New Guide:
Corporate Ecosystem Valuation

The World Business Council for Sustainable Development has released its new Guide to Corporate Ecosystem Valuation (CEV). The guide, the first major attempt to package approaches to ecosystem valuation specifically for business, offers private sector actors a framework for understanding how – and how much – their businesses depend on ecosystem services.

8 April 2011 | The World Business Council for Sustainable Development (WBCSD) released today its new Guide to Corporate Ecosystem Valuation (CEV). The guide, the first major attempt to package approaches to ecosystem valuation specifically for business, offers private sector actors a framework for understanding how – and how much – their businesses depend on ecosystem services.

Ecosystem impacts have often been overlooked by businesses; ecosystem service market advocates tend to gaze longingly at the regulatory drivers and price signals that carbon enjoys. The WBCSD’s guide is a step in the right direction. It offers a clear process for business decision-makers (whom the guide does not assume have any prior knowledge of this kind of thing) to assess how benefits from healthy ecosystems, such as a forest’s ability to control erosion, filter water, and clean the air, directly affect the bottom line. A beverage company, for example, is in big trouble if its water supplies are being contaminated or cut off by deforestation or pollution upstream.

The guide is the product of an 18-month process working with Environmental Resources Management (ERM), International Union for Conservation of Nature (IUCN), PricewaterhouseCoopers (PwC) and World Resources Institute (WRI), and eighteen businesses, whose experience and lessons learned on the CEV process are presented throughout the guide.

The report’s goal is to clarify ways in which CEV can aid in corporate decision-making and inform existing analytical approaches like internal accounting, risk assessments, or share price valuation. It is not, the authors hasten to add, “a price list of biodiversity & ecosystem services, a calculator to ‘crunch numbers’, or a stand-alone methodology.”

The guide doesn’t actually cover economic valuation techniques themselves; instead it recommends that the business bring in “an experienced environmental economist” and consult other WBCSD resources. This shouldn’t be so surprising. Ecosystem services valuation methodologies are pretty esoteric, and continually evolving.

It also focuses just on initial measurement; a framework for translating CEV into concrete actions to take to protect or improve benefits, like payments for ecosystem services or investment in green infrastructure, is left for another day.

Another open question is verification. No widely-accepted guidelines exist on standards for verifying or presenting CEV data publicly, in contrast to the carbon world, where efforts like the Carbon Disclosure Project have done much to standardize reporting. Shared metrics and methodologies (and not just in dollar terms, either) for business to assess their impacts on water or biodiversity, for example, still are lacking.

Still, it’s an impressive and ambitious project. Businesses, like ecosystems, are unique, and the reader is struck by just how complex CEV is really is. Valuation, to give a rough example, requires outlining a range of alternative future scenarios, identifying environmental baselines and the environmental changes to to be valued, the significance of those changes, which valuation technique is to be used, how values translate into costs and benefits not only to the company but other stakeholders, not to mention making choices about risk, uncertain variables, discount ratios, and so on. Developing user-friendly but robust valuation approaches that are flexible enough to work for any business structure is an enormous project, and this guide is only the beginning.

To the extent that it clarifies for business how ecosystem services contribute to the bottom line, the guide can help to align environmental, social, economic, and financial values in the private sector, and drive some much-needed investment into ecosystem service markets. All in all, exciting stuff.

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