Defra Contract WC1031: Business Indicator Options PaperMay 2013

Developing UK Indicators for the Strategic Plan for Biodiversity 2011-2020: Integrating Biodiversity into Business Decisions and Activities Indicator Options Paper

1.Rationale and Approach

Biodiversity worldwide is under great pressure (Butchart et al. 2010) and the UK Government is committed to reporting against global, regional and national frameworks which aim to address biodiversity loss. Targets set within these frameworks include those for the business sector to take steps towards minimizing their impact on natural resources. The Natural Environment White Paper (HM Government, 2011) set out a commitment to the Convention for Biological Diversity’s (CBD) Strategic Plan for Biodiversity 2011-2020 to meet these targets, yet the UK Government currently has no means to monitor progress against Aichi Target 4, which is the target which has most relevance to business:

“...By 2020 at the latest, Governments, business and stakeholders at all levels have taken steps to achieve or have implemented plans for sustainable production and consumption and have kept the impacts of use of natural resources well within safe ecological limits...”

An ideal indicator for achieving this target would be one that assists the government to better understand whether businesses are taking action to understand, manage, and enhance biodiversity resources over which they have an influence.The aim of the UK indicator B3 (Defra, 2012) is to understand if/how businesses are integrating biodiversity considerations into their corporate or business activities in order to achieve Aichi Target 4.

The aim of this paper is to present a number of indicator options that could be used by the UK Government to monitor progress against Aichi Target 4 as well as other regional and national biodiversity targets. The process of indicator option identification/development started by compiling a preliminary list of potential datasets and indicators on how businesses are integrating biodiversity considerations into their corporate or business activities from the UK National Ecosystem Assessment (UK NEA, 2011), and suggestions from an online survey of UK business professionals. UK experts in business and biodiversity then met at a workshop convened by the UNEP World Conservation Monitoring Centre (UNEP-WCMC), during which the preliminary list of datasets and indicators was reviewed and further indicators were either suggested or considered for development.

The quality of each potential indicator was evaluated and ranked against various criteria. Based on this assessment process, four indicator options were shortlisted for development and are presented below for consideration. An overview of the project and general approach for developing UK indicators is provided in Annex 1.Detailed methodology for developing the business indicator is provided in Annex 2.

It should be noted that the indicator options described in this paper aim to be UK centric to avoid overlap with UK Biodiversity Indicator A4 (Defra, 2012) which is focused on the function of UK economic activity in a global biodiversity context.

2.Summary of Data Sources

Challenges in the development of a business indicator

The aim of the indicator is to encompass as much of the business community as is possible within a single framework while avoiding overlap with other indicators within the suite of UK Biodiversity Indicators (Defra, 2012).However, businesses operate in numerous forms.There is a wide variety of sectors included within the overarching concept of ‘business’; from farming to finance and construction to retail.In addition businesses are structured in various forms and sizes.Many large businesses are publically listed while others are partnerships or sole traders.This variety of form leads to a diversity of approach when it comes to how biodiversity is addressed which is inherently difficult to measure and report in a single indicator.

While work has been undertaken within the realm of business and biodiversity very few tangible indicators or data sets exist.Data collection on how businesses interact with biodiversity has not occurred to date in a comprehensive and easily accessible format.Additionally, sourcing datasets which function in a trans-sector and nationally divisible way has proved to be challenging.

Datasets reviewed

Three potential data sources were identified as being suitable for supporting indicators of how businesses integrate biodiversity into their activities:

  1. Government Survey of Environmental Protection Expenditure by Industry
  2. Global Reporting Initiative Benchmarking Tool
  3. Institute of Directors Survey

Note: A list of the datasets identified, but not considered suitable as a basis for a biodiversity indicator are presented in Annex 3 (Table 3.1).

Government Survey of Environmental Protection Expenditure by Industry:

The Government Survey of Environmental Protection Expenditure by Industry (hereafter described as: Environmental Expenditure Survey) is focused on business expenditure where the primary aim is to reduce environmental pollution caused during normal operations.The survey requests information from the industry sectors listed below regarding the amount of money the business spends on protecting the environment.The survey includes costs associated with measures to reduce emissions and discharges, disposal of waste and reduction of noise pollution.The survey covers both capital expenditure and operational expenditure.Expenditure, in the terms of biodiversity, relates to protection of the natural environment.

