Reflections on Natural Capital Week 2018

With another year coming to an end, leading organisations across the private and public sectors interested in Natural Capital Accounting (NCA) convened in Paris to share and collaborate in preparation for 2019.

IDEEA Group Directors Mark Eigenraam and Carl Obst were in attendance. Carl Obst co-hosted the Combining Forces workshop with Mark Gough, Natural Capital Coalition (NCC) Executive Director, at the Natural Capital Policy Forum. The workshop familiarised attendees with the motivation of Combining Forces and presented 5 priority areas for advancing work on Combining Forces (for an overview, see this report).

Mark Eigenraam supported Forico’s Simon Cook during a presentation at the NCC Collaboration Day. Simon, who worked closely with IDEEA Group to apply the System of Environmental-Economic Accounting principles to the management of the Forico estate, discussed the motivations for, and the benefits of, employing environmental-economic accounting. An overview of the Forico work program is provided here.

Overall, there were many insights into the different natural capital projects being undertaken across the globe. It became evident that the appetite of business and government to implement environmental-economic accounting to underpin the implementation of the NCC Protocol is growing. Please contact us if you want to see how environmental-economic accounting can help your organisation to deliver a set of NCA’s.

Supporting the business case – why members of the Alliance for Water Stewardship should adopt the SEEA as a measurement and evaluation tool

A strong, robust evidence base that is easily shared and communicated between stakeholders is critical to support the objectives of the Alliance for Water Stewardship (AWS). Communicating the impacts of AWS certification to public sector agencies, green investors and philanthropists has the potential to generate benefits to implementers that will enhance the business case for water stewardship.

During 2018 IDEEA Group built on past work with the AWS to demonstrate the practical application of the System of Environmental Economic Accounts in two of China’s industrial parks. The project report finds that there is great potential for the adoption of environmental-economic accounting but also underlines the importance of working with local experts who have access to data and local knowledge. IDEEA Group Director, Carl Obst, presented this work at the October AWS Global Conference in Edinburgh.

IDEEA Group will continue to work with the AWS in 2019 and beyond. By building a common language that is easily understood by all AWS stakeholders, we hope to provide a basis for collaboration and maximise the benefits of AWS water stewardship. Stay tuned!

Combining Forces: efforts to prevent the degradation and depletion of natural capital must be consolidated, life on Earth necessitates it.

Numerous efforts and initiatives to advance and develop natural capital thinking have emerged over the past 10 years. The approaches vary across disciplines and the private and public sectors resulting in a cluttered and confusing landscape. Are they competing, are they useful, are they the same? Can they be streamlined to maximise our collective efforts?

The problem of natural capital depletion and degradation requires a concentrated, unified effort. Coordination and participation across public and private sectors, and across disciplines is needed at an unprecedented scale in order to preserve life as we know it on Planet Earth.

IDEEA Group is supporting the Natural Capital Coalition to deliver the Combining Forces Initiative. It is the first step towards seeking to build a common language that will enable the exchange of ideas and ongoing innovation aimed at conserving natural capital.

The public sector approach to NCA applies the UN SEEA (United Nations System of Environmental-Economic Accounting) framework, whilst the overarching framework for the private sector is the Natural Capital Protocol. These approaches use complementary valuation techniques to understand the relative importance and worth of the natural world on which we collectively depend.

Next week (Nov 26-30), IDEEA Group will travel to Paris to participate in Natural Capital Week 2018.

IDEEA Group Director Carl Obst and Natural Capital Coalition Executive Director Mark Gough, will facilitate a session on the Combining Forces Initiative at the 3rd Forum on Natural Capital Accounting for Better Policy.

Simon Cook (Forico) will also be making the trip to present on the work program completed by Forico and IDEEA Group. He will be on a panel during the session on the Combining Forces Initiative and will also be making a presentation during the Natural Capital Coalition: Collaboration Day. He will discuss the reasons behind linking up with IDEEA Group to apply natural capital accounting using the UN SEEA to the Forico forest estate.

Out with the old and in with the new – extending the production boundary of GDP to account for ecosystem services

It is widely understood that GDP, as a measure of economic activity, fails to recognise the depletion or degradation of natural capital. A key feature of national accounting (which underpins GDP) is the recording of transactions between economic units, households, business and government. However, it does not recognise transactions between economic units and the environment. The environment provides services to economic units, often referred to as ecosystem services. Accounting for ecosystem services is required to bring measures of the depreciation and degradation of natural capital in line with measures of the deprecation of built capital that is already included in GDP.

While the generic concept of ecosystem services provides an excellent platform for discussion, the ongoing lack of clarity surrounding the definition, classification and measurement of ecosystem services, is a barrier to collaboration across disciplines and its inclusion in measures of GDP.

