ACES and Ecosystem Markets 2012 Wednesday/1... · • To quantify ecosystem footprints by monetizing both the societal (economic) / financial costs as well as the benefits of ecosystems

© Hitachi, Ltd. 2012. All rights reserved.

ACES and Ecosystem Markets 2012

Ms. Ayako Kohno

Environmental Strategy Office

Hitachi, Ltd.

Corporate Ecosystem Valuation (CEV):

New Ways

to Value Natural Capital

for Business

December 12, 2012


1. Introduction What is Corporate Ecosystem Valuation (CEV)? Why Did Hitachi Apply the CEV?

2. Pilot Case Studies in Hitachi Group

Contents


1. Introduction

What is Corporate Ecosystem Valuation (CEV)?

Why Did Hitachi Apply the CEV?


What is Corporate Ecosystem Valuation?

© Hitachi, Ltd. 2012. All rights reserved. 4

5) 5)

Embedding

embed the CEV approach within company processes & procedures

Post valuation

4) 4)

Application

use & communicate valuation results to influence internal & external decision-making

Valuation

3)

Valuation

3)

Valuation

actual valuation: may be qualitative, quantitative and/or monetary

2)

Planning

2)

Planning

develop suitable plan to undertake valuation effectively

Preparation

1)

Scoping

1)

Scoping

define scope for valuation exercise, using checklist of questions

What is Corporate Ecosystem Valuation? 5 Stages to Undertake a CEV Exercise


What Motivated Hitachi to Apply the CEV?

5

• To quantify ecosystem footprints by monetizing both the societal (economic) / financial costs as well as the benefits of ecosystems and ecosystem services, through our operation • To re-think and improve project planning, to be more sustainable in practice • To tackle the issue of ecosystem conservation through the lens of lifecycle and supply chain management


2. Pilot Case Studies in Hitachi Group


Pilot Case Studies

Since May 2011, Hitachi had conducted the following two CEV pilot projects, with the support of ERM (and James Spurgeon, SustainValue) • Water Treatment Business in the Maldives by Hitachi Plant Technologies, Ltd. and Male' Water & Sewerage Company Pvt. Ltd. • Identifying Effects on Ecosystems Using IT software(GeoMationFarm) and Improving Efficiency in Agricultural Production by Hitachi Solutions, Ltd.


2. Pilot Case Studies Case 1: Water Treatment Business in the Maldives


Case 1: Water Treatment Business in the Maldives

Scope: Current drinking water treatment and sewage treatment business operation by MWSC and its future expansion plan in Male as well as surrounding islands in the Maldives (over the next 30 years)

Issue: In 3 to 5 years, likely to experience greater demand than supply of drinking water in the capital island of Male


Maldives CEV Project Methodology

10

Comparing BAU scenario with proposed expansion plan

(including both new water supply and wastewater

treatment plant, as well as new power generation) and

monetize the impacts of expansion plan to the

ecosystems in the area

LCA was used to calculate the environmental impacts on

the volumes of the proposed material for the treatment

works construction as well as impacts of operating the

power plant


Findings from the CEV Maldives Project

11

Renew-

ables

Oper

water

supply

Oper

waste

water

Power Constr Oper Constr Oper Constr Oper Oper

Land available PS Other land uses + + + + + + + + + + + + + + - -

Beach/foreshore CS Recreation + + + + + o + + + + + + + + + o

Coral reefsPS/RS/

CS

Recreation/coast

protection/fisheries/non-

use

+ + + + + o + + + + + + + + + o

Seabed RS Supports fisheries + + - o - + - + - o o

Sea/Fisheries PS Fish + + - o - + - + + o - o

Freshwater PS Water - drinking/use + + + - o - + + + - + + + o o o

GroundwaterPS/RS/

CSSource of freshwater + - - - o o - - + + o o o

Air emissions NOx, SOx, CO, PM, HC - - - o o - - - - o - o - - o

GHG CO2, GHG - - - o o - - - - o - o - - - o

Noise Noise - - - - - - - - - - - - - - - -

Visual Visual - - - - - - - - - - - -

Road disruption Traffic, noise o o o o - o - o - o o

Fuel storage Risk explosion - - o o - - o o o o o - - o

New wastewater

plant

New power

supply

Eco

syste

mE

xte

rna

lity

OEE

Ecosystem/

Externality

Ecosystem services/

Environmental externality

Relative value of ecosystem/externality associated with that scenario

Existing

baseline

Business as Usual New water

supply

Key: Green shade = positive impact (i.e. benefit); Orange shade = negative impacts (i.e. cost) + = minor, ++ = moderate, +++ = major benefit (same scale for -, - -, - - - ) o = no/negligible impact

Step 5 of Stage 3: Finding out the Relative Ecosystem Services & Externalities


Quantitative Results from the CEV Application

12

(1) The results for three scenarios combined (new water

supply, new wastewater supply, and power generation)

was CBA of 2.3, which shows reasonably strong

economic viability

(2) In this case, the planned expansion plan involves with

pipe/cable installation, and the costs of restoration of

coral reefs were also estimated, using benefit transfer

approach, which was based on a value of

US$ 13/m2/year as damage cost

A stated preference survey would be needed to

determine a more accurate value


Main Findings from the CEV Maldives Project

13

• Although there will be additional air emissions and GHGs arising from the construction phase of the planned new water and power supply project, significant overall reduction of GHG is anticipated, compared to the BAU, by:

- altering the source of power supply, and - improving equipment efficiency, over the next 30 years

• If only considering financial costs and benefits, the project is already feasible, but even when taking into account of the societal and environmental costs, the CBA is still more than 1, indicating that there is a net societal gain from this project.

