This Insight was written by Dr. Brent Matthies.
On this International Day of Forests, we think that it is important to highlight the exciting work related to forests as natural capital. Indufor has been actively engaged in the discourse around natural capital and abiotic and ecosystem services. Our work has included looking to engage companies in analysing their natural capital impacts and dependencies in our ongoing projects, but also planning and sponsorship of public seminars, and teaching by our consultants in capacity building courses. The recent developments in the EU Directive on non-financial reporting and commitments by companies and governments through the New York Declaration on Forests related to natural forest loss, mean that these activities are increasingly relevant to corporate value creation. Indufor is well-placed to build capacity necessary to meet the needs of these emerging corporate considerations.
The EU Directive on disclosure of non-financial and diversity information (2014/95/EU) requires large companies, those listed on EU markets or operating in the banking and insurance sectors, to identify and disclose information on the relevant environmental and social impacts by 2018. Together with voluntary reporting commitments, these requirements present an opportunity for companies to reduce environmental and social impacts and concurrently increase resource use efficiency. To improve reporting on natural capital impacts and dependencies, specifically related to forests, various programs have developed means for measuring impacts across the corporate value chain (see CDP Forests report for 2016).
Indufor has been active in seeking to educate and develop capacity around these impacts; especially as they relate to natural capital and ecosystem services provisioning. Our capacity building activities have provided some important take-away messages and provoked interesting responses from participants. To enhance our outreach on these topics, we have recently joined the Natural Capital Coalition as a Training and Technical Advisor. The coalition is a group of like-minded companies, institutions and consultancies looking to harmonize the approach taken in the private sector towards natural capital accounting and valuation. We share a few of these from recent seminars and courses in this blog, and then highlight some of the emerging considerations that we see for companies in the future.
In October 2016, we sponsored a seminar critiquing the usefulness and practicality of the ecosystem service concept, namely focusing on the challenge of valuation. Speakers from the Stockholm Resilience Institute, the University of Helsinki, and the Finnish Environment Institute (SYKE) participated. The take-away messages were:
- Market prices underestimate the value of ecosystem service provisioning – meaning that the exchange value is only part of the value creation opportunity for companies. Other critical considerations in the discussion of value are use and insurance value of ecosystems.
- Valuation has largely ignored use, and, in doing so, governance of use throughout the ecosystem service cascade – meaning that valuation will not address benefit distribution and there is a need for greater recognition of challenges related to use value (i.e. value-in-use).
- There are still considerable challenges inherent to valuation methods currently employed – meaning that valuations are still being improved and require careful consideration of the results’ intended use.
Indufor and our project consortium partners recently kicked-off piloting of the Natural Capital Coalition’s Protocol in Rwanda (see Figure 1). During the visit, we worked with local stakeholders and interested parties to engage around the development of natural capital accounting and valuation in the public and private sectors. Key take-aways from the kick-off mission, and particularly from the World Bank’s Wealth Accounting and Valuation of Ecosystem Services (WAVES) workshop, were:
- Government and other stakeholders are committed to natural capital integration in the relevant sectors, and have recognizable interest in natural capital accounting as a key measure for policies to promote sustainability;
- Awareness of natural capital accounting in Rwanda is already high and continues to increase; and
- Data is fundamental – challenges being that it is fragmented and spread over a varied number of sources.
Figure 1 Rwandan natural capital site visit.
Description: Rwandan landscapes with agriculture, forestry and watershed management with natural capital dependencies and impacts.
Dr Brent Matthies from Indufor, has been active capacity building around natural capital and ecosystem services in collaboration with Dr Jette Bredahl Jacobsen from the University of Copenhagen and Dr Dalia D’Amato from the University of Helsinki Courses have been taught at the University of Helsinki and the Latvia University of Agriculture. In Figure 2, we highlight the responses of participants to the Latvian course about the practicality of the capacity building materials. Indufor is now active in making these ideas available for corporate training.
Figure 2 Responses from previous participants in Latvia about the usefulness and practicality of course materials.
Emerging Considerations for Companies
The discussion around the ecosystem services concept, and its relationship to the value creation (and destruction) activities of companies, is evolving quickly. Indufor is at the forefront of that discourse. To continue our involvement, we are constantly engaging with research organizations and working to develop our own knowledge products. This helps us to remain relevant and to provide up-to-date information for our clients. Recent discussions have led to the identification of some emerging challenges on these topics:
- Integration and recognition of the value of risks and opportunities associated with natural capital stocks and abiotic and ecosystem service flows;
- Recognition of the flow of value beyond the company-customer exchange, to include service use and the spatial and temporally dynamic nature of environmental impacts (i.e. changing based on customer knowledge and interaction with the product over space and time);
- How to recognize and communicate environmental impacts in a service economy – what is relevant to the customer experience (Figure 3)? Value destruction, not only creation, is increasingly relevant.
Figure 3 Corporate value creation and destruction are an important consideration in the evolving service economy (Adapted from Matthies et al. (2016) in Journal of Cleaner Production).
If you are interested in engaging with Indufor on these activities or to learn more, please contact Dr Brent Matthies. Indufor offers a range of support opportunities, including hiring monthly consulting hours with an assigned corporate account manager. We would be happy to discuss the most appropriate approach to meet your needs.