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 / Autumn 2006 / Issue 44(originally published by Booz & Company)


Unrecognized Assets

Whether used in the public or private sector, an EAA transforms organizational thinking by linking assessments of four areas that would otherwise be considered separately: the environmental liabilities and requirements mandated by law; the innate value of natural resources in contributing to the quality of life of the enterprise and the ecology of its surrounding area; the technical capabilities of the organization (and the value of improving those capabilities); and the corporate or mission goals of the enterprise.

This holistic approach often makes people uncomfortable at first. Some worry about taking a businesslike approach to natural resource management. It can seem reductionist, even harsh, to place a monetary value or price on a waterfall or forest or eagle habitat. If natural resources are treated simply as assets or commodities, no matter how benignly, will their use for human beings overwhelm their innate ecological value?

Those with such misgivings might be relieved to learn that the valuation approach has actually been shown to strengthen conservation efforts. That’s because the valuation of resources reframes environmental costs as incentives for minimizing waste, pollution, and environmentally harmful activities. In addition, this approach enables organizations to make better decisions about investments because they understand the true cost–benefit trade-offs of their activities. Experience has shown that an EAA-based approach provides a framework for collaboration — rather than confrontation — among organizations that traditionally have disagreed over environmental policy, such as manufacturing plants and regional environmental groups.

Other corporate decision makers are skeptical of the EAA concept because it isn’t businesslike enough. They worry that any environmental assessment, no matter how well intended or well designed, could be used by interest groups to put pressure on corporate decision makers and increase their liabilities. And they know that it isn’t always possible or appropriate to assign a monetary value to every environmental asset, so they mistrust anyone’s ability to account for them.

But those concerns don’t make environmental assets any less valuable. Organizations that recognize the value of the ecosystems they control, their waste streams, and their knowledge capital — and that begin to use these resources to create wealth — can dramatically strengthen their strategic planning, risk mitigation, and portfolio management activities. In fact, the process of paying closer attention to the benefits and costs of environmental assets strengthens organizations’ ability to make better decisions in general.

Anatomy of an Assessment
An environmental asset assessment typically takes three to six weeks, depending on the size of the organization and whether it has previously conducted an EAA. The process follows four basic steps:

Step 1. Define the requirements for natural resources — the things that nature provides that make it possible for the facility to operate. In this step, organizations identify uses they make of natural resources and related environmental assets, just as they would for the human resources, capital, or infrastructure needed to keep operations going. In fact, most organizations already have detailed requirements for air, land, and water use. For example, flight operations at an Air Force base require airspace for launching aircraft and for training pilots and other crew members. The base also needs land for facilities and weapons testing, and to serve as a noise buffer for surrounding communities. Water is needed for drinking, cleaning, sanitation, and other uses. As a result, an installation needs a variety of permits, water-use rights, emissions and discharge allowances, and other legal approvals related to resource use and pollution.

An airport, factory, or oil refinery has similar requirements. An airport, for example, requires airspace for its jets. Most facilities, whether public or private, require such resources as air access for emissions, water discharge rights, noise buffers, and a host of permits to ensure the continued use of resources while they operate.

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