Business case challenges, with reference to the Forestry Commission and other examples, new business case horizons, and the enduring role of the business case.

1. 1
Making the business case:
classic challenges and new horizons
Ian Gambles
(Director, Forestry Commission England)
(Author, “Making the Business Case”)

2. 2
What I’ll be talking about
• A few key forest facts
• Old problems
• New horizons
• Staying relevant
• Questions and discussion

3. 3
Forest facts
• Forestry Commission manages the public
forest estate in England on behalf of the
Secretary of State
• 250,000 hectares - 2% of the land area
• More than 25% SSSI
• 40 million visitors each year
• Cost to taxpayer c.£20m
• Timber and visitor income c.£50m

4. 4
Classic challenges
• Selection of familiar problems
– Important issues in their own right
– Raise wider questions of relevance
• Negative NPV
• Future costs
• Decision momentum

5. 5
Negative NPV

6. 6
Negative NPV?

7. 7
Negative NPVs – key points
• Some things just have to be done
• Never appraise against a static
background
• Non-monetary benefits can outweigh a
negative NPV – eg social capital
• To ignore or to manipulate – is that the
question?

8. 8
Future costs - predictable

9. 9
Future costs - unpredictable

10. 10
Future costs – hard to quantify

11. 11
Future costs – key points
• Business case must consider:
– Operating costs
– Decommissioning costs
– Risk-adjusted future costs
• Neglecting future costs will:
– Pass costs on to future years or generations
– Restrict the choices of future decision makers
• But should they change the decision?

12. 12
Decision momentum

13. 13
Decision momentum

14. 14
Decision momentum – key points
• Sometimes the business case is irrelevant
to the main decision
• Shun the post hoc business case
• Find the decision not yet made and the
factors which can and should shape it
• But does that push the business case into
the margins?

15. 15
Casting about for relevance?
• Are we wasting our time?
• Is decision making in reality so irrational
that all our rigorous calculations are
beside the point?
We must continually strive for relevance,
innovate, and reflect changing ideas

16. 16
New horizons – Natural Capital

17. 17
What is natural capital?
• Natural capital refers to the elements of
nature that produce value to people, such
as the stock of forests, water, land,
minerals and oceans.
• These benefit us in many ways, by
providing us with food, clean air, wildlife,
energy, wood, recreation and protection
from hazards.

18. 18
Stocks, flows and benefits

19. 19
This is no longer a sideshow
• Natural Capital Committee – independent
advisor to Government
• Office of National Statistics - Roadmap for
development of Natural Capital Accounts
published December 2012
• Defra - formal environmental accounts to be
complete before 2020.
• United Nations - the UN System of
Environmental-Economic Accounting (SEEA)
sets the relevant International Standard
• Increasing relevance in corporate reporting

20. 20
Role of Environmental Accounts
• To quantify the value of benefits flowing from
the natural capital that we have in order to
inform and prioritise investment in its protection
and enhancement
• To extend economic accounts to include
environmental considerations, specifically to
include depletion of non market natural capital
assets (and to quantify any expenditure needed
for maintenance and/or restoration).

21. 21
Impact on the business case
• Challenges the definition of capital
• Gives structure to a vast category of
non-monetary benefits
• Helps to identify future costs
• Provides a language for factors
which will – and should –
increasingly influence decisions

22. 22
NCC example: where to plant woods
• Hypothesis: 250,000ha of
new woodland in GB
• Scenario A: chosen to
optimise market values
only
• Annual cost to taxpayer:
£134m
• Non-market benefits:
£68m
• So annual net social
value = (£66m)

23. 23
NCC example: where to plant woods
• Hypothesis: 250,000ha of
new woodland in GB
• Scenario B: chosen to
optimise social value
• Annual cost to taxpayer:
£287m
• Non-market benefits:
£833m
• So annual net social
value = £546m

24. 24
A rather different decision!

25. 25
Piloting PES in the public forest
• How much should the Public Forest Estate cost?
• By investing in our natural capital, we generate many
ecosystem services. Just a few examples:
– Restoring Ancient Woodland
– Creating and maintaining Open Habitat
– Promoting biodiversity and species conservation
– Providing community woodland
– Improving water quality and mitigating floods
• These services produce benefits, but not income. Indeed
they can displace income generating activity.
• Do they belong in a business case? Who should pay for
them?

26. 26
Staying relevant
• The business case is a tool for decision
makers
• Analysing the impacts of decisions matters
– even if actual decisions differ
• If a factor is important to decision makers,
and to the economy and society within
which they operate, it belongs in the
business case
• Keep your tools sharp!

27. 27
Sources
• The following sources are acknowledged.
Anyone wishing to reproduce text or images from
these sources is responsible for checking and
respecting copyright:
– Slides 5, 8, 9, 13 – Forestry Commission
– Slide 6 – Library of Birmingham
– Slide 10 – Guardian News and Media Ltd
– Slide 12 – Scottish Parliamentary Corporate Body
– Slides 16-18, 22-24 – Natural Capital Committee

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