The following industry sectors are sent the survey:

  • Basic and Fabricated Metals
/
  • Paper and Pulp

  • Chemicals and Pharmaceuticals
/
  • Printing and Publishing

  • Coke and Refined Petroleum
/
  • Products and Other Manufacturing

  • Computer, Electronic and Optical
/
  • Repair and Installation

  • Energy Production and Distribution
/
  • Rubber and Plastics

  • Food, Beverages and Tobacco Products
/
  • Textiles, Clothing and Leather Products

  • Furniture Manufacture
/
  • Transport Equipment

  • Machinery and Electrical Equipment
/
  • Water Supply and Treatment

  • Mining and Quarrying
/
  • Wood and Wood Products

  • Non-Metallic Minerals

The survey includes the total and proportional expenditure for one year, broken down by different categories: waste water, air, solid waste, soil/groundwater, noise/vibration, nature protection and other.Turnover is reported for the unit which responds to the questionnaire.. The survey process is overseen by a steering group with representatives from Defra and the Office for National Statistics (ONS).The data gathered in the survey is suggested as a baseline for indicator Option A.

Currently the survey includes a section on Environmental Management Systems (EMS).The format of the existing, relevantquestion (Question 4.1a and 4.1b)is shown below.This question would need modification with the addition of an extra element asking for more information regarding the inclusion of biodiversity within the EMS.More detail is provided in the section regarding Option D.

Current form of EMS Question 4.1:

a) Which of the following Environmental Management Systems have you implemented?Response options:

ISO14001

EMAS

In-House (Self-certified)

None

Don’t know

b) If answer to Q4.1a) is none, please state reason(s):

Temporal Coverage: The Environmental Expenditure Survey has been running since 2006.The number of survey recipients has varied between years, but has been as high as 7,827.(URS, 2012).Response rate has also varied, but was around 30% (2,352 returned surveys) in 2010 (URS, 2012).It may therefore be necessary to normalise the data to account for the different response rates.

Geographic Coverage:The information provided in the survey is anonymised and therefore it is not possible to break down by the constituent countries of the UK.The information is provided by sector only and company information is removed.

Data considerations:The 2008, 2009 and 2010 survey data used the SIC 2007[1] system meaning that there are some comparability issues between these and the 2006 and 2007 surveys which were based on SIC 2003 system.

The intention is to maintain this survey as an ongoing element of Defra Strategy.However, it may be managed by a different government department in future years and there is likely to be some modification of the format for the questionnaire, which may also cause issues when comparing data (pers. comm. Geoff Richards, Defra).

Global Reporting Initiative (GRI) Benchmarking Tool:

The GRI is a voluntary initiative to produce globally relevant guidance for sustainability reporting.The GRI produce indicators and have a database of the companies which report against these indicators.The most relevant indicator is EN14: Strategies, current actions, and future plans for managing impacts on biodiversity. Note, however, because this is classified by GRI as an ‘additional indicator’ it only targets emerging practice or addresses topics that may only be material for some organisations.

Data quality: The GRI have a database of company reports called the benchmarking database, which only includes those which have been GRI “checked” – i.e. those that have undergone internal GRI quality assurance procedures.During this procedure reports are reviewed and responses to the EN14 indicator are assigned to one of three categories: ‘Fully reported’, ‘Partially Reported’, and ‘Not Reported’.

Temporal Coverage: The database currently only includes reports from 2012 but is being backdated to include reports from 2011.

Geographic Coverage: The GRI benchmarking database is a global database which is publically available with a variety of filter options.At the public interface it is possible to filter by region, but only to the European level, as well as by sector.However, it would be possible to filter to a UK level internally at GRI.At the Europe level, the database only contains 162 reports and the UK-specific reports only make up a proportion of these – i.e. representation across UK businesses is currently very limited.Of these European level reports, 39% ‘Fully’ report against EN14 and 51% do not report against this indicator.

Data considerations: A potential issue of using data on reporting against indicator EN14 is that it could provide a false positive.For example, a company could report against the indicator which would be considered to be a ‘fully’ reported disclosure.However, their disclosure could be that they do not have a strategy, current action or future plan.

Institute of Directors Survey:

The Institute of Directors (IoD)[2] is a membership organisation with 38,000 members.They provide support, tools and information for their members, including conducting a monthly survey through a platform called ‘Policy Voice’.This survey is based around key issues that their members have and it allows them to identify business specific issues.All members of the IoD are able to sign up to participate in Policy Voice surveys.Currently 3,000 members are signed up.The response will therefore come from a small section of the UK business community.

The survey could be specifically tailored to the indicator in question.Indicator Option B and Option C are both based on using an IoD survey to identify if companies have policy structures in place.The approach would be to add specifically tailored questions into one of the monthly ‘Policy Voice’ surveys run by the IoD Policy team.The questions would be designed in collaboration with the IoD Policy team to ensure that they were suitably worded based on their experience of running a number of these types of survey.The questions would be added into the survey which most appropriately fits the theme of biodiversity.

An issue with the IoD strategy is that the inclusion of questions on an annual basis would have to be negotiated and would be under the control of the manager of the ‘Policy Voice’ survey.Therefore the security of this survey as a long term indicator option is not assured.

An alternative strategy could be to run an entirely bespoke survey from a government department or substantially amend the Environmental Expenditure Survey to include additional questions which would elicit the information required for Indicator Options B or C.

