Current state and lessons learned on international TEEB implementation

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1 Current state and lessons learned on international TEEB implementation Nick Bertrand United Nations Environment Programme International workshop business and natural capital: dialogues for a sustainable partnership 7-9 May 2014 Brasília, Brazil

2 TEEB initiatives on business

3 Uptake from business this Guide to Corporate Ecosystem Valuation operationalizes TEEB s key messages and recommendations by providing a practical approach for effective application at the company level Having been inspired by The Economics of Ecosystems and Biodiversity (TEEB) study which draws attention to the global economic benefits of biodiversity and valuing natural capital, I realized that in becoming a truly sustainable business we must address the cost of our business to nature and value it accordingly. Jochen Zeitz, Executive Chairman of PUMA SE and Chief Sustainability Officer of PPR 2011

4 Environmental Profit & Loss Account (Puma, 2011) Tier 4 suppliers Tier 3 suppliers Leather tanning Petroleum refining Cotton weaving and dyeing Tier 2 suppliers Outsole production Insole production Textile embroidery and cutting Adhesive and paint production Tier 1 suppliers Shoe manufacturing Apparel manufacturing Accessory manufacturing Own operations Offices Shops Warehouses Business travel Logistics IT Guardian Sustainable Business Awards 2012, category Biodiversity (sponsored by Friends of the Earth)

5 Biodiversity Ecosystems/ES Natural Capital 2002 Natural Capital Accounting /

6 Global Leadership Award in Sustainable Apparel (GLASA) 2014: Natural Capital Accounting 2011 Kering was awarded the GLASA 2014 for the development of the Environmental Profit and Loss account (E P&L) and its decision to implement this in its Luxury and Sport & Lifestyle brands. The E P&L provides a full analysis of a company s footprint in the key areas of water use and water pollution, waste, greenhouse gas, other air emissions and land use and places a monetary value on it, which then offers a clearer understanding of the relationship between the business and natural capital. Kering and its brand PUMA developed and published the first ever E P&L in 2011 for PUMA s 2010 accounting year. Kering is currently implementing E P&L s in its 22 luxury and sport & lifestyle brands to consolidate a Group E P&L in Kering Press release, 24 April 2014 (

7 natural capital eureka moment Business operates in a multi-dimensional world of natural, social, human, manufactured, and financial capital. It impacts not just private capital owned by shareholders (such as land, factories, cash), but private capital owned by other important individuals (such as the skills and health of staff i.e. forms of human capital), shared capital owned by communities (local amenities; relationships with local residents and staff, etc. i.e. physical and social capitals) and public capital owned by society at large (clean air; a stable climate; law and order including commercial contract enforceability; etc. natural and social capitals). Today s one dimensional approach which measures and reports changes to only shareholder owned financial capital in effect prioritises the financial goals of shareholders against a host of other interests of society and the planet. This is not only unsustainable, but also self-defeating: without sufficient social and natural capital, businesses cannot function over Pavan time. Sukhdev, 28 April Valuing natural capital: What next and why?

8 NCA: Pitch for nature

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10 What is Natural Capital? Why does natural capital matter to business? What are companies actually doing about natural capital? What tools can companies use?

11 Efforts to advance Natural Capital Accounting in business

12 Natural Capital Coalition: towards a Natural Capital Protocol Valuing Natural Capital in Business: Towards a Harmonized Framework Outlines the Protocol project Provides a high level summary of the stock take and a proposed straw man/draft outline for the Natural Capital Protocol as a starting point. Valuing Natural Capital in Business: Taking Stock- Existing Initiatives and Applications A more detailed compilation summarising existing initiatives to provide a baseline on the existing landscape. This is intended to be a useful resource to demystify the growing volume of initiatives in this space

13 The Natural Capital Declaration and Roadmap Financial sector leadership on natural capital

14 42 NCD signatories

15 36 NCD supporters

16 NCD Roadmap and Business Plan Objectives for implementation Develop understanding of links between natural capital and financial risk and returns. Pilot projects to develop and test tools, metrics and guidance to enable financial institutions to build knowledge and capacity to understand, integrate, account for and report on natural capital factors. Develop practical tools, guidance, methodologies, frameworks and indicators.

17 Governance NCD NCD Steering Committee WG Chairs, Supporters Seek multidisciplinary knowledge and expertise by inviting non-financial organizations to become supporters or join advisory network. Secretariat UNEF FI, GCP NCD Advisory Network Information Providers, GOs, Scientific Community WG I Understanding Impacts/Dependencies Chair: Rabobank WG II Embedding NC in financial products Chair: Banorte WG III Natural capital accounting Chair: National Australia Bank WG IV Natural capital disclosure/reporting Chair: Nedbank Project Manager Global Canopy Programme Project Manager Fauna & Flora International Project Manager KPMG Australia Project Manager CDP

18 WG3 work plan to account for natural capital Chair: Rosemary Bissett, National Australia Bank Project Manager: Susan Staples + team, KPMG Australia Work stream 1: Develop finance sector supplement for the Natural Capital Protocol in partnership with the Natural Capital Coalition and other stakeholders. Work stream 2: Develop application of valuation and accounting projects. Pilot project proposed by NAB: Accounting for natural value to assess credit risk assessment in agri sector.

19 Beyond the bottom line (TEEB, 2010) Better accounting of business impacts and dependence on biodiversity and ecosystem services direct and indirect, positive and negative is essential to spur needed change in business investment and operations. Current accountancy rules, purchasing policies and reporting standards do not consistently require attention to environmental externalities. Integrating biodiversity and ecosystem services into product value chains can, however, generate significant cost savings and new revenues, as well as improved business reputation and licence to operate. Annual reports and accounts of business and other organizations should disclose all major externalities, including environmental liabilities and changes in natural assets not currently included in the statutory accounts. Methodologies, metrics and standards for sustainable management and integrated accounting of biodiversity and ecosystem services should be developed as a priority by national and international accounting bodies ( ). 2010

20 TEEB assessment of major externalities heavy global industry sectors 2013 Builds on the methodological approach of the report Natural Capital at Risk: The top 100 externalities of business (2013) Investigate and decide: (i) valuation framework; (ii) preferred valuation methodologies for the typical externalities of that sector, addressing typical challenges; and (iii) recommended disclosure norms for businesses from that sector, and to carry out the evaluation of externalities In addition to a global estimate of sector externalities from published research, the project is to look at individual regions Will take a differentiated approach by major segments of society such as rural and urban population, developed and developing countries

21 wrap-up The business case for conserving biodiversity is increasingly understood, even though this varies from one company to another (e.g. Industry Canada, 1994; WBCSD/IUCN, 1997; MA, 2005) There are many examples of integrating biodiversity into the management of companies having direct impacts and dependencies on natural capital (e.g. IPIECA, 2005; EBI, 2004; Rio Tinto, 2004; ICMM, 2008) The challenge is increasingly being recognized in sectors with indirect impacts and dependencies on natural capital (e.g. NCD, 2012) The nature of partnerships has changed -- they now not only bring together UN, NGOs, companies but also accounting profession (e.g. Natural Capital Coalition) Many tools have been tested in many sectors to assess opportunities / risks associated with impacts and dependencies on natural capital (e.g. CESR, 2008/2012) The economic valuation of impacts and dependencies can help further clarify risks and opportunities (e.g. CEV, 2011)

22 TEEBweb.org