WRI Publications Feed: All

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.

2011 Eco-Audit of the Mesoamerican Reef Countries

Maggie Barron — Mon, 06 Feb 2012 15:59:57 -0500

The Mesoamerican Reef (MAR) provides a diverse array of goods and services to the people of Belize, Guatemala, Honduras, and Mexico. It is our shared heritage. Unfortunately, the health of the reef is declining, as documented by the 2008 and 2010 Report Cards published by the Healthy Reefs Initiative. The decline stems, at least in part, from inadequate management of threats to coral reefs. This Eco-Audit evaluates our efforts to protect and sustainably manage the region’s coral reefs; celebrates management success stories; and documents the extent to which recommended management actions have been implemented in Belize, Guatemala, Honduras, and Mexico. It seeks to catalyze faster, more effective management responses and to increase accountability within the public and private sectors and among nongovernmental organizations (NGOs).

An Innovative, Rigorous Process

The Healthy Reefs Initiative (HRI), in collaboration with the World Resources Institute (WRI) and local partners, developed and implemented this first-ever multinational Eco-Audit of the Mesoamerican Reef Countries.

Evaluation criteria are comprehensive and inclusive.

Twenty-two standardized management indicators were developed across seven themes, such as fisheries management and coastal zone management.1 The Eco-Audit draws on input from a variety of NGOs, governmental agencies, and the private sector, and includes transparently verified and publicly available results. In September and October 2011, HRI and WRI convened four national workshops, whose purpose was for participants to collectively rank each indicator and to compile documents to verify the rankings.

Analysis is objective, science-based, and validated.

HRI and its regional partners are committed to maintaining audit standards that are unbiased, fact-based, transparent, and replicable. The financial and management auditing firm of PricewaterhouseCoopers Costa Rica (PwC)2 reviewed the methodology and provided feedback on the processes, indicators, and quality of the verification documentation.

Data quality will be enhanced over time.

This first Eco-Audit establishes a baseline regarding the status of reef ecosystem management efforts. The results are intended to guide data collection and compilation for future Eco-Audits, which will occur every two years. These biennial Eco-Audits and the biennial HRI Reef Report Cards will occur in alternating years, thereby providing a routine accounting of reef health and efforts to improve it. As data collection becomes more complete and the database grows, we anticipate that the Eco-Audit will evolve, becoming more quantitative and comprehensive in its evaluation of management efforts.

Slideshow

2011 Eco-Audit of Mesoamerica Reef Countries

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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.

Testimony: China's Prospects for Shale Gas and Implications for the U.S.

Maggie Barron — Thu, 26 Jan 2012 09:51:49 -0500

Testimony Of Sarah M. Forbes
Senior Associate, Climate and Energy Program
World Resources Institute

HEARING BEFORE THE U.S.-CHINA ECONOMIC AND SECURITY REVIEW COMMISSION

CHINA’S GLOBAL QUEST FOR RESOURCES AND IMPLICATIONS FOR THE UNITED STATES; CHINA’S PROSPECTS FOR SHALE GAS AND IMPLICATIONS FOR THE U.S.

Introduction

Good morning and thank you for the opportunity to contribute to the deliberations of this Commission. My name is Sarah Forbes, and I am a Senior Associate for the Climate and Energy Program at the World Resources Institute. I am also manager of the World Resources Institute’s Shale Gas Initiative.

I am delighted to speak with you today about China’s prospects for shale gas and the implications for the United States. The United States and China share an interest in the domestic and international development of shale gas resources. In this testimony I will describe the state of China’s shale gas industry as well as the governmental policies that will drive its future development in China. I will discuss the implications of U.S.-China business-to-business partnerships as well as government-to-government cooperation―including the risks and opportunities such cooperation could yield. I will also describe how shale gas development in China and the United States changes the global dynamics of energy security. In conclusion, I will provide recommendations for future actions Congress and this Commission can take. In the interest of time, I have limited the scope of my testimony to a discussion of the implications of shale gas development in China on the U.S. and China.

