem valuation studies to help
with the scoping, otherwise it could take a great
deal of time and might fail to be accomplished.
Where existing data availability for the site is
uncertain, it may be advisable to undertake or
commission a scoping study to help answer the
scoping questions (and possibly complete stage 2
as well).
Don’t be too ambitious with the overall scope.
Focus on one product or project to begin with, and
use the questions to refine the scope to something
achievable.
An alternative approach is to do a high-level review
of values (probably qualitatively) for a portfolio of
products or projects to help prioritize actions, or to
target more detailed valuation studies.
The aim of the scoping stage is to
determine the objective and scope of
the CEV study, using a checklist of key
questions. It involves developing a
reasonably well-defined context, business
case and scope for the valuation. This
stage is equivalent to – or could be used
for – preparing project documents such
as concept notes, terms of reference or
requests for proposals. If required, it
could also be used to develop a strong
business case to secure internal support
and funding to conduct the CEV.
Part 2: METHODOLOGY “How to conduct a CEV”
STAGE 1
Scoping
35
The scoping checklist
The scoping checklist is comprised of ten main questions (Table 2). There is no right or wrong way
to complete this. None of the questions are mandatory, and only brief responses are required at
this stage. Greater detail will, however, be needed on all these issues at the subsequent planning
and valuation stages.
Part 2Part 1
Part 2: Methodology Stage 1 - Scoping
It may be preferable to first focus on answering the
“primary” questions – these help to define the overall
objective of the CEV. Typically, Question 1 or 3 will
be the best starting point. Then the “secondary”
questions can be addressed – which are intended to
assist in further refining the scope. Note that many
scoping questions overlap or feed into each other, so
scoping is likely to be an iterative process, revisiting
the questions a number of times before reaching an
agreed final objective.
Table 2: The scoping checklist - Primary Questions
Primary Questions – Establishing the CEV Objective
1. What are likely to be the main
ecosystem service dependencies,
impacts, and other
environmental externalities?
?? What are the main ecosystem service dependencies and impacts likely to be?
?? What other environmental externalities are relevant, and should these be
valued too?
2. What is the business case for
doing a CEV?
?? What are the associated potential business opportunities and risks?
?? What are the business benefits for undertaking a CEV?
?? How significant might the benefits be?
?? What wider benefits may be gained from doing a CEV?
3. What is the business “aspect”
to be assessed?
?? What aspect of the business is going to be assessed?
?? Are there alternatives of the same aspect to be considered?
?? What is the “business as usual” scenario likely to entail?
?? What part of the value chain is it?
4. What is the overall objective
of the CEV?
?? The responses to the above questions should provide a primary objective for
the CEV.
36 Guide to Corporate Ecosystem Valuation - A framework for improving corporate decision-making
Table 2: The scoping checklist - Secondary Questions
#
$ % ' * #
5. What geographic and temporal
boundaries should be used?
?? Where are the relevant ecosystem services located?
?? Which specific locations or countries are relevant?
?? What timeframe is appropriate for the valuation?
6. What standards or processes
should the CEV conform to?
?? Should the valuation link to an existing company analytical approach?
?? To what other internal policies or procedures should the CEV conform?
?? What external industry, national or international guidelines or regulations
should be followed?
7. What relevant information is
available?
?? What data and information is available within the company?
?? What data and information is available externally?
?? Are there any language issues?
?? What further data requirements may be needed?
8. Who are the key stakeholders and
how should they be engaged?
?? Who is the intended audience for the CEV study?
?? Who are the key internal and external stakeholders?
?? What consultation is required, how, and with whom?
?? What reporting output is needed for different stakeholders?
9. What ecosystem valuation
techniques are likely to be
necessary?
?? What application is required: trade-off analysis, total valuation, distributional
analysis or sustainable financing and compensation analysis?
?? What level of valuation is required?
?? How accurate do the values need to be?
?? What types of valuation technique are likely to be needed?
?? Should a particular valuation tool be used?
10. What might the key study
implementation constraints be?
?? What is the likely scale of the budget?
?? Who should be involved in the study?
?? When does the CEV need to be completed by?
37
Answering the scoping questions
If starting with this question (as opposed to
starting with Question 3 and then moving back to
Question 1, which is also an option), it should initially
be addressed at a high level and then narrowed down
to focus on a particular “aspect” of the business, in
what will be an iterative process. If uncertain as to the
key dependencies and impacts, consider undertaking
or reviewing Step 2 of the ESR. Also consider the
potential significance of other environmental
externalities, such as air emissions, that may be a
concern.
1. What are likely to be the main ecosystem service dependencies, impacts and other
environmental externalities?
Mond
i Mondi identified water as a key ecosystem service dependency for its tree plantations in South Africa.
Furthermore, this was a resource under considerable pressure from other users in the area. Water scarcity due to
poor catchment management would lead to rising costs for the company in the future, so this service became
the focus of their study.
AkzoNobe
l AkzoNobel examined the impacts of three alternative products on air quality, a traditional “other” externality.
The company focused specifically on emissions such as dust, GHG, NOX and SO2 released from cradle to delivery
of paper chemicals at a paper mill. For a raw material to one of the paper chemicals, a qualitative water footprint
risk assessment was carried out.
Road Tester Example 1: Scoping Question 1 (dependencies and impacts)
2. What is the business case for doing a CEV?
Begin by identifying what risks and opportunities
are associated with the ecosystem services and OEEs
identified in Question 1. Next, frame a business case
by determining how these risks and opportunities can
be translated into business benefits by undertaking
a CEV.
Where possible, indicate the relative significance of the
benefits (their materiality); is it potentially thousands
or millions of dollars? Also consider any wider benefits
to the company, such as internal capacity building or
linking with partner organizations.
GHD /
SA
W
at
er GHD / SA Water recognized that land management practices had a major influence on water quality in several catchments from which they produce drinking water. The company realized that they could achieve
significant savings in water treatment costs and reduced customer health risks if they invested in influencing
land use activities to reduce contamination and reinstate instream wetland functions in order to enhance
nutrient recycling in the water catchment. Ecosystem service benefits of cleaner waterways would also accrue
to other users, potentially improving coordination and relationships among water users across the watershed.
En
i Eni applied CEV to assess ecosystem service impacts and dependencies at one of their oil installations
near a sensitive ecological area in Italy. At a corporate level, undertaking a CEV was seen to be of strategic
significance; at the Exploration and Production (E&P) Headquarter level, the study was important for
integrating ecosystem services issues into global decision-making and to differentiate the impact of E&P from
those of other actors. At an operational level, the assessment helped improve environmental performance at
the site and enhanced the company’s reputation. The benefits from undertaking a CEV at the site included
cost savings from avoiding delays arising from stakeholder and regulator issues; sustaining and enhancing
revenues through maintaining a license to operate and gaining access to new resources; increased revenues
through possible energy crops and carbon credits from forest management; and reduced costs of mitigation
measures through cooperating with the nearby National Park.
Road Tester Example 2: Scoping Question 2 (business case)
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Part 2: Methodology Stage 1 - Scoping
38 Guide to Corporate Ecosystem Valuation - A framework for improving corporate decision-making
This may be the starting point if there is an obvious
business aspect to assess. The business aspect
could be a:
product (e.g. wheat, paint or a car);
service (e.g. financing package);
project (e.g. an infrastructure project);
process (e.g. alternative ways of manufacturing
a product);
asset (e.g. an operating facility or landholding);
incident (e.g. oil spill).
Other questions to consider include; is this aspect of
the business part of the upstream (extraction), mid-
stream (manufacturing and transport) or downstream
(sales and product disposal) process, or a mix? Does
the CEV relate directly to the business itself, the supply
chain, or its customers? Risks and opportunities for
businesses are increasingly associated with supply
chain dependencies and impacts on ecosystem
services. Are there alternative scenarios (e.g. options,
locations or designs) that should be considered for the
assessment?
The business aspect will be used as the basis for the
scenarios developed in the valuation stage, beginning
with how the aspect is managed or produced at the
current time (in other words, the business as usual
scenario).
Syn
gen
ta Syngenta assessed the “process” of commercial blueberry production in Michigan, USA. The study focused in particular on the impact on production costs and yields of investing in habitat for wild pollinators (native bees)
on sections of farmland. The “business as usual” (BAU) scenario entailed current land management practices and
current availability of pollinator habitat. The BAU was then compared to two scenarios involving increasing levels
of investment in habitat restoration and management to support native pollinators.
Road Tester Example 3: Scoping Question 3 (business aspect)
The responses to Questions 1-3 should help to refine
the focus of the CEV. Arriving at a final objective is
likely to be an iterative process. Ideally, it should
ultimately become SMART (specific, measurable,
attainable, relevant and time-bound).
US BCSD
/ CC
P The objective was to: “investigate the financial and ecological benefits generated over a 20-year period
by the replacement of the storm water management system for a manufacturing facility in Houston, with
a constructed wetland for on-site flood control and water treatment”.
Road Tester Example 4: Scoping Question 4 (CEV objective)
3. What is the business “aspect” to be assessed?
4. What is the overall objective of the CEV?
39
It is important to narrow down the countries and locations that the CEV will cover, as this will have implications
for the resources and information required, as well as the scale of the exercise. This typically requires asking
several questions; if it is a product, where are the inputs sourced from, and where are the customers located? If
it is a feasibility study for an infrastructure project, which locations and sites are being assessed? Which indirect
and secondary impacts and dependencies should be covered? (Note that some impacts may be homogenous and
global, e.g. GHG emissions, whereas others may be heterogeneous or local, e.g. water, waste, SO2 emissions). In
terms of establishing a timeframe, is there a typical project or product design life (for example 25 or 50 years for a
development project)? When comparing different product emissions with constant impacts over time, a one-year
assessment period may be adequate to inform decision-making.
G
HD
/ S
A
W
at
er GHD / SA Water used CEV to assess the value of ecosystem services, including avoided treatment costs, under several management scenarios for a catchment in which they provide drinking water services. The
geographic boundary for the study began as the catchment area (the Mount Lofty Ranges Watershed), and
was further narrowed down to specific “sub-catchments” where the direct effects of land management could
be connected to nutrient loads in a downstream reservoir.
Holci
m Holcim applied a CEV to inform the rehabilitation plan for proposed extensions to a sand and gravel pit, as part of the UK permitting process. The planning requirement was for a 50-year aftercare program, therefore
the study selected 50 years as the timeframe to examine ecosystem services generated by their proposed
wetland restoration scheme.
