As part of the group’s sustainability strategy, based on the three pillars of ESG (Environment, Social and Governance), these studies have included an important assessment of the ecosystem services associated to the oak cork forest, making it possible to calculate the environmental footprints of various of the company’s products. João Alves, Managing Director of EY in Portugal, Angola and Mozambique, has accompanied these studies very closely, and highlights their main conclusions, as well as the importance of quantification to make accurate assessments.
Why is it important to assess ecosystem services in order to reinforce public perception and interest in the conservation of ecosystems and biodiversity?
The concept of ecosystem services – which can be defined as nature’s contributions to people’s well-being – has been instrumental in increasing public awareness of the importance of the conservation and biodiversity of ecosystems. This concept introduces a perspective in which ecosystems and biodiversity are part of a specific type of capital – natural capital – which provides multiple material goods or experiences that are essential for people’s quality of life. This viewpoint highlights the fact that human beings depend on the sustainability of this natural capital, as an imperative for their own long-term survival as a species. An emblematic example is climate regulation through the carbon sequestration achieved by forests, which constitutes an essential contribution by nature to mitigate the impacts of climate change, in line with the aim to achieve carbon neutrality by 2050. There are also many other ecosystem services, such as hydrological regulation, prevention of extreme events such as flooding and fires, pollination by bees that is important for agricultural crops, and also including the potential for recreational experiences in nature such as ecotourism, which underlines the direct and indirect benefits that society can derive from ecosystems. Evaluation of such services is therefore essential to provide tangible information on the value for economic cycles of conservation of ecosystems and biodiversity. This makes it increasingly possible to maximise integration of such considerations in management and decision-making frameworks at the territorial level. This trend has been recorded at the European Union level, through the commitment of Member States to map and evaluate the condition of their ecosystems and the services that they provide, as well as to assess the respective economic value associated with the benefits derived from them, in order to integrate these flows in national accounting and reporting systems. This context reinforces the need for companies to align their sustainability policies and strategies with this agenda, which in 2020 became an urgent need for several companies (e.g., for those subscribing to the Act4Nature initiative).
Why is it important to quantify these services?
Firstly, because we need to understand the complex interaction of biological and ecological processes that result in the provision of a service, thus providing the basis for managers of the territory to intervene in the system, in order to maximise the provision of ecosystem services in a sustainable manner. Secondly, quantification is the underlying basis for valuation, which is fundamental in order to integrate the value of ecosystem services in accounting systems, for assessment of the environmental impacts of projects, or for the development of economic instruments such as the remuneration programmes for ecosystem services (attributed to owners who opt for forestry and rural management practises that are compatible with the provision of services of ecological and monetary value). From a corporate perspective, quantifying and valuing the direct and indirect impacts of company’s activities on ecosystems and their associated services, as well as assessing the risk of their dependence on natural capital, is crucial in order to understand the true extent of the footprint of activities and operations associated with their value chain, in terms of the degradation or preservation of ecosystems and biodiversity.
What methodologies did you use and why?
In the study developed by EY on the value of the ecosystem services of the cork oak forest, the assessment of ecosystem services was based on use of methodologies for mapping and quantifying services using geographic information systems, cartography and forest inventories, provided by four case studies. In this assessment, three services were monetised: climate regulation; regulation of extreme events; fire prevention, hydrological regulation and soil protection. The valuation took into account the avoided cost method, i.e., the social cost that would be borne by society if it had to remedy the environmental damages associated with absence of ecosystem service. For example, the social costs related to greenhouse gas emissions are a result of the damages that are caused to agricultural crops, medical care associated with heat waves and droughts, as well as the damages caused by floods and rising sea levels. Considering the climate regulation service, the consideration of a social cost of carbon (€ / ton of CO2eq emitted), makes it possible to estimate the monetary value associated with this ecosystem service.
What conclusions have you reached?
The study developed by EY, based on the selected case studies, concluded that cork oak forests provide benefits to society worth on average over € 1300 / ha per year. The value of the total quantified services is an underestimate of the total value of the ecosystem services associated to the cork oak forest. This ecosystem plays an essential role in the maintenance of biodiversity and habitats, responsible for invaluable ecological functions, some of which are not yet fully understood by humanity. There is also a complex set of benefits generated for society, ranging from provision of services, regulation or cultural services. These services are evaluated in the study using qualitative and quantitative information in order to provide a set of useful information on the dimension of the identified contributions.
What can this work offer for the future?
This work demonstrates the value associated with the cork oak forest, which goes far beyond its landscape importance, and includes the fact that it forms part of the cultural identity of Portugal and the Mediterranean and considers the multiple applications of cork in different sectors. For the various stakeholders in the cork sector and its respective products, the work demonstrates the societal benefits associated with good management of the cork oak tree and can serve as a catalyst for the adoption of management practices that ensure a compatible balance between economic exploitation and conservationin the rest of Portugal. This is also a good example of how companies can benefit from knowledge about their impacts and their dependence on natural capital, both in reputational terms and through demonstrating their contribution to achieving public policy objectives, in terms of biodiversity conservation and ecosystem services.