In its new publication “The Business Case for Natural Capital Assessment”, the Global Nature Fund (GNF) highlights the different triggers for companies to assess their natural capital. The advantages and diverse applications of this tool are exemplified by means of international developments and practical examples. One example is the UK based water company South West Water that worked in collaboration with farmers to improve water quality instead of investing in cost intensive technology. Another example is the German machine manufacturer TractoTechnik which valued and compared the natural capital impacts of its trenchless pipe laying with the open construction. The natural capital assessment was able to express the environmental performance of the trenchless technology with help of monetary values (Euro).
The true value of natural goods and services
Every business depends on natural goods and services, either by the use of water, plants, minerals, climate regulation, water purification or bee-pollination. Many business models are based on natural capital, but do not assess the value of the usage. Businesses rather have a negative impact on natural capital due to the use of resources and due to production processes. Companies in the textile industry for example purchase cotton for their production. The price of cotton does not reflect how water consumption and usage of pesticides affect the local water system, water quality and soil. Thus, unsustainable farming techniques entail the risk, that cotton won´t be available in the long run. This can delay production and lead to sales losses. With the help of natural capital assessment, companies such as the luxury fashion group Kering, calculates the environmental impact of cotton along the supply chain in Euro. In addition, Kering analyzed different irrigating systems in order to support sustainable cotton cultivation and to ensure the quality and quantity of the cotton supply.
Drivers of natural capital assessments
Natural capital belongs to the core of every business. It should be included in corporate decision-making in addition to other capitals such as financial or manufactured capital. This enables companies to fulfil corporate responsibility and to communicate in a credible way. The assessment of natural capital also provides businesses the opportunity to value the positive effects they have on society or local communities. As a further driver for this development, GNF describes politics that framework conditions for companies and promote sustainable growth. In addition, the financial sector increasingly incorporates ecological and social risks in their investment decisions. Companies, who identify and manage their natural capital impacts and related risks and / or use opportunities from nature, can present themselves positively in the financial market.
With its publication, GNF provides the essential drivers of natural capital assessments. It further supports companies that are interested in this topic with a description of the Natural Capital Protocol, the first framework for natural capital assessments. Additionally, information on literature and supporting materials are provided.