Road Tester Example 5: Scoping Question 5 (boundaries)
5. What geographic and temporal boundaries should be used?
6. To what standards or processes should the CEV conform?
The timing and required outputs of the CEV may be influenced by, or need to sequence with, existing company
policies, reporting processes or analytical approaches (such as ESIAs or LCAs). The CEV might also have to comply
with national guidelines on ecosystem valuation, or with particular regulations (such as compensation claims).
Alternatively, companies may wish to tailor the CEV to fit into permit applications or approval processes, or to
meet relevant international standards, such as the International Finance Corporation (IFC) Environmental and
Social Performance Standards.
G
HD
/ S
A
W
at
er GHD / SA Water has their own well-defined capital and operational funding investment process set out in internal corporate policy documents, which the CEV outputs informed. In addition, SA Water recognized
the need to follow the South Australia Department of Treasury and Finance guidelines on evaluating public
sector initiatives. Although these do not refer to ecosystem services, they provide a suitable framework for
integration within the specified approach for evaluating project scenarios.
Road Tester Example 6: Scoping Question 6 (standards and processes)
Part 2Part 1
Part 2: Methodology Stage 1 - Scoping
40 Guide to Corporate Ecosystem Valuation - A framework for improving corporate decision-making
Valuation studies often demand a considerable
amount of data, especially relating to the
environmental baseline and impacts/changes. Finding
and accessing this information may require thorough
and prior planning. In some cases, the relevant data
may already exist within the company (for example
from ESIAs or baseline surveys), or it may be available
externally (such as from government departments or
NGOs). If an ESIA has yet to be undertaken, this could
provide an opportunity to target data collection to
better feed into the CEV.
In many cases, not all of the information necessary
to carry out the CEV will be readily available. Expert
consultation or further research may be needed,
including targeted surveys to cover key biological,
ecological, physico-chemical or socio-economic issues.
Veolia
En
vi
ronnemen
t Veolia Environnement used CEV to help prioritize land management options for a parcel of land owned by
their subsidiary Berlin Wasserbetriebe (BWB). Data for the study was gathered from a wide range of sources.
This included estimates of input, costs and yields of energy crops from the energy company partnering with
BWB and details on the capital and operational water management costs for several scenarios from BWB.
Information on the existing environmental conditions was found in a report conducted by the local wildlife
authority, and an ecologist was used to advise on predicted environmental changes under the different
scenarios. Because value transfer data available was not considered adequate to value the scenario changes,
Veolia chose to implement a limited (quasi) contingent valuation survey. This was targeted at visitors and
Berlin residents to estimate local willingness to pay for changes in recreation and non-use value associated
with the scenarios.
En
i For their assessment of ecosystem service impacts and dependencies at one of their operating Exploration and
Production sites, Eni could draw upon a good set of historical GIS data available from the Biodiversity Survey
and Impact Assessment conducted at the site. This information could be matched with current GIS snapshots
of the area of interest (including species and habitat distribution data) available from the IUCN.
Es
ko
m Eskom used information obtained through the Environmental Impact Assessment (EIA) carried out to obtain the required environmental authorization for the Ingula pumped storage scheme. However, this data still fell
short in terms of certain avian species and the associated value that these species could obtain from a birding
and tourism perspective. Therefore a targeted questionnaire was developed, which also sourced values related
to the willingness to pay from other birding and conservation areas in the wider region.
Road Tester Example 7: Scoping Question 7 (information needs)
7. What relevant information is available?
41
It is wise to engage in broad-based consultation
from an early stage of the CEV process. This not
only ensures buy-in from stakeholders, but can also
considerably improve the design and content of the
CEV that is eventually carried out. Key groups include
both individuals from within the company
(for example, senior management and finance) as
well as external stakeholders (such as regulators,
government agencies, NGOs and affected
populations). As a general principle, the broader the
consultation the better, as long as it is well targeted.
Face-to-face consultations at meetings and workshops
are an effective means of obtaining information,
eliciting people’s views and seeking their buy-in.
Questionnaires and other forms of survey can also
be used. It may also be helpful to consider what
kinds of information and awareness materials (for
example, detailed and summary reports, maps, glossy
brochures and presentations) need to be provided
to stakeholders, both at this stage and at later stages
of the CEV process. This can have implications for the
cost of the CEV.
ED
P EDP assessed the costs and benefits of maintaining higher water levels in the canals and reservoirs associated with
several hydropower facilities in a 7,200 ha watershed. Some of the findings will be useful for marketing materials,
as they demonstrate to potential European Renewable Energy Certificate System (RECS) buyers the overall benefits
of EDP’s watershed management approach. The CEV approach and methodology are also being converted into a
training kit for internal use, so that it can be used to help the company scale up the ecosystem services approach
for wider use.
Es
ko
m The valuation study had a core focus on possible avian tourism in the conservation area associated with the Ingula pumped storage scheme. It was critical that the target audience responding to the questionnaires should be
approached through existing channels, as far as practically possible, as this improves responsiveness, buy-in and
credibility to the data that is being sourced.
Road Tester Example 8: Scoping Question 8 (stakeholders)
8. Who are the key stakeholders and how should they be engaged?
9. What ecosystem valuation techniques are likely to be necessary?
La
fa
rg
e Lafarge assessed the value of ecosystem services impacted by reclamation planning for a quarry in Presque
Isle, Michigan. The value estimates did not need to be precise, but would be used internally to develop land
management strategies. The study used the value transfer method to estimate the potential value of recreational
and educational uses, and avoided costs to estimate the value of erosion regulation and water purification
provided by restored habitat. Two off-the-shelf tools were used: InVEST, a GIS-based tool, was used to estimate
the erosion and water purification values, and the Wildlife Habitat Benefits Estimation Toolkit was used for the
value transfer. However, some significant limitations were recognized in the tools.
Road Tester Example 9: Scoping Question 9 (valuation techniques)
Even at this early stage, it is necessary to start to
form an idea as to how the ecosystem valuation
will ultimately be undertaken. This requires making
decisions about the generic application (for instance,
assessing trade-offs or total values), type of valuation
(qualitative, quantitative or monetary), and level
of accuracy. The answers to these questions will,
of course, depend on the business case and objectives
that have been determined for the CEV (Questions
2 and 4).
Based on these parameters, it should be possible to
decide whether a simple value transfer approach will
suffice, if a survey or other data collection method will
be required, and whether some additional tool (such
as GIS or valuation software) will be used. Usually,
a simple spreadsheet model will be the most cost-
effective tool to undertake a CEV. However, over time,
off-the-shelf tools may become sufficiently developed
to be used more effectively and reliably.
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Part 2: Methodology Stage 1 - Scoping
42 Guide to Corporate Ecosystem Valuation - A framework for improving corporate decision-making
In addition, it is important to reflect at this stage
as to whether there are any major study planning
constraints that may affect the scope. As available
funds, resources, expertise and time are typically
limited in supply, this is an important reality check,
and it may be necessary to revisit some of the earlier
questions on the scope and approach of the CEV.
Consideration of such constraints at this stage will
help pre-empt major issues arising over the scope
at the planning stage.
Useful questions include: what ballpark level of
budget and resources are likely to be available
or justifiable, based on the business case? What
economic and technical skills are likely to be needed
and available internally? How much external support
is required? Are there any key internal (such as project
cycle or reporting) or external (such as permitting)
deadlines to be taken into account?
10. What might the key study implementation
constraints be?
43
Helpful hints:
If the scope of the valuation exercise is still a little
uncertain, a flexible plan may be best. A provisional
plan may be developed and modified as the study
progresses.
Alternatively, a scoping study could be undertaken.
This could investigate the data available, prioritize
the ecosystem services affected, assess alternative
valuation methodologies and costs, and propose a
way forward (this was, for example, the approach
taken by Veolia Environnement).
This stage involves developing a plan
for undertaking ecosystem valuation.
It elaborates how the valuation will be
carried out, and specifies the time-frame,
staff responsibilities and other planning
parameters. Investing time in planning
and anticipating how the valuation will
actually be implemented should ensure
a more timely and cost-effective outcome.
The plan may be formulated internally.
However, requesting an external
organization (e.g. consultant, academic
or NGO) to submit a plan or proposal
can be effective, especially when done
in conjunction with the company.
STAGE 2
Planning
Part 2Part 1
Part 2: Methodology Stage 2 - Planning
Part 2: METHODOLOGY “How to conduct a CEV”
44 Guide to Corporate Ecosystem Valuation - A framework for improving corporate decision-making
Contents of the plan
Context
The context for the study should include, most
importantly, the overall objective of the CEV (as
defined in Scoping Question 4). Other elements
defined in the scoping stage can also be referenced
here, including the business aspect and location
of the study, as well as any internal or external
processes or policies that the results will be fed into.
Methodology
This section should provide details of the proposed
valuation methodology. For example, it should
describe how and by whom consultation and data
collection will be undertaken, identify site visits
and surveys that will be required, outline which
valuation techniques will be used, and lay out how
results will be analyzed.
For valuation studies which will include primary
data collection, additional details on methodology
should be provided. For example, CEVs that utilize
stated preference studies should provide details on
the proposed approach for questionnaire design,
focus groups, piloting, sample sizes, interviewers,
data analysis etc.
Contents Key elements to address
Context This information should have been established in the scoping stage, but may need
elaborating.
Methodology Describe the proposed methodologies for undertaking the valuation in some detail.
Planned reporting outputs Indicate the nature of the reporting outputs to be produced.
Team details Identify key team members, setting out their roles. Also describe project
management and quality control issues.
Detailed timeline Set out a timeline and identify dates for key milestones, site visits and deliverables.
Detailed budget Indicate the total expected cost and a reasonable breakdown of planned labor
and expenses.
Table 3: Contents of the plan
Planned reporting outputs
While identifying the types of outputs to be produced,
it may be helpful to reflect upon responses to Scoping
Questions 6 and 8. Scoping Question 6 identifies internal
or external reporting processes that the results should
be aligned with, while Scoping Question 8 focuses on
identifying the stakeholders and audience for the analysis.
Additional deliverable output, such as maps and GIS,
should also be identified.
Team details
The plan should provide details of the valuation team,
clearly specifying their roles and responsibilities in relation
to managing, carrying out, reporting on and responding
to the CEV. Where external experts or organizations
are involved, it may be necessary to develop a plan for
cooperation and interaction. It is advisable to prepare brief
Terms of Reference for key team members and, if required,
contracts or agreements with external participants.
Possible questions to consider include:
Who is the environmental economist involved?
An experienced one will certainly be needed.
Who will provide other technical skills? This could
include scientific input to assess cause-effect
relationships, as well as GIS and remote sensing inputs.
