WRI Publications Feed: Mainstreaming Ecosystem Services Initiative (MESI)

Insights from the Field: Forests for Species and Habitat

Kevin Lustig — Mon, 13 Feb 2012 10:22:56 -0500

Summary

Market-based mechanisms focused on candidate species conservation, also known as pre-compliance conservation, can provide preemptive and cost-effective interventions prior to a species becoming listed under the Endangered Species Act (ESA).
To advance candidate conservation incentive programs, the World Resources Institute (WRI) is working with its partners to build demand, supply, and transactional infrastructure through a pilot initiative in the nonfederally listed range of the gopher tortoise (Gopherus polyphemus) in the southern forests of the United States.
This innovative approach strives to create a scalable, voluntary, and science-based marketplace where conservation credits can be bought and sold prior to the enactment of a regulatory requirement, resulting in additional acres of southeastern forests being managed for habitat and species conservation.
Through this pilot initiative, landowners with southern pine forests capable of supporting healthy populations of the imperiled gopher tortoise can receive payments to conserve and manage their forests. These payments and stewardship activities are designed to offset habitat disturbance elsewhere and may help preclude the species from becoming listed as threatened or endangered under the ESA.
A candidate conservation marketplace may allow federal and private project developers to manage their environmental risk by investing in conservation on private lands in return for regulatory certainty from the U.S. Fish and Wildlife Service (USFWS). This process can help these stakeholders avoid the potential for costly project development delays and litigation since it front-loads much of the ESA review process and gives entities greater regulatory certainty.
Interest in candidate conservation incentive programs is rapidly growing in the private, public, and nongovernmental organization sectors as changes in land use across the country spark new challenges in balancing ecosystem management with residential and commercial development, national security, energy infrastructure, and climate change.

Nature in Performance:Integrating Ecosystem Services into Business Performance Systems

Kevin Lustig — Wed, 08 Feb 2012 09:37:16 -0500

Executive Summary

In 2008, the World Resources Institute (WRI), in collaboration with the World Business Council for Sustainable Development (WBCSD) and the Meridian Institute, published the Corporate Ecosystem Services Review (ESR). The ESR is a structured method that helps managers develop strategies to address business risks and capture opportunities arising from their company’s dependence and impact on ecosystems.

Over the course of the past few years, a number of business managers have inquired about how to integrate the ESR or, more fundamentally, considerations of ecosystem services into their existing business performance systems. Business performance systems are the range of tools, methods, techniques, approaches, and practices used by managers to guide, measure, monitor, and improve corporate performance. Examples include corporate strategy development procedures, product design guidelines, environmental management systems, environmental impact assessments, environmental and social impact assessments, environmental audits, and sustainability reporting.

Most companies already have their own established business performance systems. The question managers are now asking is “How can considerations about ecosystem services and their impacts on the bottom line be integrated into our existing systems?” This publication tackles this and a series of related questions. Key messages include:

Ecosystems provide businesses—as well as people and communities—with a wide range of benefits known as ecosystem services. Ecosystem services matter to companies because they are intimately linked in two fundamental ways. First, businesses depend upon ecosystems and the services ecosystems provide. Second, businesses impact ecosystems and the services ecosystems provide. These two linkages can pose a number of operational, regulatory/legal, reputational, market, or financing risks and opportunities to a company.
Basic principles that guide how to integrate ecosystem service considerations into business performance systems, regardless of the system, include: (1) consider all ecosystem services; (2) assess dependence; (3) identify opportunities; (4) look beyond the company boundaries; (5) engage stakeholders and experts; and (6) manage with incomplete data.
Ecosystem service considerations are relevant to a variety of business performance systems, including corporate strategy development processes, product design guidelines and life-cycle assessments, environmental and social impact assessments, environmental management systems, corporate sustainability reporting, and investment screening processes.
The ISO 14001 guidance on environmental management systems contains at least four components into which ecosystem service considerations could be readily inserted: (1) environmental policy, (2) aspects review, (3) objectives and targets, and (4) management review.
The Global Reporting Initiative (GRI) reporting framework contains at least four guidance components into which ecosystem service considerations could be readily inserted: (1) materiality, (2) sustainability context, (3) organizational profile and strategy, and (4) performance indicators.
For further guidance and reference, a number of scientific assessments, business tools, and working groups exist and can help business managers integrate ecosystem services into their business performance systems.