Considering the speed with which shale gas has shifted the U.S. energy outlook1, this is an important moment to consider the implications of the development of China’s shale gas resources. Development of shale gas in China will shift future global energy dynamics. How it is done will affect the environment and global climate picture. As I describe in this testimony, shale gas can help improve international energy security by providing an abundant domestic energy resource and reducing the need for natural gas imports. What role it plays in addressing climate change will depend in large part on the degree to which shale gas displaces inefficient coal plants and supplements continued improvements in energy efficiency and renewable energy.

As I start, I would like to emphasize the following key points, which I will describe in detail in the sections that follow.

1. Current state and future direction of China’s shale gas industry: The shale gas industry in China is in early development, but the topic has already garnered significant interest from the national government. The Chinese government is implementing new policies that support the future development of China’s gas industry broadly, as well as supporting shale gas research. State-owned and provincial-owned enterprises are conducting exploration and pilot demonstrations on shale gas in China. Through its state-owned enterprises, China2 is also investing in shale gas development in the United States.

2. U.S.-China cooperation on shale gas: The global oil and gas industry operates joint ventures (JVs) to sustain growth and defuse financial risk. The emerging international shale gas industry will rely on the same tactics, particularly given the current state of the global economy. In recent years, major investments or partnerships between U.S. and Chinese companies in the shale gas sector have been used to the near-term economic benefit of both countries and provide potential for U.S. companies to benefit domestically and abroad.

3. Impacts on the energy situation in China: Shale gas development in China will reduce natural gas imports, thus improving China’s energy security. Because total natural gas demand will continue to far outstrip all domestic production for the foreseeable future, any natural gas from shale in China is expected to be consumed domestically. From an environmental perspective, the more China can develop energy alternatives to imported oil and domestic coal, the less pressure it exerts on global energy markets and the global environment. China’s domestic use of its own natural gas resources would be unlikely to have an effect on net U.S. energy imports, as the U.S. is projected to domestically produce sufficient quantities of natural gas to meet its own demand for at least the next 25 years.

Throughout my testimony, I will also emphasize a fourth point that cross-cuts these three themes.

4. Ensuring responsible operations and creating a “level playing field”: Shale gas development should proceed in China (or any country) with environmentally and socially responsible operations which are (1) enforced by appropriate laws, regulations, and standards, (2) realized through implementation of international best practices, and (3) based on an understanding of the real risks and benefits of responsible deployment (both to industry and the public). Such approaches drive demand for U.S. products and ensure a “level playing field” between companies operating in the United States and those in China. More importantly, they help ensure that any negative environmental impacts associated with shale gas development in the United States are not repeated elsewhere.

Read the full testimony here >>> (PDF, 10 pages, 454 Kb)

Ready or Not: Assessing National Institutional Capacity for Climate Change Adaptation

Kevin Lustig — Tue, 10 Jan 2012 09:44:07 -0500

Summary

Effective institutions are at the heart of our ability to respond to growing climate risks. Governments and other institutions at the national level can play a critical role in increasing society’s capacity to adjust and readjust (i.e., “adaptive capacity”) as conditions shift and as new climate change knowledge emerges.
As national policymakers, United Nations Framework Convention on Climate Change (UNFCCC) negotiators, international funders, and others develop methods and guidelines for adaptation planning, it is critical that they include a focus on building institutional capacity to adapt to climate change impacts.
The NAC framework provides a practical approach for understanding the institutional aspects of adaptive capacity. NAC assessments support planning through the development of indicators and targets for tracking national adaptation progress and the identification of capacity gaps that can be filled through investment and action.
The NAC framework assesses national institutions’ abilities to perform assessment, prioritization, coordination, information management, and climate risk management for adaptation at a particular period in time. This assessment can help planners, funders, and other decision makers identify key activities to track over time, as well as critical players to engage.
The pilot applications of the framework in Bolivia, Ireland, and Nepal suggest that the NAC framework applies across a range of countries and that it can be tailored to specific country contexts. The pilots used the NAC framework in the following ways:
- As a tool for developing indicators for monitoring and baseline setting. The NAC assessment in Bolivia resulted in the development of specific indicators and metrics for adaptation policy.
- As a tool to catalyze action and fill key capacity gaps. The Irish NAC assessment identified gaps in capacity to build the evidence base for justifying new investments. It also inspired the commission of a national vulnerability assessment.
- As a tool to gather and synthesize resources. The NAC framework can provide a practical organizing frame for sorting a diverse and often scattered body of adaptationrelevant information and resources. This proved particularly useful in Nepal and Bolivia.
The country teams that applied the NAC framework in Bolivia, Ireland, and Nepal used distinctly different approaches to completing the assessment and also formatted their evaluation findings differently. This indicates that the NAC framework can be tailored for use in a variety of different planning or evaluation processes.