What opportunities are there for training and capacity
building? Internal experience and knowledge can be
increased by involving a mix of staff from different levels
and departments.
45
Detailed timeline
It is useful to set out a reasonably detailed timeline
for the CEV, by using, for example, a Gantt chart.
This should specify key milestones in data collection,
analysis, reporting and communication. The timeline
helps to clarify which deliverables are required,
and when. Refer back to the deadlines identified
in Scoping Question 10.
La
fa
rg
e Lafarge used CEV to help evaluate alternative land use management options at a 5,000 acre quarry. They decided
to develop their CEV project in three phases. Based on an initial outline scope, the project held a kickoff meeting
to establish the work plan, budget and responsibilities for conducting the three phases. The first phase was to
conduct an ESR at the site, to identify key ecosystem services and associated risks, opportunities and strategies.
This highlighted three key areas relating to sedimentation/erosion, nutrient retention/water purification and
recreation/education. The second phase was to apply various ecosystem service valuation models. The third
phase involved i) conducting an internal feedback workshop; ii) developing an assessment on the reliability,
reproducibility, and business applicability of ESR and CEV; and iii) presenting the project’s results
and recommendations for internal and external communication.
Road Tester Example 10: Planning
Detailed budget
The budget for the CEV study should include all the
basic input and cost elements that are required to
carry it out, such as staff-time, external consultants,
meetings, travel, publications and other items.
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Part 2: Methodology Stage 2 - Planning
46 Guide to Corporate Ecosystem Valuation - A framework for improving corporate decision-making
This stage involves undertaking the
valuation itself, via a nine-step process.
The steps adhere to best practice in
ecosystem valuation, and also align with
the ESIA process. The guidance provided
focuses mainly on the “process” required
for ensuring an appropriate and valid
CEV. Additional material on valuation
techniques is provided at
www.wbcsd.org/web/cev.htm
STAGE 3
Valuation
Helpful hints:
Due to the complexities of environmental valuation,
CEV should be undertaken or supervised by an
experienced environmental economist.
Don’t think you necessarily need detailed and
accurate valuation studies. Ballpark values can still
provide important information for decision-making.
Be wary of “black box” models or toolkits that
produce seemingly accurate values. These should
be reality-checked, and their key assumptions
should be made visible.
Although benefit (value) transfer can provide
useful indications of value, make sure that the
context and ecosystem changes are sufficiently
similar to be of use.
Value transfers are most useful when comparing
significantly different options and ascertaining
relative values. Be wary of using them to value
subtle differences and absolute values.
If using stated preference and travel cost valuation
questionnaires, it is essential to involve someone
who is experienced in their design, implementation
and analysis. It is very easy to design a
questionnaire that elicits useless values.
Part 2: METHODOLOGY “How to conduct a CEV”
47
Table 4: Valuation steps
Overview of the steps
The nine steps involved in ecosystem valuation are summarized below in Table 4. Although
companies are encouraged to work through the complete nine-step process, this may not
be necessary in all cases, given the broad range of potential CEV applications and ways of
undertaking ecosystem valuation.
The specific requirements for, and focus of, each step
may also differ, depending on the objectives and
scope of the CEV, and on the application with which
it is associated. Table 5 highlights key differences
in emphasis, depending on the generic application
of the valuation.
Valuation steps Brief description
1. Define the business “aspect” Describe the key features of the company aspect to be valued. This is effectively the
“with” scenario being valued. Also identify any other “alternative” scenarios (i.e.
options) to be valued.
2. Establish the environmental
baseline
Establish the environmental baseline conditions under the “without” or “do nothing”
scenario. Identify the relevant ecosystems and determine the status of habitats,
species, ecosystem services and associated stakeholders. For carbon and OEEs, give
details of existing baseline emissions.
3. Determine the physico-chemical
changes
Identify and quantify the relevant physico-chemical changes resulting from the
company aspect (e.g. emissions, discharges and land-take). For carbon and OEEs,
state the changes in emission levels between the scenarios.
4. Determine the environmental
changes
Detail the changes in conditions in terms of quantity and quality of the relevant
ecosystems (i.e. habitats and species). For carbon and OEEs, refer to the value
transfers being used.
5. Assess the relative significance
of ecosystem services affected
Undertake a qualitative assessment of ecosystem service changes to determine which
are likely to be of high, medium or low significance. Where relevant, support the
assessment with quantitative information. This step helps screen priority ecosystem
service changes to value in step 6. For carbon and OEEs, state the relative significance
of the changes.
6. Monetize selected changes to
ecosystem services
Identify the ecosystem service changes for which monetary valuation is possible and
relevant (e.g. the high and medium value ecosystem services in step 5 above). Select
the most appropriate valuation technique(s) and determine the monetary values.
7. Identify internal and external
benefits and costs
Identify which values are internal and external to the company. Determine which
external values could become internalized either through company or external
actions.
8. Compare benefits and/or costs Aggregate the stream of benefits and/or costs and convert them into “present day
values” using an appropriate discount rate.
9. Apply sensitivity analysis Determine the sensitivity of the outcome to a few key variables whose values are
uncertain, providing a high and low range of values.
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48 Guide to Corporate Ecosystem Valuation - A framework for improving corporate decision-making
Table 5: Emphasis of steps depending on generic application of valuation
Application How do you do it? Difference in emphasis
1. Trade-offs Measure the marginal change in quantity/
quality of ecosystem services due to the
company aspect (compared to without);
multiply by the “marginal” value of each
service.
Steps 2 – 6 require care to ensure it is the “marginal”
changes associated with each alternative scenario that
is assessed. It is not necessary to value the total
ecosystem service benefits for each option.
2. Total valuation Identify all mutually-compatible ecosystem
services provided; measure the quantity of
each service provided; multiply by the value
of each ecosystem service.
In step 1, the aspect to be valued is likely to be a
landholding. In step 2, the “without scenario” should
assume a situation without any ecosystems on the
landholding (i.e. zero ecosystem services). Steps 5 and
6 should assess all ecosystem services that maintenance
of the landholding generates over time.
3. Distributional
analysis
Determine the nature and size of costs and
benefits accruing to different stakeholders.
The step 2 and 5 stakeholder analysis components
are critical.
4. Sustainable
financing /
compensation
Identify stakeholders that receive or cause
significant benefits or losses, and identify
appropriate means of generating revenues
or compensating them.
The step 2 and 5 stakeholder analysis components are
critical. Step 7 (analysis of internal and external costs
and benefits) is critical.
The Nine Steps
The nine steps are explained below using selected examples.
For continuity, two road testers are referred to in each step:
The Veolia Environnement case assesses
ecosystem service trade-offs associated with
land use management.
The Hitachi Chemical case is an example of
valuing carbon emissions (an OEE) associated
with alternative production processes.
An assortment of case studies from other road testers is also used.
Veolia
En
vi
ronnemen
t Veolia Environnement is part of a public-private partnership with Berliner Wasserbetriebe (BWB), the water
and wastewater service provider for Berlin. BWB owns and manages the 290 ha Karolinenhöhe land fields
in west Berlin, Germany, as an area for nature conservation, agriculture and recreation. BWB has been
discharging treated wastewater here for two decades, but must stop after 2010, due to the threat of legacy
contaminants at the site potentially affecting a nearby groundwater supply of drinking water to Berlin.
The CEV objective is to evaluate alternative water use and land management options for the site, focusing
on short rotation energy crops (biofuels), to determine the optimum solution from a financial and societal
perspective. It will achieve this through a CEV trade-off analysis between different associated agricultural,
biodiversity, recreational and landscape impacts. The findings will aid discussions with the energy crop
provider, local stakeholders and local water and nature conservation authorities, and will inform the potential
application of payments for ecosystem services at this and other sites owned by Veolia Environnement.
Hi
ta
ch
i
Chemica
l Hitachi Chemical produces a variety of base materials and components for manufacturers producing
electronic equipment such as computers, digital cameras and cell phones (i.e. it is a mid-stream
manufacturing company). The CEV objective is to incorporate a cost for carbon emitted during the
manufacturing process for producing multi-layer CCL (Copper-Clad Laminates). It is envisaged that the
outcome will help identify products to select where there is a choice (i.e. those which are more sustainable)
and those investments worth making in order to reduce carbon emissions. The valuation will link to an LCA,
with a view to potentially expand the monetized results of LCA outputs, in the hope of ultimately saving
costs, enhancing revenue and being more sustainable.
Road Tester Example 11: CEV Objectives
49
This step involves describing in detail the company
aspect to be valued. It characterizes key features
such as its nature, extent, components, location and
lifespan. The company aspect is the “with” scenario,
against which a “without” scenario will be compared
during the valuation. If several scenarios exist (for
instance, alternative locations, design specifications
or options), these should be identified. It may also be
useful to consider and clarify what part of the value
chain is being assessed.
Veolia
En
vi
ronnemen
t The company aspect is several alternative projects (scenarios) involving energy crops and targeted irrigation at
the Karolinenhöhe land fields. The “without” situation is a “do minimum” scenario (scenario 1) representing
the least cost option for BWB where the treated water is all discharged into a nearby river, with minimal
interventions by BWB at the site. Scenario 2 is growing 100 ha of a single energy crop species with targeted
irrigation, using a new groundwater pump, scenario 3 is the same but with two energy crop species, and
scenario 4 is growing 100 ha of two energy crop species irrigated with treated water for only three years,
using BWB’s existing irrigation infrastructure.
Hi
ta
ch
i
Chemica
l The company aspect was the production process for multi-layered CCL (for printed circuit boards). The
production process takes place in a factory in Japan using varnish, epoxy resin, methyl ethyl ketone, glass
cloth and copper foil. Hitachi Chemical assessed carbon emissions from CCL production on an annual basis.
Holci
m The company aspect assessed by Holcim was the rehabilitation process for a specific mining project site. Rehabilitation options for the site included restoring the area to agricultural land, its former use, and
alternatives including construction of artificial lakes and wetland restoration.
ED
P The company aspect was the provision of electricity using a hydropower system, comprising 6 dams linked
by open air canals, situated on land of high conservation value. The case study compared the total services
provided by the entire watershed with the hydropower system operating, compared to a scenario of its
dismantlement.
En
i The company aspects assessed by Eni were: (a) the main economic, social and environmental changes
occurring in the area under study and their interactions with the company’s activities and with other human
activities; and (b) the increase of ecosystem service value related to mitigation and restoration activities that
have been carried out.
Road Tester Example 12: Valuation Step 1 (business aspect)
1. Define the business aspect
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50 Guide to Corporate Ecosystem Valuation - A framework for improving corporate decision-making
This step involves identifying and describing the
environmental baseline for the “without” scenario.