The Corporate Ecosystem Services Review: Guidelines for Identifying Business Risks & Opportunities Arising from Ecosystem Change

Suzanne Ozment — Tue, 07 Feb 2012 16:32:54 -0500

Summary

Ecosystems provide businesses with numerous benefits or “ecosystem services.” Forests supply timber and wood fiber, purify water, regulate climate, and yield genetic resources. River systems provide freshwater, power, and recreation. Coastal wetlands filter waste, mitigate floods, and serve as nurseries for commercial fisheries.

However, human activities are rapidly degrading these and other ecosystems. The Millennium Ecosystem Assessment— the largest audit ever conducted of the condition and trends in the world’s ecosystems—found that ecosystems have declined more rapidly and extensively over the past 50 years than at any other comparable time in human history. In fact, 15 of the 24 ecosystem services evaluated have degraded over the past half century. The Assessment projected further declines over coming decades, particularly in light of population growth, economic expansion, and global climate change. Left unchecked, this degradation could jeopardize future economic well-being, creating new winners and losers within the business community.

Ecosystem degradation is highly relevant to business because companies not only impact ecosystems and the services they provide but also depend on them. Ecosystem degradation, therefore, can pose a number of risks to corporate performance as well as create new business opportunities. Types of risks and opportunities include:

Operational

Risks such as higher costs for freshwater due to scarcity, lower output for hydroelectric facilities due to siltation, or disruptions to coastal businesses due to flooding
Opportunities such as increasing water-use efficiency or building an on-site wetland to circumvent the need for new water treatment infrastructure

Regulatory and legal

Risks such as new fines, new user fees, government regulations, or lawsuits by local communities that lose ecosystem services due to corporate activities
Opportunities such as engaging governments to develop policies and incentives to protect or restore ecosystems that provide services a company needs

Reputational

Risks such as retail companies being targeted by nongovernmental organization campaigns for purchasing wood or paper from sensitive forests or banks facing similar protests due to investments that degrade pristine ecosystems
Opportunities such as implementing and communicating sustainable purchasing, operational, or investment practices in order to differentiate corporate brands

Market and product

Risks such as customers switching to suppliers that offer eco-certified products or governments implementing new sustainable procurement policies
Opportunities such as launching new products and services that reduce customer impacts on ecosystems, participating in emerging markets for carbon sequestration and watershed protection, capturing new revenue streams from company-owned natural assets, and offering eco-labeled wood, seafood, produce, and other products

Financing

Risks such as banks implementing more rigorous lending requirements for corporate loans
Opportunities such as banks offering more favorable loan terms or investors taking positions in companies supplying products and services that improve resourceuse efficiency or restore degraded ecosystems.

Unfortunately, companies often fail to make the connection between the health of ecosystems and the business bottom line. Many companies are not fully aware of the extent of their dependence and impact on ecosystems and the possible ramifications. Likewise, environmental management systems and environmental due diligence tools are often not fully attuned to the risks and opportunities arising from the degradation and use of ecosystem services. For instance, many tools are more suited to handle “traditional” issues of pollution and natural resource consumption. Most focus on environmental impacts, not dependence. Furthermore, they typically focus on risks, not business opportunities. As a result, companies may be caught unprepared or miss new sources of revenue associated with ecosystem change.

The Corporate Ecosystem Services Review (ESR) is designed to address these gaps. It consists of a structured methodology that helps managers proactively develop strategies to manage business risks and opportunities arising from their company’s dependence and impact on ecosystems. It is a tool for strategy development, not just for environmental assessment. Businesses can either conduct an Ecosystem Services Review as a stand-alone process or integrate it into their existing environmental management systems. In both cases, the methodology can complement and augment the environmental due diligence tools companies already use.

