As any similar tool or methodology, the updated ENCORE knowledge base and the methodology behind it have some limitations. Some of these could be addressed through future research and development of ENCORE, others are inherent to this type of a screening tool.
Qualitative links between economic activities and ecosystem services, and economic activities and pressures
The links between economic activities and ecosystem services and between economic activities and pressures documented in the updated ENCORE knowledge base are high-level, global links. Therefore, where there is a dependency or a pressure link recorded for an economic activity, it does not mean that all firms engaging in that activity have that dependency or exert that pressure. ENCORE is designed as a screening tool showing potential dependencies and impacts. All users are encouraged to delve deeper and assess their actual dependencies and impacts on nature, taking into consideration the context of their company and characteristics of locations where they have direct operations or value chain links.
Value chain links
The value chain links shown in the updated ENCORE knowledge base are taken from the Environmentally-Extended Multi-Regional Input-Output (EE-MRIO) database developed by ETH Zürich based on EXIOBASE version 3.6. They do not show all value chain links that an economic activity has, only the key links based on the value added data in the EE-MRIO database. Similarly to other input-output databases, the EE-MRIO models the links between different economic activities based on trade flows within and between economies. The input-output databases may assign different importance to value chain links than other approaches to mapping of a value chain, for example based on a product life cycle assessment.
Since the ENCORE value chain links data only shows two tiers upstream and two tiers downstream, it may not reach the point of extraction or primary production. For example, for direct economic activity Wholesale of food, beverages and tobacco, the activity of Growing of fibre crops will not appear in the N-1 or N-2 value chain links provided by the ENCORE knowledge base because it is more than two steps removed. Extending the value chain links coverage for key sectors will be one of the areas for potential future research and development of the ENCORE tool. In the meantime, users are encouraged to add or extend value chain links in their own assessments as relevant.
Fossil fuels
In the updated ENCORE knowledge base, stocks of fossil fuels (e.g., coal, gas, oil) are not considered as part of natural capital’s stock of abiotic resources. Economic activities dependencies and impacts on the stocks of coal, gas, oil and other fossil fuels are therefore not captured in the qualitative links or materiality ratings.
Materiality ratings
The materiality ratings indicate typical level of materiality at global level. The actual materiality of dependencies and impacts is likely to vary significantly based on the specific context, company and location that is assessed.
The updated ENCORE knowledge base allows users to compare materiality ratings for a given dependency or pressure across multiple economic sectors and activities. However, the ratings are not designed to enable comparisons across different ecosystem services or pressures. As an example, users of the updated ENCORE knowledge base will be able to say that the economic activity Growing of rice tends to use more water than the economic activity Manufacture of plastics per 1 EUR of output. However, users seeing that the economic activity Growing of rice has VH materiality rating for the pressure of Volume of water use and VL materiality rating for the pressure of introducing invasive species, will not be able to say how much more material the water use is for the Growing of rice economic activity compared to the pressure of introducing invasive species. This reflects the recognition that there is no consistent hierarchy between pressures or ecosystem services – while some pressures or ecosystem services may appear more important to address in certain contexts or locations, in other cases the relative priority between them may be completely different. ENCORE users are encouraged to consider this limitation when interpreting the materiality ratings.
Where quantitative indicators were used, the calculations of materiality ratings were done using values per 1 EUR of output. This enabled comparability of the materiality across sectors and economic activities. In ISIC, similarly to other industry classifications, economic activities are not defined to be consistent in size (neither size of the turnover nor number of companies included). Since the per 1 EUR of output values were used, some economic activities with the same absolute quantities of pressures exerted may be assigned different materiality ratings. For some ecosystems and pressures that are linked to a small number of economic activities, not all materiality rating scale grades are represented. For example, in the ecosystem service of Other provisioning services - Animal-based energy, there are no economic activities that have a High or Very High materiality rating.
Water supply ecosystem service
The SEEA EA definition of the water supply ecosystem service states that the service “reflects the combined ecosystem contributions of water flow regulation, water purification, and other ecosystem services to the supply of water of appropriate quality to users for various uses including household consumption” (SEEA EA, 2021). When interpreting the dependency data and ratings from ENCORE, we encourage users to consider that water supply represents a final ecosystem service that combines other water-related ecosystem services also captured in ENCORE. As these ecosystem services are designed to overlap in the SEEA EA categorisation, users should consider excluding the water supply ecosystem service from their analyses where this may cause duplication.
When describing an economic activity’s dependency on the water supply ecosystem service, we encourage users to refer to ecosystems as “providing the ecosystem service of regulating water quantity” or “providing the water quantity regulation ecosystem service”. The wording “water provision” or “ecosystems supply water” are occasionally used as a shorthand but these statements are not scientifically correct and could be misleading. Ecosystems do not generate, produce, or provide water, they support the regulation of quality and quantity of water throughout the water cycle.
Dependency on water supply, water purification and water flow regulation ecosystem services
Following a precautionary approach, in this knowledge base, an economic activity is described as dependent on the water supply, water purification and water flow regulation ecosystem services both if the activity extracts water from the ecosystem itself and if the activity uses piped water (e.g., provided through municipal means). Scientific and grey literature reviewed for the purposes of determining the dependency links do not always differentiate between an economic activity’s consumption of water that it directly extracted or that has been supplied to it. The data from the EE-MRIO database that was used to calculate the dependency materiality ratings for water-related ecosystem services also does not differentiate between water that has been directly extracted by the economic activity and water that has been supplied to it.
Location specificity
The knowledge base was not developed using location-specific information. All users are encouraged to integrate, apply and adapt the broad information gathered here for their own individual use case. Shifting supply chains to a different country to manage impacts on ecosystem components is also not captured in this framework, but these mitigation efforts could be captured in individual risk assessments by financial institutions or businesses.
Data coverage
Possible data sources are collected and curated in a wide variety of languages worldwide. As such, it is unlikely that all available data sources have been identified.
Data currency
The data sources identified in the updated ENCORE knowledge base represent the best available data at the time the research was conducted (2023-2024). However, websites providing access to data sources may not be accessible indefinitely and more up-to-date datasets may become available.
Technical skills
Many of the spatial data sources identified within the inventories may require technical skills or Geographical Information Systems knowledge to use.
Industry classification coverage
The ENCORE knowledge base on natural capital dependencies and impacts currently uses a list of economic activities drawn from the UN’s International Standard Industrial Classification of All Economic Activities (ISIC). It is recognised that many financial institutions and businesses use other classification systems. ENCORE now provides crosswalks for ISIC to some other classifications (e.g., NACE and GICS®). However, it is recognized that it does not yet support all major industry classifications.
Opportunities
The ENCORE knowledge base currently provides information on dependencies and impacts associated with different economic activities. However, it does not yet cover opportunities related to interactions of the economy with nature.