The preferred “without” scenario to examine is
“business as usual”. Business as usual should
either be the current environmental status (if that is
reasonably stable), or a prediction as to the status of
the environment over time, given recent and future
likely trends due to other influences. This may be
the equivalent of a “do nothing” or “do minimum”
scenario. It should consider today’s existing baseline,
and take into account future trends that will occur
regardless of company intervention, such as an
increase in human population, a decrease in water
availability or growth in per capita GDP.
Given the uncertainty, and the difficulty of predicting
environmental change, it is important to be very
careful when establishing the baseline. At a minimum,
it should include details on:
The main ecosystems in terms of the quality
and quantity of habitats and species, and their
protection status;
The main associated ecosystem services; and
The different stakeholders that benefit from the
main ecosystem services, as well as those that
bear opportunity costs from any changes in land
and resource use and associated production and
consumption possibilities.
If dealing with a large site and many ecosystems,
only those ecosystems and ecosystem services likely
to change need to be described in any detail. If
assessing the total value associated with creating
a new habitat such as a wetland, the nature of the
existing environment at that site will still need to be
considered (e.g. agricultural land or scrubland). For
carbon and OEE assessment, details should be given
of the existing quantities of the “without” scenario
baseline emissions.
Veolia
En
vi
ronnemen
t The existing environmental baseline was first assessed to provide a reliable starting point for the analysis. This
included describing the current condition and protection status of the different ecosystems (e.g. farmland,
grasslands, wetlands and groves) and associated flora and fauna on the Karolinenhöhe site. It also involved
identifying the main ecosystem services and associated stakeholder beneficiaries, the most important being
local farmers and recreational visitors. In this case, the biodiversity and landscape values associated with
wetlands at the site were considered very high, but so was the risk of contaminating Berlin’s water supply
through continued discharge of treated wastewater due to the legacy contamination.
Hi
ta
ch
i
Chemica
l Hitachi Chemical used “business as usual” production methods, materials and life cycle for CCL products as
the baseline. They explored emission rates of CO2 per kg produced of CCL, under two alternative scenarios as
compared to the baseline.
Rio
Tin
to Rio Tinto established the environmental baseline by projecting how local forests would be converted or degraded without conservation action. They looked at historical rates and drivers of deforestation such as
“slash and burn” agriculture and the unsustainable harvest of forest products. Only the incremental benefits
of conservation, i.e. avoided deforestation, were included in the cost benefit analysis.
GHD /
SA
W
at
er GHD / SA Water used current land use practices in the Upper Cox Creek catchment as the baseline or “business as usual” scenario (scenario 1). They compared the baseline to five alternative scenarios, each
successive scenario adding an additional management action. For example, scenario 2 introduces on-farm
management actions such as sediment traps, improved cover crops and buffer strips. Scenario 3 adds
construction of a sedimentation pond and a wetland to this, and so on.
Road Tester Example 13: Valuation Step 2 (environmental baseline)
2. Establish the environmental baseline
51
This step involves identifying and quantifying the
physico-chemical changes associated with company
impacts and dependencies under different scenarios:
For company impacts, this could, for example,
include land-take (m2 of habitat destroyed or
improved), emissions (kg or tons emitted of specific
pollutants), discharges (m3 of specified chemicals
discharged or accidentally spilt) and waste
(m3 of specified solid waste). For carbon and OEE
assessments, state the change in emission levels
between the scenarios.
For company dependencies this could, for example,
include consumption of provisioning services
(m3 of water and kg or tons of natural materials)
by a company process.
Veolia
En
vi
ronnemen
t Physico-chemical changes were assessed for all four scenarios, which in particular included determining
changes in agricultural activity (e.g. the number of hectares of fodder and energy crops) as well as changes
in volumes of water flowing to the site.
Hi
ta
ch
i
Chemica
l The change in carbon emissions relative to the business as usual scenario represented a decrease of 5% and
7.5% for the two alternative production processes analyzed.
GHD /
SA
W
at
er The GHD / SA Water case examined physico-chemical changes associated with different land use management efforts in a watershed supplying water to reservoirs used for drinking water. Land management
changes, such as on-farm management actions, construction of artificial wetlands, providing sewerage to
a township, and riparian re-vegetation were examined. Chemico-physical modeling was undertaken to
determine the reduction in nutrients and suspended sediments entering the system as a result of these
changes.
US BCSD / BP
S US BCSD identified synergy opportunities between companies in terms of alternative uses for waste materials.
The materials identified included vehicle tires, waste asphalt, acetic acid, off-specification polymers and diesel,
spent tungsten catalysts, kiln dust and aluminum oxide. These potentially provide fuel, raw materials for
construction and manufacturing as well as secondary chemical resources. The Ecologically-Based Life Cycle
Assessment (Eco-LCA) method – developed by the Centre for Resilience – was used to calculate physical
quantities of resources saved through identified project opportunities. The results are potential annual
resource savings of: 250 million gallons of water; 4.4 million barrels of oil-equivalent of energy; 3,000 acres
of land; 13,000 metric tons of CO2 equivalents; and 29,000 metric tons of non-renewable resources.
Associated monetary values were then determined in step 6.
Road Tester Example 14: Valuation Step 3 (physico-chemical changes)
3. Determine the physico-chemical changes
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52 Guide to Corporate Ecosystem Valuation - A framework for improving corporate decision-making
This requires identifying and quantifying the “net”
changes in ecosystems (such as habitat and species)
and environmental conditions resulting from the
“with” scenarios, as compared to the “without”.
It is usually necessary to predict the modified
ecosystem and environmental characteristics under
the alternative scenarios. Complications often arise,
such as predicting how different stakeholders might
react to different scenarios, thereby influencing the
ecosystem outcomes and subsequent values. These
should be assessed to the best extent possible, given
the constraints of the study, with all assumptions
made clear, for example, using an “expected values”
approach based on the probability of alternative
events occurring.
This step can be very complex. It usually requires
good, credible scientific information about the
relationships, linkages and predicted environmental
changes between the alternative scenarios. In turn,
this often necessitates specialist expertise and bio-
physical modeling.
If the assessment is for an event that has already
occurred, such as a pollution incident, a “pre-event”
environmental baseline will be needed. Where such
data is not available, either a model or similar nearby
“reference” site can be used to inform the baseline
characterization.
For carbon and OEE assessments, this step may
simply require describing the “net” differences
in environmental parameters, without having to
establish and compare their actual impact on the
environment. This will be the case where standard
values for emissions are available. If more accurate
valuations of emissions with heterogeneous impacts
(for example NOX and VOCs) are required, then
regional values or a more detailed cause-effect (dose-
response) assessment will be needed.
Veolia
En
vi
ronnemen
t The environmental changes considered under each of the scenarios included increases or decreases in: crop
productivity (hay and wheat fodder production and energy crops); ground water quality (heavy metals
leaching); groundwater moisture affecting grassland productivity; habitat quality (diversity of plant, insect
and bird species); and landscape aesthetics changing due to plantation of energy crops or to increasingly
dry conditions under the “do minimum” scenario.
Hi
ta
ch
i
Chemica
l Because the Hitachi case assessed carbon emissions rather than an ecosystem service, a direct measurement
of environmental change was not needed. Instead, the valuation relied upon current market prices for carbon
which are related to an extent to associated environmental changes caused by green house gas emissions
(see Step 6).
W
ey
er
haeuse
r Weyerhaeuser owns several hundred thousand hectares of land in its two case study areas, North Carolina and
Uruguay. The different land use options being considered by the company could result in different habitat
types and hence different mixes of ecosystem services. Weyerhaeuser examined the differences in yield of
wood between solid wood forests (eucalyptus in Uruguay and southern yellow pine in North Carolina), a mix
of hardwood and energy crops, a dedicated energy crop regime, and native pastureland (in Uruguay only).
Road Tester Example 15: Valuation Step 4 (environmental changes)
4. Determine the environmental changes
53
5. Assess the relative significance of ecosystem services affected
This step involves a qualitative assessment of the
relative significance of changes to ecosystem services.
Significance is often best assessed as to whether
ecosystem service changes are likely to be manifested
as high, medium or low values (or absent), and
whether they constitute costs (negative impacts) or
benefits (positive impacts). These ratings can be based
either on professional judgment, or informed through
a basic quantitative assessment. The latter involves
indicating what items or groups are affected (such as
volume of produce or number of people).
Distributional aspects are typically key to this
assessment – in other words, which stakeholder
populations are affected by ecosystem service
changes, and by how much. The type of stakeholder
group affected may influence the values, as is often
the case with foreign tourists’ willingness to pay
values compared to those of locals or nationals. This
evaluation can also help identify potential winners
and losers, and can identify needs and options when
considering payment for ecosystem service schemes.
Road Tester Example 16: Valuation Step 5 (significance of ecosystem service effects)
Veolia E
nvi
ronnemen
t The site was split into four core ecosystem types, and the relative value of the main ecosystem services were
assessed qualitatively for the current baseline and for the predicted conditions under the four scenarios. Ecosystem
services particularly impacted include: agricultural output (fodder crops), energy crop (biofuel) output, carbon
sequestration, recreation and non-use values and drinking water supply (quality).
Note: P = provisioning, R = regulating and C =cultural services.
The pluses and minuses represent the level of ecosystem services provided under each scenario over a 25 year period.
(-) = minor negative value; (- - -) = moderate negative value; (- - - - -) = major negative value.
Similarly (+) = minor positive value; (+ + +) = moderate positive value; (+ + + + +) = major positive value.
Ecosystems Ecosystem services Existing
baseline
Scenario 1 -
‘Do
Minimum’
Scenario 2 -
Single Energy
Crop
Scenario 3 -
Mixed Energy
Crop
Scenario 4 -
Low Irrigation
Energy Crop
Crops / fallow
land
P Hay / crops for
fodder + + + + + + + + + + +
P Energy crops n/a n/a + + + + + + + + + +
Woodlands /
trees
P Fruit crops
+ + + + + + + +
Above two
ecosystems
plus natural
grassland and
wetlands
R Carbon
sequestration
& avoided
emissions
- + + + + + + + + +
R Local climate
regulations + + + + + + + +
R Assimilation
of waste by
vegetation
+ + + + + + + +
C Informal
recreation
(landscape /
biodiversity)
+ + + + + + + + + +
C Non-use values
(landscape /
biodiversity)
+ + + + + + + + + + + + + + + + +
Groundwater P Quality of
drinking water
supply
- - - - - - + + + + + + + + +
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Part 2: Methodology Stage 3 - Valuation
54 Guide to Corporate Ecosystem Valuation - A framework for improving corporate decision-making
Road Tester Example 16: Valuation Step 5 (significance of ecosystem service effects)
Hi
ta
ch
i
Chemica
l Because the Hitachi case assessed carbon emissions, the CEV did not assess changes in ecosystem services.