The Project is still at early planning stage, so we will take into consideration the results from the CEV application as

we proceed with project planning


2. Pilot Case Studies

Case 2: Identifying Effects on Ecosystems using IT Software (GeoMationFarm) and Improving Efficiency in Agricultural Production


Case 2: Identifying Effects on Ecosystems Using IT Software

15

Scope: Application of GeoMationFarm, an agricultural information management system that improves efficiency of resource use and enhances crop productivity, with a focus in hypothetical studies on the USA and France. (Note: This study is a high-level theoretical analysis based on publicly available data, and not based on empirical data taken from actual regions or the farms.)

Current Situation: Demand and use of IT in agriculture—as well as the economic assessment of benefits from agriculture (societal and environmental)—is growing, but sometimes difficult to implement, due to challenges in assessing the effects of the agricultural activities on ecosystems


Background: What is GeoMationFarm?

16

• GeoMationFarm is a geographic information system (GIS) applied to the management of agricultural activities to enable:

- Using high quality agricultural production by information - Managing this agricultural information in a spatially explicit way - Mapping crop fields - Identifying optimum pesticide application - Providing know-how in planning fertilizer inputs

• Combined use of GeoMationFarm with various technologies of Precision Agriculture (PA) will assist farmers to enhance efficiency and reduce pollution relating to agriculture


Findings from CEV - GeoMationFarm Project

17

Methodology:

Three major crop types (corn, wheat, soybean) were

examined using the CEV methodology in order to:

• quantify the value in monetary terms, and

• assess scenarios in terms of productivity and inputs

(such as water, fertilizer and pesticides) with and

without use of GeoMationFarm

Note: This study is a high-level theoretical analysis based on publicly

available data, and not based on empirical data taken from actual

regions or the farms



18

Financial -

Farmers

bottom line

Societal -

Stakeholders

impacted

Financial -

Farmers

bottom line

Societal -

Stakeholders

impacted

Financial -

Farmers

bottom line

Societal -

Stakeholders

impacted

Prov S + + + + + + + + + + + + + + + + + + + +

Prov S - - + + + - - - + + - -

Nitrogen Nitrate pollution - - - - - - - - - - - -

PhosphorousPhosphate

pollution- - - - - - - - - - - -

Pesticides &

herbicidesPollution - - - - - - - - - - -

GHG - - - - -

Air emissions - - - - -

Water

Crops

Category Parameter

- - - - - -

Other

environ-

mental

extern-

alities

(OEE)

Farm

in

pu

ts

Fuel/energy

Business as Usual Precision agricultureBaseline

Eco

syte

m

se

rvic

es -

Dir

ect

Step 5 of Stage 3: Relative Magnitude Value of Directly Affected Ecosystem Services and Externalities for the USA and France

Key: Green shade = positive impact (i.e. benefit); Orange shade = negative impacts (i.e. cost) + = minor, ++ = moderate, +++ = major benefit (same scale for -, - -, - - - ) o = no/negligible impact Scenarios: Baseline: Condition at current state Business as Usual: Simulation if current practice continues for the next 25 years. Precision Agriculture: Simulation if PA is used in agricultural practice for the next 25 years.



19

Financial -

Farmers

bottom line

Societal -

Stakeholders

impacted

Financial -

Farmers

bottom line

Societal -

Stakeholders

impacted

Financial -

Farmers

bottom line

Societal -

Stakeholders

impacted

Surface waters + + + + + + + + + + + +

Ground water + + + + + + + + + + + +

Coastal water n/a + + n/a + n/a + + +

Terrestrial

habitats + + + + + + + + + + + +

Prov SFisheries/

aquaculturen/a + + n/a + n/a + + +

Reg S Pollination + + + + + + + + + + + +

Reg S Pest control + + + + + + + + + + + +

Cult S Recreation n/a + + n/a + n/a + + +

Cult SNon-use/

conservationn/a + + n/a + n/a + + +

Human health + + + + + + + + + + + +

Precision agriculture

Ecosystem

services -

Indirect

impacts

Other

Ecosystems (and

associated species)

Category Sub-category

Baseline Business as Usual

Key: Green shade = positive impact (i.e. benefit); Orange shade = negative impacts (i.e. cost) + = minor, ++ = moderate, +++ = major benefit (same scale for -, - -, - - - ) o = no/negligible impact Scenarios: Baseline: Condition at current state Business as Usual: Simulation if current practice continues for the next 25 years. Precision Agriculture: Simulation if PA is used in agricultural practice for the next 25 years.

Step 5 of Stage 3: Relative Magnitude Value of Indirectly Affected Ecosystem Services and Externalities for the USA and France


Initially, the efforts by the farmers to clarify the societal

and environmental benefits of conserving ecosystems

throughout the agricultural activities may be a challenge,

but such initiative will bring long-term solutions to

maintain sustainability of agriculture, and for that

reason, increasing knowledge by conducting CEV

studies based on actual agricultural site is preferable

and recommended



Corporate Ecosystem Valuation (CEV)

New Ways to Value Natural Capital for Business

December 12, 2012

Thank you!

Ms. Ayako Kohno

Environmental Strategy Office

Hitachi, Ltd.

E-mail: [email protected]


Documents

ACES and Ecosystem Markets 2012 Wednesday/1... · • To quantify ecosystem footprints by monetizing both the societal (economic) / financial costs as well as the benefits of ecosystems