Fact Sheet: EPA Mercury Rules and Power Reliability

Kevin Lustig — Wed, 14 Dec 2011 10:30:45 -0500

Recent Electricity Reliability Assessments

North American Electric Reliability Corporation (NERC). (November 2011) 2011 Long-Term Reliability Assessment.

M.J. Bradley & Associates, LLC; Analysis Group. (November 2011) Ensuring a Clean, Modern Electric Generating Fleet while Maintaining Electric System Reliability; Fall 2011 Update.

DOE. (December 2011) Resource Adequacy Implications of Forthcoming EPA Air Quality Regulations.

Bipartisan Policy Center. (June 2011) Environmental Regulation and Electric System Reliability.

CERES. (November 2011) New Jobs-Cleaner Air Part II: An investment in American Businesses and American Jobs.

Edison Electric Institute. (January 2011) Potential Impacts of Environmental Regulation on the U.S. Generation Fleet.

Electricity generation capacity adequacy and transmission and ancillary services reliability are difficult to quantify and forecast due to the inherently local scale of power flow modeling. However, the lack of reliability problems over decades of previous Clean Air Act regulation and the flexibility of the standards suggest that the U.S. can keep the lights on while cost effectively removing toxic pollutants from power plant emissions.

Power plants are the largest source of mercury emissions to the air. This mercury eventually makes its way into water, and can cause neurological problems for people who eat contaminated seafood. Because of the dangers of mercury emissions, especially to children and pregnant women, a court order mandated that the EPA issue a final set of Mercury and Air Toxics Standards (MATS) by December 16, 2011.

Recent modeling assessments have typically focused more broadly on the cumulative impacts of EPA regulations, including: the Cross-State Air Pollution Rule (CSAPR), the Coal Combustion Residuals rule, the 316 (b) Cooling Water Intake Structures rule, and the yet-to-be announced New Source Performance Standards for greenhouse gases. Recent studies have varied largely based on assumptions regarding the stringency of pending regulations, the costs of compliance measures, and the legal flexibility of regulatory enforcement.

Rules Are Flexible, and States Are Prepared

While there are modeling and forecasting limits for assessing long-term electricity system reliability, recent studies indicate that MATS and other EPA rules can be effective and implemented in a timely way while allowing for a range of compliance outcomes. The feasibility of cost-effectively complying with new regulations while maintaining electricity system reliability is supported by four key points:

Both state and federal regulators have a suite of flexible enforcement options, which they have been using for decades, to delay power plant closures when this is necessary to preserve grid reliability; for example, the Cooling Water rule requires states to first consider reliability in implementing new regulations;
While states often have the authority to set more protective pollution control standards in the interest of public health and welfare, there is no evidence that they would do so at the risk of grid reliability. Many states have already exercised this authority without imperiling electricity reliability — as of 2011, 17 states have already imposed rules on mercury and other toxic emissions from power plants, including Montana;
Adequate new plant capacity is in the pipeline to replace the majority of potentially affected power plants; most American power companies are on record as already having prepared for expected environmental regulations;
In terms of compliance, the MATS rule allows for temporal and technological flexibility. As this fact sheet goes to press, the final rule has not yet been published but is expected to allow three years for compliance, with an optional 4th year extension from the EPA or additional security-based extension from the President. A wide range of commercially viable, proven compliance technologies from Flue Gas Desulphurization (FGD) to Dry Sorbent Injection (DSI) and Activated Carbon Injection (ACI) are available to help reduce toxic air emissions and can be installed in 10 to 30 months, providing ample time for America’s skilled engineers, manufactures and technicians to conduct plant upgrades within the legally allotted time frame.