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Defra Contract WC1031: Business Indicator Options PaperMay 2013

3.Indicator options

Four indicators are presented as options for understanding the integration of biodiversity into business decisions and activities.During the workshop twelve draft indicators were identified and these are included in Annex 2, Table A2.1.The four options described below were chosen, from the long list of twelve, by the workshop participants in a post workshop survey.Each indicator is described in terms of how it would be presented and interpreted, together with a description of the data that would be required to generate the indicator, its strengths and weaknesses, and potential costs of producing the indicator. An example graphic (using dummy data) is also presented to illustrate how the indicator may be represented.

Option A: Expenditure on protecting Biodiversity

The Indicator (Description and Interpretation): Through the course of normal business operations there is the potential risk of causing damage to the natural environment.In response to this, businesses invest in avoiding or mitigating this harm.The purpose of the indicator would be to identify the level of spending annually on protecting the natural environment, whereby an increase in expenditure would reflect increased investment in protection of the environment (Figure 1).

Data Source: Environmental Expenditure Survey: Annually run survey by government on environmental protection expenditure by industry.This indicator option would be based on the existing data collected by the survey with no modifications.

Strengths:

  • The survey is already being undertaken so there is an existing dataset on which to base the indicator.
  • The unit costs are gathered so it is possible to work out the proportion on the expenditure on environment as well as the actual value spent.
  • The data and survey methodology already exists and has been implemented successfully.
  • The survey covers a wide range of sectors.However it misses some key sectors such as construction and elements of the infrastructure sectors (with the exception of water) are not included.
  • An understanding of the percentage of company turnover that biodiversity protection requires is useful.As the economy becomes more difficult for the company to operate in the percentage of turnover dedicated to the environment may reduce.Understanding the difference between actual spend and proportion of spend will allow some visibility of this issue.If the value increases while the proportion decreases there is an indication that either processes are becoming efficient or potentially spending on environmental protection is becoming less of a priority.

Weaknesses:

  • The survey is particularly focused on pollution prevention so may miss some key areas of expenditure, such as negative effects on biodiversity from land conversion - for example the conversion of land from a natural habitat to developed land supporting a factory extension or new reservoir.The survey is also likely to miss expenditure on supply chain management where the company aims to minimise the impact of sourcing raw materials.
  • The level of expenditure will depend on business sector, for example if their impacts are more direct they will be expected under some legislation and policy instruments to manage this.However, if the impacts are remote to the business, for example within their supply chain, the costs of environmental protection may remain within the supply chain company and not be measured.Therefore if a supply chain organisation, which is not included within the survey frame, incurs environmental protection costs these will not be included in the overall figure and therefore the overall costs of environmental protection could potentially be underrepresented.
  • Businesses could spend money on philanthropic activities which would be unconnected with their actual impact and therefore not appear within this survey.
  • Comparison between years historically is difficult because of the changes in the survey format and UK Standard Industry Classifications for Business (SIC).Previous surveys were carried out in 1994 (a pilot survey), 1997, and annually between 1999 and 2009. The 2003 Standard Industrial Classification (SIC) system was used during the 2006 survey process.The 2007 SIC was used for the 2008, 2009 and 2010 surveys. The 2006 and 2010 surveys covered a greater number of SIC sectors than the 2008 and 2009 surveys.Statistical advice could be sought to determine the implications of comparing the results from the different years, and results from different survey formats.
  • False Positive/Negative: if the value spent reduces it could represent new technology becoming cheaper rather than a reduction in effort for environmental protection.
  • Level of expenditure does not necessarily translate into effective biodiversity protection.

Cost of producing indicator[3]: This survey is currently undertaken by Defra as part of their core business.This indicator option does not require any amendment to the existing survey unless it is considered necessary to expand the industries surveyed to include those from the construction and infrastructure sectors.

a)Initial development. Minor costs for researching existing relevant survey questions and ensuring they are applicable to additional sectors included.

b)Ongoing data collection. Currently minor costs, but if the survey is substantially amended, or even discontinued, and it became necessary to run the survey solely for this indicator, then costs could rise to substantial.

c)Ongoing analyses. Minor to significant costs to compile and update data.Some retrospective analysis may be required on the existing data to ensure it is produced in the most useful format for an ongoing indicator.

Figure 1. Illustrative Graphic - Expenditure of UK Companies in Environmental Protection Activities (operational and capital expenditures).

Option B: Policy Awareness

The Indicator (Description and Interpretation): Many companies potentially impact on, and are dependent on, biodiversity and natural resources.However, this is not recognised by all companies and many of them do not have a policy which relates to biodiversity.The aim of this indicator would be to track how the number of companies who have a policy which identifies biodiversity as a material issue changes over time.The inference being that the presence of a policy acts a proxy for how aware businesses are of their impact and reliance on biodiversity. An upward trending line would indicate more companies are becoming aware of biodiversity and its values (Figure 2).