The Ecosystem Services Review can provide value to businesses in industries that directly interact with ecosystems such as agriculture, beverages, water services, forestry, electricity, oil, gas, mining, and tourism. It is also relevant to sectors such as general retail, healthcare, consulting, financial services, and others to the degree that their suppliers or customers interact directly with ecosystems. General retailers, for example, may face reputational or market risks if some of their suppliers are responsible for degrading ecosystems and the services they provide.

This publication describes the five steps for performing an Ecosystem Services Review. It provides an analytical framework, case examples, and helpful suggestions for each step. It concludes by highlighting a number of resources managers can use when conducting an ESR, including a “dependence and impact assessment” spreadsheet, scientific reports, economic valuation approaches, and other issue-specific tools.

As of 2012, an estimated 300 companies have used the Ecosystem Services Review. In addition, complementary tools and guidance now exist to help companies more fully assess business risks and opportunities emerging from ecosystem change. For example, in 2011 the World Business Council for Sustainable Development released the Guide to Corporate Ecosystem Valuation (CEV), which provides information on how to quantitatively, or in some cases monetarily, assess risks and opportunities related to ecosystem services. CEV can therefore be a logical next step after undertaking an ESR. The Economics of Ecosystems and Biodiversity (2010) highlighted new examples of the linkages between business and ecosystem services. The ESR remains a fundamental starting point for companies to assess business risks and opportunities related to ecosystem change.

Global degradation of ecosystems and the services they provide threatens to alter the landscape in which business operates. The Ecosystem Services Review is a proactive approach for companies to manage the risks and opportunities that are emerging. Furthermore, by helping companies make the connection between healthy ecosystems and the bottom line, it will encourage not only more sustainable business practices, but also business support for policies to protect and restore ecosystems.

WRI developed the ESR in collaboration with the Meridian Institute and the World Business Council for Sustainable Development (WBCSD). Five WBCSD member companies—Akzo Nobel, BC Hydro, Mondi, Rio Tinto, and Syngenta—road-tested the methodology, providing feedback and case examples. Since 2008, an estimated 300 companies have used the Ecosystem Services Review. Yves Rocher, Lafarge, and CEMEX have also contributed ESR case studies to demonstrate the experience and results of the method.

Insights from the Field: Forests for Climate and Timber

Maggie Barron — Mon, 06 Feb 2012 12:25:59 -0500

The Carbon Canopy is a novel partnership among companies, landowners, and nongovernmental organizations (NGOs) that seeks to leverage markets for ecosystem services to increase the area of southern U.S. forests certified as sustainably managed. The partnership aspires to sustain southern forests for their economic, climate, water, and other benefits.

The Carbon Canopy’s first focus has been on linking forest carbon offset generation and certified forest management, wherein carbon offset revenue is designed to compensate woodland owners for the cost of certification and provide an attractive new revenue stream.
The Carbon Canopy’s experience to date provides a number of insights for other organizations seeking to build and expand markets for forest carbon offsets linked with forest certification. These insights were gleaned from the authors’ observations as well as interviews with several members of the Carbon Canopy partnership, including landowners, buyers, and NGOs. These insights apply to building demand, ensuring supply, and creating the transactional infrastructure for forest carbon offsets and certified saw timber or wood fiber.
To build robust demand, companies, NGOs, and other organizations seeking to replicate the approach of combining forest carbon offsets and certification should—
- Actively recruit buyers; and
- Secure an anchor buyer early on.
- To ensure sufficient supply of offsets and certified timber, these organizations should—
- Invest in woodland owner education;
- Make the business case to woodland owners;
- Find upfront financing; and
- Be sure to engage all parties with claims on the land.
To create an efficient transactional infrastructure, these organizations should—
- Select forest management and carbon offset certification standards early on;
- Select standards that are high quality and that facilitate market participation; and
- Leverage existing resources and landowner networks.