Holci
m To maximize its chances of receiving approval to extend a quarry, the company proposed wetland restoration to follow extraction on flood-prone land previously used for agriculture. Due to constraints on bringing in
soil for restoration, the company proposed a mixture of wetlands and an artificial lake. The main benefits
identified were based on managing the wetlands for biodiversity and the lake for recreation. Both areas would
provide flood control benefits, but to avoid double-counting in relation to the biodiversity benefit transfer
values for reedbeds, specific flood control benefits were included for the lake only. Water filtration benefits
were not considered as there is no local water extraction for human consumption.
La
fa
rg
e Lafarge assessed changes in ecosystem services that could result from alternative approaches to land
management during reclamation of a mining area. Changes in land use were expected to impact a number
of bio-physical and environmental aspects of the local watershed, and hence a number of ecosystem services.
Lafarge applied the InVEST model to quantify, map and value changes in erosion regulation and water
regulation resulting from land use changes. They also estimated changes in fishing, hunting, and wildlife
viewing (recreation services) that could result from habitat changes in wetland and terrestrial habitats.
ED
P At the initial stage of the valuation process, the provisioning service of wild food was not considered to be
of high or even medium significance. However, during a local stakeholder workshop, it was clear that the
perceived importance of this service by stakeholders was high, and therefore important for EDP to evaluate
in their CEV.
Veolia
En
vi
ronnemen
t Veolia Environnement used the “change in production” approach to assess the value of agricultural and
energy crop outputs. Value transfer was applied to estimate benefits and costs from reduced CO2 emissions
through use of energy crop biomass instead of fossil fuels, and increased emissions from pumping water to
irrigate the energy crops respectively. French government values, based on the marginal abatement cost of
carbon, were used (starting at € 32 per ton of CO2 and increasing over time). To estimate recreation and
non-use values, the available resources allowed for a small-scale contingent valuation survey. Local stakeholder
engagement as part of this exercise was also welcomed by BWB, with 124 visitor and 83 general public
interviews conducted. Average visitor willingness to pay values for scenario 3 were between € 1.9 to € 7.8 per
person per year, while average general public non-use values for scenario 3 ranged from € 0.05 to € 7.2 per
adult per year.
Road Tester Example 17: Valuation Step 6 (monetizing changes)
This step first of all involves identifying which
ecosystem service values will be monetized. As already
mentioned above, in few cases it is possible to value
each and every change in ecosystem services that
occur as a result of a given course of action. The
ecosystem services that are selected for monetary
valuation will usually be the most significant ones (as
identified in Step 5), and the ones for which sufficient
data is available.
Having identified the ecosystem services to be
monetized, it is then necessary to select and apply
appropriate valuation techniques. Detailed guidance
on valuation techniques is not included in this Guide,
but can be found on www.wbcsd.org/web/cev.htm.
6. Monetize selected changes to ecosystem services
55
Road Tester Example 17: Valuation Step 6 (monetizing changes)
Hi
ta
ch
i
Chemica
l After carefully considering a range of potential carbon costs to use, Hitachi Chemical decided to use a proxy
market price of US$ 20 per ton based on the EU ETS Mid Price: EUA Spot Vintage (for 3 months between
March and June 2010). The price was accessed from www.ecosystemmarketplace.com.
ED
P EDP assessed a large variety of ecosystem services associated with the system of reservoirs and canals making
up a section of the company’s hydropower network in Portugal. Market-based estimates were available for
some services, including water consumption, electricity generation and soil protection (dredging costs).
Recreational services such as fishing and boating were measured using the travel cost method. Benefits
transfer was used to estimate non-use values. Results were still preliminary at the time of this publication,
but ranged from € 4,167 per year in recreational fishing value to € 13,157 per year in fire risk avoidance,
to € 7.5 m per year in electricity generation.
Mond
i Mondi used a GIS-based analysis to assess the value and distribution of water use in the Mhlatuze catchment
(see figure below). The analysis reclassified 2005 land use and land cover data from Ezemvelo KwaZulu-Natal
Wildlife into categories of major water use by sector (forest plantations, irrigated crops, sugar cane, urban
and mines). Next, the land use class and total annual registered water use was calculated using data from
the South African Department of Water Affairs and Forestry. Annual volumes from 2008 were multiplied
by 2009-2010 water use tariffs, which vary by sector, to estimate the cost of water use by sector in the
catchment. Although there is still some way to go in refining the map and data, the figures provide
a good estimation of the annual value of the freshwater system in this heavily allocated catchment.
Sector Estimated area
(ha)
Registered area
(ha)
2008 water use
mill (m³)
2010 tariff
(Rand/m³)
Current value
(Rand)
Forestry
plantations
67,200 43,570 68.7 0.38 R 26.1m
Irrigation (mostly
sugar cane)
107,929 150,000 58.5 0.70 R 40.9m
Urban / industrial 18,412 ________ 85.7 0.81 R 69.4m
Registered water use and cost
Mhlatuze catchment
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Part 2: Methodology Stage 3 - Valuation
56 Guide to Corporate Ecosystem Valuation - A framework for improving corporate decision-making
In most cases it is necessary to distinguish between
costs and benefits that are internal to the company
and which directly affect the bottom-line (financial
costs and benefits), and those that are external
(societal and non-financial, i.e. externalities).
Some external costs and benefits may potentially
be internalized by the company. This could be
achieved, for example:
Directly by company actions (e.g. charging visitors
for access to their land or resources);
Directly by external bodies (e.g. regulators
establishing new market mechanisms to capture
the costs of externalities, such as water pricing,
biodiversity offsets or NOX trading);
Indirectly by stakeholder actions, and impacts
to corporate reputation.
From a business perspective, it is worth identifying
which costs and benefits might or could be internalized
at some point in the future. These can be investigated
further in Stage 4 (Application) of the CEV process.
Veolia
En
vi
ronnemen
t Veolia Environnement undertook financial analyses to assess direct bottom-line implications for BWB and
financial viability of the energy crop scenarios. These analyses included asset depreciation, taxes, capital
and operating costs and market prices for the energy crops. Separate economic analyses estimated net
agricultural benefits accruing to local farmers, the cost of carbon affecting global populations, recreation
values of site visitors and non-use values for the general public in Berlin. The analyses were used to inform
BWB’s discussions with the energy crop provider, and encouraged local authorities to seek appropriate
authorizations. They were also used in decisions over future water bills and possible payment for
environmental services.
Hi
ta
ch
i
Chemica
l The cost of carbon is currently an external cost to the company as Japan is not yet involved in any carbon
trading schemes, and because there is no carbon tax. However, this could well change in the near future.
Hitachi Chemical also believes they may gain indirect reputational benefits from improved sustainability due
to reduced carbon emissions.
Rio
Tin
to The results of the Rio Tinto case suggest that the financial costs of conserving rainforest, borne by the company, are relatively small. However, the societal costs of conservation were very large, particularly the
opportunity costs borne by local communities whose access to forests to supplement their incomes was
restricted. Moreover, the benefits with the highest economic value (carbon storage and biodiversity) accrued
to global populations, with fewer benefits accruing locally. By looking at the distribution of costs and benefits,
the company is better able to determine appropriate compensation and benefit-sharing regimes that protect
local communities and identify potential income streams associated with benefits accruing to rich country
populations.
Road Tester Example 18: Valuation Step 7 (identifying benefits and costs)
7. Identify internal and external benefits and costs
57
This step involves aggregating and comparing all
the benefits and costs associated with the “with”
scenario(s). Costs should include capital, operating,
decommissioning and externality costs, as appropriate
for each assessment. All potentially significant benefits
(and costs) should be identified, even if they are not
valued monetarily.
It is also necessary to account for the time factor.
Streams of benefits and/or costs will accumulate over
time. However, economic theory suggests that the
further into the future costs and benefits accrue, the
less value they have in today’s terms – due to people’s
time preferences and the opportunity cost of capital.
This requires the use of a “discount rate” (essentially
the inverse of a compound interest rate), to bring
future values to their present-day value. Further
guidance on the use of discount rates can be found at
www.wbcsd.org/web/cev.htm.
Two common techniques for comparing (discounted)
costs and benefits are worthy of notice. Firstly, the
difference between total costs and benefits provides
the “net present value” (NPV), which is preferably
positive. Secondly, the ratio of benefits to costs gives
the +
/ !0' , which should be
greater than one. Finally, some means of comparing
costs and benefits, together with a range of other non-
monetized impacts and broader sustainability metrics
(such as multi-criteria analysis), should be considered.
Further guidance can be found at www.wbcsd.org/
web/cev.htm.
Veolia
En
vi
ronnemen
t The costs and benefits were compared over a 25 year period for each scenario, using a financial discount rate
of 5.5% and an economic discount rate of 3.5%. The financial analysis revealed scenario 2 (planting a single
species of energy crop) as the only financially viable energy crop scenario, with a benefit cost ratio (BCR) of
1.03. However, when economic (societal) costs and benefits were included, scenario 3 (the two crop species)
emerged as the most favorable option with a BCR of 17.4. This was due to the value of recreation and cultural
benefits which included increased biodiversity and visual variety provided by the mix of crops on the site.
Hi
ta
ch
i
Chemica
l Hitachi Chemical calculated the additional annual costs it might incur based on the various scenarios
examined, which assumed different costs of carbon and different emission levels of production. Internal
benefits could potentially accrue in future scenarios where the cost of investment in alternative production
processes is lower than the possible carbon cost.
W
ey
er
haeuse
r Weyerhaeuser found that the relative value of different land management scenarios varied depending
upon the time-frame considered. For example, for land holdings in Uruguay, management for hardwood
production would generate the highest annual cash flow. However, taking potential changes in carbon prices
into account, a mixed-use regime of trees for carbon sequestration, including dedicated energy crops and
hardwood production, would generate the highest net benefits for the company over a longer term.
Holci
m The scale of economic benefits associated with wetland restoration was assessed using a value transfer approach. The study showed that the value of biodiversity benefits that would be generated by the proposed
wetlands (£ 1.4 million), the recreational benefits of the lake (£ 350,000) and increased flood storage
capacity (£ 224,000) would, after deducting restoration and opportunity costs, deliver net benefits to the
local community of about £ 1.1 million, in present value terms. The value of carbon sequestration in these
wetlands was found to be relatively small, while the marginal benefits associated with wetland restoration far
exceeded the current benefits derived from agricultural production.