Our paper applies the principles of national accounting to bring additional rigour and consistency to the discussion on ecosystem services. The key outcome of the paper is a framework for describing the relationship between ecosystems and economic activity that can be used to consistently define, classify, measure and account for ecosystem services.

Mark Eigenraam & Carl Obst (2018) Extending the production boundary of the System of National Accounts (SNA) to classify and account for ecosystem services, Ecosystem Health and Sustainability, DOI: 10.1080/20964129.2018.1524718

Accounting for ecosystem services in the forest sector – Forico, Tasmania

Since 2016, Forico and IDEEA Group have worked together to apply the United Nations System of Environmental-Economic Accounting (SEEA) in the Forico Estate. Phase 1 of the work program explored the feasibility of applying the SEEA framework to the Forico estate, while Phase 2 put the concepts developed during Phase 1 into practice. It is understood that these efforts are the first to employ the UN SEEA principles to account for the environment and ecosystems at the business level.

Completed in September 2018, Phase 2 of the work program involved:

  1. accounting for the stock and condition of ecosystem assets held by Forico
  2. accounting for the flow of ecosystem services supplied by these ecosystem assets
  3. developing a method to integrate this information with financial information

A key outcome of the work was a set of environmental accounts that enable Forico to recognise the value of the ecosystem services that it delivers. Incorporating environmental-economic accounting into standard financial accounting approaches and business processes provides several benefits for Forico including:

  1. improved operational decision-making by using a more complete set of financial accounts;
  2. improved communication to stakeholders through the recognition of a wider range of environmental values; and
  3. improved strategic allocation of financial resources to maximise the flows of ecosystem services.

Additionally, the accounts could be used to report on requirements under the Forest Stewardship Council’s (FSC) newly released FSC National Forest Stewardship Standard for Australia

Combining Forces – Natural Capital Coalition

Natural capital has both private and public dimensions that are reflected in different perceptions, management and decision-making approaches. These differences often lead to overuse and poor management of natural capital – often referred to as the tragedy of the commons – at both global and local scales.

A key feature of the differences between public and private approaches to natural capital concerns the language that is used to describe and discuss the relevant environmental stocks and flows. Central to improving the management of natural capital is having a common language to define, measure and report on it.

There is now an opportunity to combine forces natural capital thinking and assessment, leverage the strength of the support from the public and private sectors for two key approaches, the Natural Capital Protocol (NCP) and the System of Environmental-Economic Accounting (SEEA) and seek to understand the opportunities and synergies of these approaches both with each other and with the wide range of other approaches in this space.

This workshop is one part of a broader program of work to engage widely on the subject of natural capital. The primary objectives are to:

  • Broaden the understanding of the breadth of different approaches to natural capital
  • Establish the benefits that might be obtained from combining forces on natural capital
  • Identify the barriers to combining private and public sector approaches to natural capital thinking and assessment
  • Identify opportunities and activities that can be undertaken in the short to medium term to overcome those barriers and demonstrate the benefits of combining forces to both the public and private sector.

Workshop participants are encouraged to visit the Natural Capital Coalition’s Combining Forces page for additional background and resources, especially concerning the potential linkages between NCP and SEEA.

Asia and the Pacific Regional Expert Workshop on Ocean Accounts, Bangkok

Great to be a part of a foundational workshop kicking of the process to develop a System of Ocean Accounts 2025, complementing the current System of Environmental Economic Accounts (SEEA). There are three key areas of focus over the three days including ocean science, ocean statistics and ocean governance.

Some useful examples have been shown including Australian work and links to accounting for poverty and the environment

Linking Alliance for Water Stewardship (AWS) and the SEEA

Around the world there are tremendous challenges surrounding the use and management of water resources. The Alliance for Water Stewardship (AWS) was established in 2008 to promote the stewardship of water resources, and in 2014 they released the first International Water Stewardship Standard. It is premised on the idea that improved management of water resources must be context driven, i.e. considering site (farm) and catchment level issues and solutions.

In the wake of the advancements in the development of the System of Environmental-Economic Accounting (SEEA), AWS saw an opportunity to use an internationally comparable measurement approach as the basis for measurement and transparency in the implementation of the AWS Standard. To this end, AWS engaged IDEEA Group to describe the potential ways in which the SEEA could be applied in the six steps of the AWS Standard.

This introductory report outlines a variety of ways in which the SEEA could support implementation including; ensuring coherence of data across scales and enabling site; catchment and administrative level narratives can be aligned; and providing a common language for the communication and framing of management responses and outcomes. The report identifies seven key benefits from linking the AWS Standard and the SEEA and recommends undertaking case studies to demonstrate the potential opportunities for firms, catchment managers, industry and sector leaders.

Access the report here