Explore the resources below to assist in completing this action.
Biodiversity Guidance action 7.2.4
7.2.4 Undertake or commission valuation
Applying these techniques to estimate values for biodiversity requires significant training and applied experience. You should consider whether you have the necessary skills and experience within your business to undertake valuation internally. If necessary, you should commission external partners, such as appropriate consultants, academics, or non-governmental organizations to assist with your biodiversity valuation.
Avoiding double-counting and considering the condition of biodiversity stocks
Double-counting can be a concern when you value biodiversity and ecosystem services. This is because biodiversity delivers benefits in multiple ways. For example, in production of agricultural crops, biodiversity supports nutrient cycling and pollination. These ecosystem services (and other benefits from biodiversity) combine to provide one final benefit to a business—increased crop yields. If you value each ecosystem service individually you may count the role of biodiversity several times.
To avoid double-counting, you can focus on final benefits, such as the crop yield, rather than intermediate or supporting services, such as nutrient cycling or pollination.
However, when you value final benefits (if they are flows resulting from values other than biodiversity’s direct value) the connection between business benefits and the underlying condition of biodiversity stocks may be overlooked. For example, if you focus on valuing final crop yields the importance of pollinators may not be recognized. Where biodiversity is being degraded, it is particularly important that you consider these connections, as the final benefit being valued may also be degraded in the long term.
To address the limitations of only valuing final benefits, it is important to try to identify where the condition of biodiversity stocks has been overlooked in estimated values, and consider the importance of biodiversity for continuing to provide benefits to your business in the future.
Refer to action 1.2.1 (C) of the Framing Guidance for more information on the hidden values of biodiversity.
Further potential limitations and how to address them
Whether you are undertaking or commissioning valuation, there are several important limitations, particularly to monetary valuation, which you should consider and try to address when designing and implementing methodologies and interpreting valuation results (Sukhdev et al. 2014):
- Subjectivity – Values are a reflection of how a single group of people perceive their relationship with biodiversity at a single point in time. To address this limitation, you should try to identify and engage with all relevant stakeholders to understand their perceptions of biodiversity and its importance. You should avoid influencing these perceptions when designing your assessment.
- Incommensurability – The problem of incommensurability remains, even where some aspects of biodiversity’s values have been converted to monetary units, as the full value, which cannot be expressed in monetary units, remains difficult to take into account. For example, it is impossible to use monetary units to express intrinsic values associated with biodiversity, and very difficult to calculate accurate values associated with rights, responsibilities, and care. Biodiversity provides multiple benefits to business and society, and even when all are expressed in monetary units it may be inappropriate to mix market values associated with biodiversity with values that biodiversity provides linked to the welfare of wider society. By exploring non-monetary techniques, you can look at the impact of weighting and scoring different values and begin to reduce the risk of missing intrinsic and ethical values in the valuation.
- Economic uncertainty – Economic uncertainty can contribute to the complexity of valuations (particularly where ecologically uncertain relationships exist) and risks reducing the reliability of the results. Using the best available information on forecasted market prices and revising these market prices periodically to incorporate deviations on the state and values of your impacts and dependencies on biodiversity will help reduce the economic uncertainty of the results.
- “Commoditization” – Expressing biodiversity values in monetary units can be misinterpreted as pricing and marketing biodiversity. Even if the results of your monetary valuation indicate that greater economic value could be obtained through land uses or activities that would have negative impacts on biodiversity, you should not interpret these results as suggesting biodiversity is replaceable. To reduce concerns surrounding commoditization you should make clear that biodiversity has many hidden values and intrinsic value that it is not possible to assess through monetary values. You could use qualitative techniques alongside monetary values to better incorporate biodiversity’s intrinsic value in your assessment, or perhaps include a condition to always maintain a certain level of biodiversity in calculations of potential economic values associated with different business options.
It is important that you recognize these limitations and try to address them where possible. You should interpret values estimated for biodiversity with caution, and use them alongside other information to assist (rather than replace) deliberation in your decision-making. You should always present the approach taken, and the assumptions made, clearly alongside your valuation results. Remember that values for biodiversity are likely to represent minimum estimates.
These issues notwithstanding, biodiversity valuation can provide a useful aid to your decision-making.