Download the fact sheet to keep reading and see full citations.

Inside Stories on Climate Compatible Development: China

Kevin Lustig — Tue, 13 Dec 2011 09:48:27 -0500

Key messages

A clear expression of political will, backed by a set of effective policy measures, has been key to China’s success in building the world’s largest wind power market.
The establishment of a stable and favorable pricing mechanism is crucial for the development of wind power, because it increases the chances for profitability and growth.
A strong domestic market contributes to the growth of local wind power equipment manufacturing.

Inside Stories on Climate Compatible Development: Niger

Kevin Lustig — Tue, 13 Dec 2011 09:42:26 -0500

Key messages

Farmer Managed Natural Regeneration brings increased crop yields, income and food security to impoverished rural communities in Niger. It also holds climate change mitigation potential.
Honouring local wisdom is key to the success of Farmer Managed Natural Regeneration – farmers can play a central role in experimenting, innovating, communicating potential benefits, and advocating behaviour change.
Winning the support of opinion leaders and authorities is important in tackling farmers’ initial resistance

Inside Stories on Climate Compatible Development: Zambia

Kevin Lustig — Tue, 13 Dec 2011 09:26:40 -0500

Key messages

Production of staple crops, such as maize, is under increasing risk in Africa because of climate change and depleting soil fertility. The potential consequences for food security are dire. Climate change and food security must be tackled together.
Modern methods of agroforestry and “conservation agriculture with trees” are employing age-old indigenous practices of natural fertilisation with dramatic effects. Field studies show that growing maize under “fertiliser trees” can more than triple the yields.
“Evergreen agriculture” practices (where trees are intercropped in annual food crop and livestock systems) help retain water in soils during droughts and prevent landslides and erosion during heavy rain, so reduce vulnerability to climate extremes.
The capacity for these practices to also retain and store carbon in soils means that the potential climate change mitigation benefits of wide-scale evergreen agriculture in Africa are large and globally significant – potentially up to 50 billion tonnes of carbon dioxide over 50 years.
The challenge of spreading the knowledge and uptake of evergreen agriculture and other “climate-smart” agriculture practices is being taken on as a priority by regional governance bodies in Africa.
Payments for ecosystem and social impact services may be one means to fund the practical on-farm research, testing and knowledge transfer needed for adoption on a wide scale. Carbon funds, from biocarbon projects, are one possible source of finance, but uptake is still at very low levels.
The costs of measurement, reporting and verification can be prohibitive and new methods are needed.
Supported NAMAs (nationally appropriate mitigation actions) programs of evergreen agriculture could be a new approach and play a key role in Africa low carbon development strategies.

Inside Stories on Climate Compatible Development

Kevin Lustig — Tue, 13 Dec 2011 09:11:27 -0500

WRI Publications Feed: All

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

Summary

Operational

Regulatory and legal

Reputational

Market and product

Financing

2011 Eco-Audit of the Mesoamerican Reef Countries

An Innovative, Rigorous Process

Slideshow

Insights from the Field: Forests for Climate and Timber

Testimony: China's Prospects for Shale Gas and Implications for the U.S.

Introduction

Ready or Not: Assessing National Institutional Capacity for Climate Change Adaptation

Summary

Fact Sheet: EPA Mercury Rules and Power Reliability

Recent Electricity Reliability Assessments

Rules Are Flexible, and States Are Prepared

Inside Stories on Climate Compatible Development: China

Key messages

Inside Stories on Climate Compatible Development: Niger

Key messages

Inside Stories on Climate Compatible Development: Zambia

Key messages

Inside Stories on Climate Compatible Development

Briefs in this series: