IMPROVING BUSINESS DECISION MAKING:
Valuing the Hidden Costs of Production in the Palm Oil Sector
This report demonstrates how natural and human capital accounting can be used to understand and reduce the environmental and human impact costs of palm oil production. It was commissioned by TEEB as part of a series of studies for its Agriculture and Food (TEEBAgriFood) project.
This research is organized in two parts. First, a materiality assessment quantifies and monetizes a selection of material natural capital impacts of palm oil across the 11 leading producer countries. This is followed by a case study that quantifies and monetizes natural capital impacts in more detail in Indonesia, the largest palm oil producer, and also quantifies and monetizes a selection of human capital impacts. A scenario analysis illustrates how natural and human capital accounting can be used in Indonesia to compare a selection of alternative techniques for growing palm oil which may lower impact costs.
The scope of the research is limited to palm oil production and its supply chain for inputs such as fertilizers and pesticides. This approach was chosen rather than a full value chain assessment because this is where most natural capital impact costs occur. It does not include downstream activities such as transportation, product manufacturing, consumption and end of use. For the same reason, the study also focuses on assessing the natural and human capital costs of palm oil production. The natural and human capital benefits of palm oil production do not fall within the scope of this study. TEEBAgriFood’s universal Valuation Framework helps place this scope in context by illustrating a full value chain from production to disposal assessing the cost as well as the benefit side of the equation (TEEBAgriFood, 2016).
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