Gaining Ground: Increasing Conservation Easements in the U.S. South

Maggie Barron — Tue, 13 Sep 2011 12:29:18 -0400

Summary

A “conservation easement” is a voluntary, legally enforceable land preservation agreement between two parties wherein a landowner sells or donates the development rights to a tract of land to a qualified holding organization, such as a land trust, effectively preventing forest conversion or other stipulated activities, usually in perpetuity.
Conservation easements are attractive to conservation organizations and funders because such agreements often offer a more cost-effective means of securing land under some form of conservation status. Easements typically cost at least 40 percent less per acre than outright land purchases.
Conservation easements have four major benefits to landowners: (1) they allow the retention of private ownership, (2) they provide a high degree of flexibility in terms of meeting landowner management and conservation objectives, (3) they allow active forest management, and (4) they offer financial benefits via income, estate and property tax reductions, and potential revenues from existing and emerging ecosystem service markets.
Conservation easements have become an increasingly popular land conservation approach in the United States. The amount of land nationwide under conservation easement has grown from approximately 500,000 acres in 1990 to more than 30 million acres in 2011.
However, the southern United States currently has a disproportionately low share of the nation’s private land under conservation easement. Although the South constitutes approximately 37 percent of the private land area in the United States, to date it has only 18 percent of the country’s total conservation easement acres. The south also has a disproportionately low share of the total number of easements in the U.S.; only approximately 9 percent of the total number of easements in the country are located in the South.
Key barriers to greater uptake of easements in the South and elsewhere include: (1) landowner misconceptions about what easements are and what easement agreements entail, (2) landowner perceptions that the financial costs of easements outweigh the benefits, (3) landowner concerns about the perpetual nature of most conservation easement agreements, and (4) limited financial and staffing resources by holding entities or land trusts to purchase easements, in addition to the small number of institutional buyers.
There are three main ways these barriers can be overcome: (1) increase resources and capabilities of land trusts, (2) increase financial benefits and contract length flexibility, and (3) strengthen landowner education in order to correct misconceptions.
This issue brief is intended to provide an overview for conservation professionals and conservation funders in the South of the current status of conservation easements in the region relative to the rest of the United States, and how easement use can be increased. It is also intended for landowners interested in exploring conservation easements for their own properties. Although this brief is part of a series dedicated to southern U.S. forests, the ideas presented here could be applied to a spectrum of ecosystems throughout the United States.

Forests for Carbon: Exploring Forest Carbon Offsets in the U.S. South

Maggie Barron — Thu, 01 Sep 2011 16:34:42 -0400

Southern U.S. forests remove carbon dioxide from the atmosphere and store it in the form of carbon in leaves, roots, branches, trunks, soil, and woody debris and other plant litter through a process known as “carbon sequestration.” Through this process, southern forests and other woodlands play a role in regulating Earth’s climate and moderating the effects of global climate change.
Emerging voluntary and compliance markets often have provisions for greenhouse gas emission reductions or emissions avoided by preventing forest conversion or changing forest management practices. These reductions or avoided emissions are considered “forest carbon emission reductions.”
A “forest carbon offset” is a metric ton of carbon dioxide equivalent (CO2e), the emission of which is avoided or newly sequestered and is purchased by greenhouse gas emitters as a cost-control mechanism to compensate for emissions occurring elsewhere. Four types of forest carbon offset projects exist—reforestation, afforestation, forest conservation/avoided conversion, and improved forest management.
Forest carbon offsets can create an incentive for southern woodland owners to engage in land management practices that retain or restore forests and bolster forest carbon sequestration capacity.
Forest carbon offset projects must meet a number of quality criteria if they are to become credible, eligible for markets, and financially feasible for southern woodland owners. The main quality criteria include: assurance that the offset is real (including handling the issue of negative leakage), additionality/surplus, verifiability, permanence, and enforcement.
Recently, a number of carbon offset standards have emerged that adhere to these quality criteria. These standards provide a detailed list of offset project eligibility requirements, or “protocols,” as well as methods for quantifying and verifying a project’s net emissions impact. These standards seek to provide consistency in determining offset eligibility and quantification, improve offset credibility, and lower transaction costs for offset providers.
At present, from the financial standpoint of many southern woodland owners, income from forest carbon offsets alone is likely insufficient to outcompete real estate development. However, depending on landowner management goals and circumstances, income from forest carbon offsets might be sufficient in some instances to help pay incremental costs of sustaining forests, such as property taxes or sustainable forest management certification.
Forest carbon offset markets, like all other markets, require robust demand, adequate supply, and good transactional infrastructure. In light of these three conditions, southern woodland owners can take several initial steps to explore and prepare for existing and upcoming markets: (1) monitor market demand for forest carbon offsets, (2) conduct a solid forest inventory to assess the potential to supply forest carbon offsets, (3) engage in project development, and (4) enroll in a credible offset registry.