Road Tester Example 19: Valuation Step 8 (comparing benefits and costs)
8. Compare the benefits and/or costs
Part 2Part 1
Part 2: Methodology Stage 3 - Valuation
58 Guide to Corporate Ecosystem Valuation - A framework for improving corporate decision-making
This last step involves investigating how sensitive the
valuation results are to changes in key assumptions,
where uncertainty exists. Typical assumptions to test
for sensitivity include the number of people affected,
the magnitude of change in ecosystem service, and
real changes in price levels (for example, the amount
people are willing to pay for key goods and services,
the price of energy over time and the cost of carbon).
If value transfer techniques have been used, it is
particularly important to conduct a sensitivity analysis
which assesses the impacts of changes in key values,
as they typically represent imprecise estimates.
Sensitivity analysis usually involves determining
high, medium and low values for key parameters,
thus giving a range of possible results, depending
on future circumstances and conditions. Risk
assessments and calculations of statistical levels
of significance can be useful measures for these
calculations. Another approach to sensitivity analysis is
to determine “switching values”. These are the values
that a parameter needs to reach in order to change a
decision, or to alter the ranking of options from one
option in favor of another.
Veolia
En
vi
ronnemen
t High, medium and low estimates were determined for a number of values assessed. However, three core areas
of uncertainty were tested through sensitivity analysis. In the financial analysis, an increase in assumed market
value of energy crops by 33%, would mean that scenario 3 becomes financially viable as well as scenario 2.
When non-use values are excluded from the economic analysis, the overall BCRs for all three scenarios were
less than 0.5, with scenario 2 having the highest at 0.43. This highlights the considerable significance of the
non-use values. Finally, doubling the estimated number of site visitors, and taking a high estimate of their
willingness to pay, has little impact on the BCRs, highlighting their relative insignificance in relation to the
scenarios assessed.
Hi
ta
ch
i
Chemica
l Sensitivity analysis was a central part of the whole valuation process in that the scenarios assumed different
carbon prices (ranging from half to double the assumed mid-value) and emission factors (varying by 5% and
7.5%). The outcome showed how sensitive the assessment and possible strategic investment responses may
be to potential market price fluctuations.
Rio
Tin
to Due to uncertainty regarding certain parameters, extensive sensitivity analysis was undertaken. Changes were made to discount rates (2%, 5% and 10%), the time horizon (10, 30, 60 years), the willingness to pay (US$/
person/year) of OECD populations for rainforest conservation, carbon prices (US$ 4-20/ton CO2e), and the
success of developing ecotourism in the area. A form of sensitivity analysis was used to identify a suitable level
of compensation for local communities. It was estimated that if local communities received roughly one third
of revenue associated with Reduced Emissions from Deforestation and Forest Degradation (REDD) at modest
carbon prices (US$ 4/ton CO2e), they would not be worse off, and if they received roughly half of REDD
revenues, they would be significantly better off, compared to the “business as usual” scenario.
Road Tester Example 20: Valuation Step 9 (sensitivity analysis)
9. Apply sensitivity analysis
59
Helpful hints:
Engage with experts with extensive experience
in CEV to consider the broad range of potential
applications within your business.
Using maps, graphics and simple summary tables
can significantly enhance the communication of
the message and results.
If, at the outset, it is not clear what the results may
show, consider adopting a flexible approach to
targeting external stakeholders.
Thinking about how the CEV results
might be applied is a fundamental issue
both at the beginning of the process
(i.e. at the scoping stage) and after
ecosystem valuation has been carried
out. The intention of Stage 4 is to
outline different strategies which can
be used to help target the application
of credible results. It focuses on five key
areas: internal applications, external
applications, communicating the results,
dealing with confidentiality issues, and
verification of the results.
STAGE 4
Application
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Part 2: METHODOLOGY “How to conduct a CEV”
60 Guide to Corporate Ecosystem Valuation - A framework for improving corporate decision-making
Overview of strategic application of results
Applying the results internally
As already mentioned in earlier chapters, companies
can gain substantial internal benefits from conducting
a CEV – for example, sustaining and enhancing
revenues, saving costs and revaluing assets, together
with informing staff mindsets, behavior and actions.
To maximize the likelihood of achieving these
benefits, it is useful to think how the four generic
applications of CEV can be applied (trade-off analysis,
total valuation, distributional analysis, sustainable
financing and compensation analysis), and to consider
how the results can feed into existing company
analytical approaches. Both trade-off analysis and
total economic valuation can be readily applied. For
example, trade-off analysis can be used for option
appraisal to save costs and to inform the pricing
of products to enhance revenues. Total economic
valuation can be used to revalue landholdings and
inform risk assessments, thereby reducing operational
costs. In addition, sustainable financing analysis can
help identify and enhance revenue streams (such as
carbon and biodiversity credits).
In order to increase the likelihood of CEV results
being adopted internally, it is important to link the
process directly to existing company processes and
analytical approaches. There is considerable scope
to incorporate or add CEV values to most existing
approaches, and even to align them over time (see
Stage 5 – Embedding). Table 7 highlights the ways
in which linkages can be made between CEV and
corporate analytical approaches that are commonly
used for internal decision-making.
Strategic elements Description
Internal application Highlights use of the generic applications of CEV and links to existing business analytical
approaches to secure internal business benefits.
External application Covers the same strategy as above, but with more focus on securing external business benefits.
Communicating the results Provides advice on how best to communicate the results.
Confidentiality Outlines how to deal with confidentiality issues.
Verification Stresses the importance of verification of the results.
Table 6: Overview of strategic elements to consider
61
Table 7: Linking CEV results with company analytic approaches – internal focus
Corporate analytical approach Linkages with CEV
Monetar
y Management accounting CEV can inform management accounting techniques for assessing pricing decisions on
products, new revenue streams and cost savings etc, which are relevant to budgeting
and pricing decisions.
Full (environmental) cost
accounting
CEV can supplement full cost accounting approaches by putting monetary values on
social and environmental parameters.
Non-monetar
y Environmental management
systems
CEV outputs can supplement the assessment of environmental opportunities and risks
thereby saving costs, enhancing revenues and justifying and prioritizing environmental
management actions.
Ecosystem Services Review CEV can help evaluate and prioritize potential strategic outcomes from an ESR to
help manage ecosystem service risk and opportunities, delivering a range of business
benefits.
Multi-criteria analysis (MCA) CEV outputs are often included in MCAs to assist in company option appraisals where
monetary and non-monetary criteria can be evaluated together.
Risk assessments CEV outputs can be readily included in risk assessment when the probability of their
occurrence is determined, thereby saving costs and reducing liability.
Life cycle assessment (LCA) CEV derived monetary values can be directly linked to quantitative LCA outputs, to
inform sustainability assessments, reduce risks and costs, and justify product premiums
that enhance revenue.
Land management plans CEV is ideal to help identify and value the full range of true values associated
with different land uses, and to explore the costs and benefits of alternative land
management options.
Road Tester Example 21: Internal benefits
AkzoNobe
l AkzoNobel applied a trade-off analysis CEV to help inform the societal costs of three alternative paper chemicals.
The study compared the societal costs of negative environmental externalities relating to GHG, dust, SO2, NOX
and ammonia. The Figure below summarizes one set of results that came out of the analysis, which were linked
to a life cycle assessment, to help to inform internal decisions on how to manage supply chain risks and optimize
the sustainability of the company’s supply chain. In addition, use of CEV in this way will hopefully provide internal
benefits relating to sustained or enhanced profitability through enhanced product positioning, and improved
sustainability decisions for capital investment.
The results show minimum and maximum total societal costs (expressed as Euro per ton solid board) for
alternative sizing chemicals used in solid board production.
0
1
2
3
4
5
Total societal cost
(Eu
ro per
ton solid boa
rd
)
Greenhouse gases
Dust (PM2.5)
Sulphur dioxide
Nitrogen oxides
Ammonia
Product
A,
min
Product
A,
ma
x
Product B,
min Product B,
ma
x
Product C
,
min
Product C,
ma
x
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62 Guide to Corporate Ecosystem Valuation - A framework for improving corporate decision-making
Companies can also generate important external
benefit from conducting a CEV – for example,
assessing liability and compensation, measuring
share value, reporting company performance and
optimizing societal benefit, together with informing
stakeholder mindsets, behavior and actions.
As with internal business benefits, the four generic
CEV applications can be used to maximize the
likelihood of securing these benefits. Trade-off
analysis is particularly useful for identifying the ways
in which societal benefits can be optimized, when
choosing between alternative options for informing
stakeholders and regulators about actions and policies
aimed to enhance sustainable natural resource use
and management. Total valuation of landholdings and
natural assets can inform company share valuations. In
addition, distributional analysis, sustainable financing
and compensation analysis can all help in assessing
how much various stakeholders should contribute,
or receive as compensation, when company actions
enhance or decrease the supply of ecosystem services.
As with internal applications, it is important to link
CEV output and approach with existing company
processes and analytical approaches to enhance
the acceptance of external uses. Again there is scope
to both integrate values and align approaches (see
Stage 5 – Embedding), as summarized in Table 8.
Applying the results externally
Table 8: Linking CEV results with company analytic approaches – external focus
Analytical approach Linkages with CEV
Moneta
ry Financial accounting CEV can inform the valuation of fines, liabilities, new revenue streams and the value of
landholdings which can all feed into profit and loss accounts and balance sheets used for
external reporting purposes.
Economic cost-benefit
analysis
CEV results are ideal for assessing and potentially optimizing overall net benefits to society
of alternative options, as well as identifying winners and losers.
Economic (socio-economic)
impact assessment
This assessment requires different information (e.g. expenditure, income and jobs etc.),
but CEV output can supplement and inform socio-economic data.
Natural resource damage
assessment
CEV studies are commonly used to inform valuation of impact to natural resources for
compensation claims following incidents such as oil spills, coral damages etc.
Share price valuation CEV output can inform theoretical share price valuations, particularly if it identifies and
quantifies major new revenue, cost savings, liabilities and reputational impact.
Non-moneta
ry approache
s Company reporting CEV study output can currently add value as case studies in annual company reports, and
in the future, the monetary values could be routinely included.
Environmental & social
impact assessments (ESIA)
CEV can readily be used to supplement evaluation of baselines, impacts; mitigation and
enhancement measures; and compensation/offsetting packages. It is particularly useful to
assess cost and benefits of alternative options.
Strategic environmental
assessments
The CEV results can be used in the same way as for ESIAs, but the application would be a
more strategic, high-level perspective, covering a broader assessment.
Sustainability appraisals CEV results can represent or feed into one or more of the sustainability parameters used in
such appraisals to demonstrate the degree of sustainability.
Ecosystem Services Review CEV can help evaluate and prioritize potential strategic outcomes from an ESR to help
manage ecosystem service risk and opportunities with various external applications.
63
Rio
Tin
to Rio Tinto has found that application of CEV has presented new opportunities to identify ecosystem values and potential income streams that can be used to:
?? provide long-term sustainable income streams for conservation programs associated with large scale
mining operations;
?? provide long-term sustainable income streams for local communities that live and work in and around
protected areas, who may be disadvantaged by conservation programs;
?? demonstrate that Rio Tinto’s investment in conservation programs is transparent, equitable across
stakeholders, and commensurate with the value of the biodiversity impacts that are being offset.
GHD /
SA
W
at
er GHD / SA Water intends to use the CEV method in future catchment management planning within SA Water. The CEV provides a process for placing value on the services that the catchment provides to SA Water in
terms of natural water filtration and nutrient assimilation and the value of reinstating these services through
improved catchment management. The process also enables a more holistic view of catchment management
and enables valuation of broader benefits such as recreational and aesthetic values and carbon sequestration.
Road Tester Example 22: External benefits
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64 Guide to Corporate Ecosystem Valuation - A framework for improving corporate decision-making
However interesting, relevant or useful the results of
a CEV are, their ultimate impact on decision-making
(both internal and external) depends largely on how
well they are communicated. As a general principle,
the more open, inclusive, simple and transparent
the communication process and results, the more
likely the results will be accepted and used.
A fundamental requirement is to make the results as
clear and relevant as possible to the target stakeholder
audience, using language they understand and can
relate to.
A variety of options and tools exist for communicating
the results to a broad range of stakeholders (see
Table 9). Typically, a combination of approaches
should be adopted to get the message across to those
stakeholders deemed most appropriate to be targeted.
Considerable care and effort should be expended in
communicating the results to maximize the impact.
Key aspects to communicate include the context,
objective, methodology, stakeholder engagement,
results, verification and implications.
Table 9: Communicating results – how and to whom
Syn
gen
ta The output from the CEV is critical to assess the economic threshold (tipping point) in order to facilitate grower decision-making on field margin enhancement for native pollinators, and ultimately to promote broader
adoption. The information may also serve to educate consumers, university researchers, policy makers and other
governmental agencies to strengthen policy development relating to the provision of conservation buffers for
pollinators on agricultural lands. Syngenta understands that the future of agriculture ultimately depends
on protecting the environment and enhancing the livelihood of growers. They see CEV as a means to enhance
long-term agricultural productivity for themselves and the growers they serve, and also to provide society with
wider benefits.
Road Tester Example 23: Communicating the results
Communicating the results
Internal staff Business community
Suppliers,
customers &
sector
Local
communities,
land-owners &
general public
Shareholders Regulators & policymakers
Internal report
Technical report
Annual report
Meetings
Presentations /
articles
Website
News stories,
media campaigns
and advertizing
65
The amount of CEV information that is revealed
to external audiences depends both on legislative
requirements as well as the discretion and policies of
the company concerned and should seek to balance
the interests of commercial confidentiality and
public disclosure. Transparency is, however, a key
CEV principle to be followed where possible. When
disclosing results and values, one way of maintaining
a degree of confidentiality is to use indices and
percentages rather than absolute values.
Addressing confidentiality concerns
The extent to which CEV values should be verified
depends largely upon their proposed use and
dissemination. If the CEV is solely to be used internally,
verification is usually less of an issue. However, if
it is to be disseminated externally, some form of
verification is usually advisable. This will need to
be undertaken by a suitably-qualified individual
or organization, and should involve reviewing the
methodology, results and assumptions. In time,
specific verification guidelines will need to be
developed.
In the absence of formal verification procedures,
the credibility and reliability of CEV output will
be enhanced by:
Involvement of appropriate stakeholders during
the scoping, valuation and application stages;
Using an independent environmental economics
expert or organization to conduct or advise on
undertaking the CEV.
Verification of the values
Road Tester Example 24: Addressing confidentiality concerns
W
ey
er
haeuse
r Weyerhaeuser wanted to develop a standardized methodology to compare different forest management options
and understand trade-offs between different ecosystem services. They applied the CEV to two sites using the
“change in productivity” approach with quantities, market prices and costs. A cash flow index was produced,
wherein the base case is 100 and others are indexed relative to the base case. This approach enabled them to
compare the alternative options and share their output with stakeholders, without being concerned over any
sensitive or confidential information.
Management Regimes Cash Flow Index
Southeastern U.S.
Non-industrial private forest owners
Solid wood regime (southern yellow pine) 100
Industry standard
Solid wood (southern yellow pine) + biomass + hunting 170
Weyerhaeuser - USA
Solid wood (southern yellow pine) + biomass + hunting 226
Solid wood (southern yellow pine) + intercropping + biomass + hunting 274
Solid wood (southern yellow pine) + carbon sequestration + biomass + hunting
(low CO2e price - $5/Mt CO2e)
219
Solid wood (southern yellow pine) + carbon sequestration + biomass + hunting
(high CO2e price - $20/Mt CO2e)
237
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66 Guide to Corporate Ecosystem Valuation - A framework for improving corporate decision-making
Helpful hints:
Use company networking and newsletter
opportunities to communicate broadly within the
company, informing others on the value of the
approach.
Having completed a CEV, develop a strong
business case for further applications for example
incorporating aspects of CEV where appropriate
into (i) executive performance and review and
(ii) financial and management accounts.
Consider adapting the CEV approach so that it links
more closely with one or more of your existing
processes.
Identify external organizations or individuals with
whom your company can interact, to further
develop CEV topics internally.
This stage provides suggestions on
the actions that companies can take
to help ensure that CEV, if proven to be
of value, is embedded within company
processes and procedures.
STAGE 5
Embedding
Part 2: METHODOLOGY “How to conduct a CEV”
67
Overview of strategies for embedding
Holci
m Aggregate Industries UK, the subsidiary of Holcim that undertook the road test, is planning to write a business case report both for themselves and for Holcim, making the case for potential future applications. They consider
it necessary to understand emerging tools such as ecosystem valuation in order to: anticipate and save costs in
relation to potential future mineral planning requirements; streamline decision-making; and inform negotiations
for rehabilitation and aftercare requirements. Eventually, Holcim may use CEV routinely as a process to identify
restoration options with the greatest biodiversity and local livelihood benefits, forming part of their ESIA toolkit.
Road Tester Example 25: Getting internal buy-in
Strategies Description
Getting internal buy-in It is vital to develop a strong business case, and to identify champions at all levels within
the company who are willing to promote CEV.
Linking CEV to existing processes It is important to find ways to link CEV to existing processes, analytical approaches and
tools within the company.
Capacity building In order to stimulate the take-up of CEV it is essential to build capacity and awareness
across the company.
If CEV is to be successfully embedded into company
practice, the company must see that it has a clear
use and relevance. There needs to be buy-in from the
high-level managers who are responsible for making
decisions on company policy and practice, as well
as from the staff in specific technical, research and
operational units. Communicating the business case
for CEV to these groups, identifying “champions” who
will advocate for its use, and finding concrete areas for
the further application of CEV approaches can all help
in securing this buy-in.
A first step is to use this Guide to complete a
successful pilot study – a robust and relevant
application of CEV that delivers value to the company.
It will be important to critically appraise and articulate
the business benefits the CEV provides, or could yield.
A strong pilot study will need to be complemented
by a number of other elements in order to build a
foundation for embedding CEV. For instance, it is likely
to be necessary to develop a business case for further
applications.
Future applications of CEV in the company may or
may not be similar to the pilot study – either in their
scope and approach, or in the technical issue or
geographical area to which they are applied. Another
key step is therefore to identify CEV champions within
the company – ideally within senior management
(to facilitate uptake) as well as within other teams
and business units, to help escalate the embedding
process. Finally, it will be important to build
awareness about the functions of CEV and what types
of benefits it could bring to the company. This could
involve writing articles in newsletters and for company
internet sites, running workshops, etc.
Getting internal buy-in
Part 2Part 1
Part 2: Methodology Stage 5 - Embedding
Table 10: Overview of strategies for embedding CEV
68 Guide to Corporate Ecosystem Valuation - A framework for improving corporate decision-making
If CEV is to be assimilated by a company, it is advisable
to link it with existing company processes and
systems. In most cases this should be straight-forward;
for example, where an ESIA is being carried out, when
the company must respond to a particular regulatory
demand or request for information from shareholders,
or in cases where new market research is being
initiated. Other situations may be more challenging.
It may be desirable to develop CEV-based
performance indicators that align with other company
approaches (for example with EMS and company
sustainability reports). Some companies may wish to
develop an internal company version of the guidelines
– either a streamlined guide or a related framework,
tailored specifically to the company context.
Rio
Tin
to Rio Tinto plans to integrate the CEV approach with their existing biodiversity offset and Net Positive Impact (NPI) planning toolbox to improve the rigor of their existing methodology. The existing approach currently
calculates biodiversity losses and gains generated by development projects based on habitat quantity and
quality indicators.
ED
P EDP plans to link CEV with their European Eco Management Audit Scheme (EMAS), its environmental
management system. EMAS requires a communication plan with the public which the CEV has helped reinforce
and inform. As part of the CEV process, stakeholder engagement was conducted to collect local perception
regarding the hydro-system operation, impact on their use of the watershed, and to identify an optimum level
of social benefits through appropriate site management.
O
th
er
s Holcim hopes to link CEV more closely with their ESIAs. AkzoNobel and Hitachi Chemical plan to further explore
how to utilize the CEV thinking with current LCA methodologies. Lafarge and Holcim plan to use CEV for land
use planning and mine rehabilitation. Mondi plans to expand CEV to the Usutu catchment and extend the
valuation to include grasslands and wider biodiversity issues.
Road Tester Example 26: Linking to existing processes
Linking CEV to existing processes
69
Embedding CEV into company practice over
the longer term will require educating staff and
cultivating experts, to ensure that use of CEV as a
process continues to grow along with the company.
A first step will be to identify staff with appropriate
skills. There may already be qualified and experienced
environmental economists within the company
working on other matters.
Capacity building more broadly will be likely to
require internal training. Broad-based awareness
activities are advisable in order to promote the
approach to a wide audience within the company,
while specific training may be required for those staff
likely to be more closely involved in undertaking or
supervising CEVs.
Fully embedding the approach across a company may
require developing a resource team. This team could
either be located at the corporate level, or within a
specialized business unit. In some cases, team skills
can be developed through hiring new staff with the
right background, or through training of existing staff.
A “virtual network” of skilled staff across different
business units may be effective in some situations.
In others, it may be decided that the detailed skill set
required is best outsourced, for example, through
partnering with a consultant, NGO or university, or
even a combination of all of these.
ED
P EDP has decided to convert the approach and framework into a training kit for internal use, so it can help
the company to scale up its applications of CEV. Although road testing this Guide allowed EDP to gain a deep
understanding of the process, they recognize that external expertise and partnerships are still needed for
future projects.
Rio
Tin
to Rio Tinto has committed to a partnership with IUCN to provide a range of ecosystem and biodiversity-related skills, including in ecosystem service valuation.
Road Tester Example 27: Capacity building
Capacity building
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70 Guide to Corporate Ecosystem Valuation - A framework for improving corporate decision-making
The Economics of Ecosystems and Biodiversity
study (TEEB) – initiated by the G8+5 environment
ministers (2007-2010) – has emphasized the concept
of ecosystem valuation as a practical and influential
aid to decision-making. Companies must anticipate
that ecosystem valuation will be more consistently
incorporated into public policies, regulations,
and political decisions. Ecosystem values will be
increasingly considered by the finance sector and
business-to-business customers as they assess
the biodiversity and ecosystem- related risks and
opportunities of investments and supply chains.
In this respect, this Guide to Corporate Ecosystem
Valuation “operationalizes” TEEB’s key messages and
recommendations by providing a practical approach
for effective application at company level. There is,
however, still work to be done and areas that need
improvement, for example, the availability of values
in databases, standardization of values and valuation
techniques, and the development of more robust and
user-friendly valuation tools.
In a world that is increasingly carbon- and natural
resource-constrained, global companies with strong
brand positions face material risk as a direct result of
biodiversity loss and ecosystem degradation. By the
same token, these risks provide many new business
opportunities.
WBCSD encourages the business community to
proactively manage these risks and opportunities by:
1. Measuring, valuing, managing and reporting
biodiversity and ecosystem impacts and
dependence, i.e. know, understand and manage
their “footprint”.
2. Innovating and leading the development of new
(i) markets for ecosystem services and (ii) eco-efficient
goods, services & technologies.
3. Encouraging suppliers & purchasers – including
SMEs – to adopt “best” biodiversity and ecosystem
practices throughout their supply chain.
4. Entering into creative partnerships with
municipalities, governments, NGOs and the science
community for on-the-ground solutions.
5. When appropriate, advocating for and supporting
“smart” ecosystem regulation that reverses
degradation, leverages market forces, “levels
the playing field” for all and supports social and
livelihood benefits.
Corporate Ecosystem Valuation – and the use of
this CEV Guide – can support companies with all
these strategies and actions by better integrating
biodiversity and ecosystem considerations into core
corporate operations.
Next Steps
71
A list of key literature, toolkits and case studies which
relate to CEV are available on the WBCSD website
(see www.wbcsd.org/web/cev.htm). These include
briefing papers on CEV concepts and valuation
techniques, as well as a full set of summaries of the
CEV “road tests”. Such additional resources and
guidance aim to assist business managers, analysts,
and consultants conduct a CEV, for example, how they
can select and apply different valuation techniques.
The ESR website (www.wri.org/ecosystems/esr)
also provides a wealth of additional resources
covering ecosystem services and associated tools.
While by no means exhaustive, Box 10 lists a few
useful supporting documents, valuation guidelines
and benefit transfer databases. These and many others
can be accessed from the WBCSD website.
Resources
Box 10: Key supporting documents, guidelines and databases
Companion WBCSD documents:
?? WBCSD and IUCN (2007): “Markets
for Ecosystem Services – New
Challenges and Opportunities for
Business and the Environment:
A Perspective”. This highlights
new markets being developed for
ecosystem services and implications
for business.
?? WRI, WBCSD and Meridian Institute
(2008): “The Corporate Ecosystem
Services Review” (ESR). The ESR
is a structured method that helps
managers develop strategies related
to the risks and opportunities arising
from their company’s dependence
and impacts on ecosystems.
?? WBCSD (2009a): “Corporate
Ecosystem Valuation: A Scoping
Report”. This provides an introduction
to ecosystem service valuation and
examples of past CEV applications.
?? WBCSD (2009b): “Corporate
Ecosystem Valuation: Issue Brief”.
This explores the broader context
and concepts underlying CEV.
?? WBCSD (2009c): “Corporate
Ecosystem Valuation: Building the
Business Case”. This identifies ten
reasons why companies should
undertake CEV.
?? WBCSD (2007, revised in 2009 and
2010): “Global Water Tool”. This
tool maps a company’s water-related
risks and provides an inventory for
reporting on GRI’s water indicators.
?? WBCSD and WRI (2001, revised in
2004): “Greenhouse Gas Protocol
(GHG Protocol)”. This is the most
widely used international accounting
tool for government and business
leaders to understand, quantify, and
manage greenhouse gas emissions.
?? WBCSD (2008): “Measuring
Impact Framework”. This tool
helps companies understand their
contribution to society, inform their
operational and long-term investment
decisions, and have better-informed
conversations with stakeholders.
?? WBCSD and WRI (2008, revised in
2009): “Sustainable Procurement
of Wood and Paper-based Products
Guide”. This is a toolbox designed to
help corporate managers understand
and find the best advice on how to
purchase products originating from
the world’s forests.
Valuation guidelines:
?? Bateman et al (2009): “Valuing
Environmental Impacts: Practical
Guidelines for the Use of Value
Transfer in Policy and Project
Appraisal”. Report to Defra.
?? Business and Biodiversity Offsets
Program (BBOP) (2009): “Biodiversity
Offset Cost-Benefit Handbook”.
?? Defra (2007): “An introductory guide
to valuing ecosystem services”.
?? Dixon et al (1994): “Economic
analysis of environmental impacts”.
Published in association with the
Asian Development Bank and the
World Bank.
?? HM Treasury (2004): “Green Book”
for undertaking economic appraisals.
?? Pearce D, Atkinson G and Mourato S
(2006): “Cost Benefit Analysis and the
Environment: Recent Developments”.
OECD
?? Navrud S. and Brouwer R. (2007):
“Good practice guidelines in benefit
transfer of forest externalities”.
Draft report for EuroForex.
?? UK Department of Transport (2002):
“Economic valuation with stated
preference techniques: a manual”.
Valuation databases:
?? Benefits Table (BeTa): a database
developed for the European
Commission to estimate externality
costs (health and environmental)
of air pollution in Europe.
http://ec.europa.eu/environment/
enveco/air/pdf/betaec02a.pdf
?? Environmental Valuation Reference
Inventory (EVRI): currently the most
comprehensive database of ecosystem
service values with the greatest
coverage of UK studies.
www.evri.ca
?? ExternE: database of energy-related
externality values in Europe.
www.externe.info
?? National Oceanographic and
Atmospheric Administration (NOAA):
provides databases and annotated
bibliographies for coastal and marine
resources. http://marineeconomics.
noaa.gov/bibsbt/welcome.html
?? Natural Resource Conservation
Service (NRCS), US Department of
Agriculture: a database and listing
of unit value estimates for different
recreational activities.
www.economics.nrcs.usda.gov/
technical/recreate
?? Review of Externality Data (RED):
a listing of studies related to
environmental costs (from a life
cycle perspective) of energy and
other sectors.
www.red-externalities.net
Part 2Part 1
Resources
72 Guide to Corporate Ecosystem Valuation - A framework for improving corporate decision-making
We would like to extend our general appreciation to
the members of the Ecosystems Focus Area, whose
leadership and vision remain instrumental to the
WBCSD’s success.
Thanks to our Partners: James Spurgeon and Emily
Cooper (ERM); Joshua Bishop and Nathalie Olsen
(IUCN); William Evison and Chris Knight (PwC);
John Finisdore and Jeffrey Wielgus (WRI) for their
role in supporting the company road testers and for
reviewing and providing inputs into the Guide.
Thanks to our company road testers: Karin Andersson
Halldén (AkzoNobel), Sara Carvalho Fernandes (EDP),
Roberto Bossi (Eni), Ian Jameson (Eskom), Peter
Sutherland (GHD), Ayako Kohno (Hitachi Chemical),
Delia Shannon (Aggregate Industries UK, a subsidiary of
Holcim), Harve Stoeck (Lafarge), Peter Gardiner (Mondi),
Stuart Anstee (Rio Tinto), Jennifer Shaw (Syngenta),
Kieran Sikdar (US BCSD), Mathieu Tolian (Veolia
Environnement) and Venkatesh Kumar (Weyerhaeuser)
for road testing the Guide and for sharing their results
and findings.
A special thank you to James Spurgeon (ERM),
the principle writer of this document, for his
significant contribution and to Mikkel Kallesoe,
who conceptualized and coordinated the overall
CEV project during his secondment to WBCSD
from IUCN (2008-2010).
Finally, we would like to express our gratitude
to Lucy Emerton for editing this document.
Acknowledgements
Ecosystems Focus Area Core Team
Hitachi, Ltd. (co-chair) Hiroaki Nakanishi President and Representative Executive Officer
EDP – Energias de Portugal, S.A. Antonio Mexia Chief Executive Officer
Holcim Ltd. Markus Akermann Chief Executive Officer
Mondi David Hathorn Chief Executive Officer
Natura Cosméticos S.A. Alessandro Carlucci Chief Executive Officer
Rio Tinto plc Tom Albanese Chief Executive Officer
SGS S.A. Christopher Kirk Chief Executive Officer
Syngenta International AG Michael Mack Chief Executive Officer
WBCSD Secretariat
James Griffiths, Managing Director
Mikkel Kallesoe, Program Manager
Eva Zabey, Assistant Program Manager
Violaine Berger, Assistant Program Manager
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3 WBCSD, IUCN, WRI and Earthwatch. 2006. Business
and Ecosystems: Ecosystem Challenges and Business
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4 TEEB – The Economics of Ecosystems and Biodiversity.
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6 Madsen et al. 2010 cited in TEEB for Business.
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7 WBCSD. 2010. Vision 2050. The new agenda for
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Investment. 2010. Universal ownership: Why
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9 “The next environmental issue for business: McKinsey
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10 Ibid. reference 1
11 Adapted from: Pagiola, et al. 2004. “Assessing the
economic value of ecosystem conservation”. The World
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12 Waage, Stewart and Armstrong. 2008. Measuring
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