The Importance of Natural Capital in Scotland

Tender description

Introduction The Scottish Government wish to commission economic analysis to determine which sectors in Scotland rely on high quality natural capital, and quantify the economic value (in terms of GVA (gross value added) and employment) of these “nature-dependent” sectors. Background & Context Natural capital is the world’s stock of natural resources including air, water, minerals and all living things. These natural resources underpin Scotland’s economy and are of vital importance to our wellbeing and economic performance. Our natural capital: - provides many of the foundations that allow our society and economy to thrive – for example through the provision of ecosystem services (such as clean water, carbon sequestration, and food, etc.). - can significantly improve physical and mental health – helping to support a wellbeing economy that is focussed on benefitting wellbeing, and boosting productivity and labour market participation. - is crucial to many of Scotland’s businesses – providing natural resources (for example, through provisioning services such as timber, fuel, and food), climate and air pollution regulation (regulating services), and by playing a vital role in Scotland’s brand and reputation, attracting visitors for recreation and tourism (cultural services), and supporting Scotland’s exports. However, estimates of how Scotland’s natural capital contributes to economic activity vary. Developing a sound, transparent and repeatable method for measuring the economic value of sectors reliant on Scotland’s natural capital will allow for these benefits to be better taken into account in policy development, and give an indication of the relationship between natural capital and the economy. This work is different from the natural capital accounting in publications such as the Natural Capital Accounts. Instead of valuing the impact at the level of stocks and flows of specific natural assets that provide ecosystem services, this work will look at the economic value in terms of GVA and employment figures of industrial sectors (or proportions of sectors) which are dependent on natural capital. Scope /Statement of Requirement The requirements are: - Develop a definition and methodology to determine which of Scotland’s industry sectors are reliant upon Scotland’s natural capital, how they are reliant upon it, and to what extent they are reliant upon it (i.e. what proportion of their value is reliant on natural capital). This will require the use of Standard Industrial Classifications (SIC) and research to determine an appropriate level at which different sectors rely on thriving natural capital. - Use GVA and Employment data to establish the economic impact and employment which natural capital brings to Scotland’s economy through each of the sectors identified. - Make appropriate use of input-output tables to develop a methodology to determine the indirect and induced GVA and employment associated with each sector. - The methodology will be required to be well evidenced, and draw on similar work conducted previously in Scotland, the UK and other countries (see below links to similar and related work). Time will also be built into the timeline of the project in order for the proposed methodology to be reviewed by the steering group before proceeding to the next stages of the work. - Provide regional breakdowns of this information (ideally at Local Authority level, and possibly also at Regional Land Use Partnership Pilot Area level and Regional Economic Partnership area level). - Produce a summary report and a full report setting out clearly the key findings, evidence, data and methodology behind the figures produced. The methodology and models should be described in sufficient detail such that it can be replicated by Scottish Government analysts. - Provide a model (preferably in Excel) which allows for this analysis to be updated in future years - including allowing the percentages of each sector’s activity that is thought to rely on natural capital to be updated. This model should complement the written description of the methodology. A piece of work was carried out on behalf of NatureScot (previously Scottish Natural Heritage) in 2008, which expanded on existing input-output tables to include the natural environment and produce associated GVA and employment figures: NatureScot Commissioned Report 304: The Economic Impact of Scotland's Natural Environment | NatureScot. This follows a similar methodology as the one set out above and the successful bidder should draw on and build on this analysis. A number of other related pieces of work have also been carried out at a UK level. For example, in 2023 ONS built on the UK natural capital accounts to produce supply use tables and estimate figures for the GVA derived from natural capital at a sector and industry level. This work can be found here: Developing supply and use tables for UK natural capital accounts - Office for National Statistics (ons.gov.uk). Eftec (in behalf of DEFRA) also carried out work looking at the contribution of different ecosystem services to the value of tourism and outdoor leisure: Science Search (defra.gov.uk). ONS have also carried out similar work using a similar approach: Tourism and outdoor leisure accounts, natural capital, UK - Office for National Statistics (ons.gov.uk). NatureScot also published a report in 2020 on nature based jobs which can be found here: NatureScot Research Report 1257 - Supporting a green recovery: an initial assessment of nature-based jobs and skills | NatureScot. Consideration should also be given to “green jobs” (as described by ONS here: The challenges of defining a "green job" - Office for National Statistics (ons.gov.uk)) when estimating employment figures for the sectors reliant on natural capital.