Current Use Valuation Programs: Property Tax Incentives for Preserving Local Benefits of Forests

Kathy Doucette — Mon, 13 Jun 2011 10:59:07 -0400

Summary

This paper explores current use valuation programs as one tool for conserving and fostering sustainable management of southern U.S. forests under private ownership. The brief identifies key constraints on existing programs and suggests measures that could be implemented to enhance program effectiveness.
As a result of rising property taxes on lands under development pressure, nonindustrial private forestland owners in the South often resort to selling all or a portion of their properties to pay tax bills. Rising property taxes also reduce the profitability of timber production and induce corporate and industry landowners to engage in real estate sales as an alternative activity.
Current use valuation programs are one way that states and counties in the South are encouraging landowners to forgo unwanted development sales. Under these programs, enrolled forest and agricultural lands are assessed not at their fair market value but at their value for current uses. This lowers the tax bill for landowners, improves the profitability of timber production, and helps reduce development pressure.
Though current use valuation programs in one form or another are authorized by statute in all southern states, the programs’ general implementation and programmatic effectiveness is often limited by perceived negative fiscal impacts, minimal economic benefits to landowners relative to conversion, land speculation, and lack of promotion of sustainable forest management.
With respect to fiscal impacts, research shows that while current use valuation programs may cause a short-term loss of revenue, preserving these lands can actually result in positive, long-term fiscal benefits. This is because the cost of providing community services and public infrastructure on lands converted to residential use often exceeds the property tax revenues generated. Making counties more aware of this fact can help overcome reluctance to offer current use valuation.
Changes that can increase the overall implementation and programmatic effectiveness of current use valuation programs include state reimbursement funds for short-term reductions in tax revenues, longer covenant terms, allowances for ecosystem service management, and the inclusion of marginal or idle cropland transitioning into forest.
With these modifications, current use valuation programs can be a tool for not only keeping forest as forest but also stimulating a wide range of beneficial management activities, such as reforestation and management of ecosystem services.
This brief is designed to inform state, county, and municipal decisionmakers; land-use planners; and other stakeholders working to conserve and sustainably manage forests.

Forests at Work: A New Model for Local Land Protection

Maggie Barron — Thu, 31 Mar 2011 15:04:03 -0400

Summary

To date, traditional public land acquisition programs have played a relatively small role in the conservation and sustainable management of southern U.S. forests. The South trails behind other U.S. regions in both the percent of the land base and the acres per capita conserved in parks, wildlife refuges, wilderness, and other protective categories.
Working forests offer a new model for scaling up the amount of publicly protected forestland in the South. “Working forests” are defined as forests that are actively managed to generate revenue from multiple sources, including sustainably produced timber and other ecosystem services, and thus are not converted to other land uses such as residential development.
A public entity can “acquire” a working forest in two ways. It can purchase all of the property rights associated with a forest through a fee simple, or outright, purchase of the land from willing sellers. Alternatively, a public entity can purchase just the development rights to the forest through a conservation easement, leaving ownership of all the other rights in the hands of private landowners. This brief uses the term “acquire” to cover both fee simple and conservation easement purchases.
Public entities can finance working forests via public bonds, sales taxes, or other means. In return, revenues from working forests can be used to offset acquisition costs over time, cover stewardship expenses, and/or pay taxpayers “dividends” in the form of tax rebates or some other equitable revenue sharing scheme after expenses are covered.
Citizen advisory boards could shoulder much of the administrative and management responsibility for the working forest, thereby keeping management and financing local.
Revenues from timber, recreation, and other ecosystem service payments, increases in tax revenue due to higher surrounding property values, and avoided development costs are among the economic benefits generated by working forests.
Scaling up working forests in the South would necessitate further documentation of the economic benefits of the model relative to traditional acquisition programs, broadening the scale and scope of available financing options, offering favorable tax benefits, and educating woodland owners about the benefits of working forests.
This issue brief is intended as a resource primarily for local public officials in the southern United States who are interested in a more cost-effective approach to acquiring and managing public forestland. It provides readers with several economic scenarios that examine the community benefits of a working forest model and discusses the opportunities for scaling up the model in the region.

Forests for Water: Exploring Payments for Watershed Services in the U.S. South

Maggie Barron — Mon, 28 Feb 2011 12:35:36 -0500

Summary

The forested watersheds of the southern United States provide a number of benefits—including water flow regulation, flood control, water purification, erosion control, and freshwater supply—to the region’s citizens, communities, and businesses.
The loss and degradation of forests can reduce their ability to provide these watershed-related ecosystem services.
Payments for watershed services provide landowners financial incentives to conserve, sustainably manage, and/or restore forests specifically to provide one or more watershed-related ecosystem services. Such payments typically involve downstream beneficiaries paying upstream forest owners or forest managers.
There are three general types of payments for watershed services: (1) voluntary payments by downstream entities to upstream landowners to reduce the costs of doing business, (2) payments made to minimize an entity’s cost of meeting a regulation, and (3) payments made to generate public benefits. A number of instances of each type of payment have been piloted in the United States, Latin America, and elsewhere.
Many payments for watershed services share a common trait: they are investments in “green infrastructure” instead of “gray infrastructure.” In other words, they are investments in forests and natural, open space instead of in human-engineered solutions to address water quantity or quality problems. In many instances, investments in green infrastructure can be more cost effective than investments in gray infrastructure.
Entities that may have a business case for making a payment for watershed services include beverage companies, power companies with hydroelectric facilities, manufacturers that rely on clean freshwater supplies for processing, housing developers, public and private wastewater treatment plants, city and county governments, drinking water utilities, and public departments of transportation, among others.
These entities can pursue a number of steps to capture the potential benefits of payments for watershed services, including identifying those forests most responsible for their clean water supplies, conducting economic analyses of green versus gray infrastructure, and exploring public/private financing partnerships.
Upstream landowners can pursue a number of steps to advance— and ultimately benefit from—payments for watershed services, including developing an understanding of the watershed-related ecosystem services their forests provide, actively looking for emerging payment opportunities, and collaborating with other landowners to achieve economies of scale when engaging beneficiaries of the services their forests provide.
This issue brief is intended as an introductory resource primarily for entities that depend upon stable supplies of clean freshwater in the southern United States and are looking for cost-effective approaches to sustain this supply. This brief also provides information to southern landowners interested in potential revenue streams generated by conservation and sustainable management of forests.

Keeping Forest as Forest: Incentives for the U.S. South

Maggie Barron — Fri, 28 Jan 2011 15:25:05 -0500

Summary

Forests of the southern United States provide a wide variety of benefits—collectively known as “ecosystem services”—to people, communities, and businesses. For example, they provide timber, help purify water, control soil erosion, help regulate climate by sequestering carbon, and offer outdoor recreation, hunting, and fishing opportunities.
Over the coming decades, several direct drivers of change are expected to negatively affect the quantity and quality of southern forests and thus their ability to provide ecosystem services. These direct drivers include suburban encroachment, unsustainable forest management practices, climate change, surface mining, pest and pathogen outbreaks, invasive species, and wildfire.
A number of incentives, markets, and practices — collectively called “measures” — could help address these drivers of change and promote southern forest conservation and sustainable management. These measures fall into five major categories: land use instruments, fiscal incentives, liability limitations, market incentives, and education/capacity building. With such measures in place, these forests could continue to supply needed ecosystem services and the native biodiversity that underpins these benefits.
The South has experience with many of these measures. A few have been around for awhile, such as parks and protected areas, while many are relatively new, such as payments for watershed protection. However, adoption of even some of the most traditional measures is still relatively low in the South. Why is this the case? What can be done to increase adoption of these measures? Are there other innovative ideas that hold promise for more widespread application?
This issue brief sets the stage for these questions and introduces subsequent installments of the Southern Forests for the Future Incentives Series, which will answer these and related questions. This brief is designed for conservation and land use professionals, decision makers, and concerned citizens.