"Natural capital is another term for the stock of renewable and non-renewable resources (e.g. plants, animals, air, water, soils, minerals) that combine to yield a flow of benefits to people"
-Natural Capital Coalition definition-
All economic activity depends, to a greater or lesser degree, on natural capital. The established measure of economic growth -Gross Domestic Product (GDP) – does not contemplate the value provided by natural capital to a country´s social and economic growth, nor to its business fabric.
This has resulted in the traditional economic system having long decoupled the wealth of raw materials and the ecosystems that facilitate productive growth. The need to recognize our natural capital is expressed through the serious consequences of its continuous degradation (deforestation, soil degradation, loss of biodiversity, air pollution …). And in the limitations that this represents for a sustained growth over time from the economic and social point of view.
The exploitation of the goods and services that natural capital provides underpin the development and progress of economies and societies. However, most organisations do not fully appreciate their relationship with natural capital. Therefore, they are missing opportunities to improve their performance and avoiding significant risks from their business models.
What is natural capital?
“Natural capital is the stock of both renewable and non-renewable resources (e.g.: plants, animals, air, water, land, minerals) that combine to yield a flow of benefits to people”, as defined by the Natural Capital Coalition.
These resources provide services -known as ecosystem services (EE.SS.) – such as air and water filtration, food production, pollination, climate and erosion control and recreational areas, which are essential to humankind´s well-being.
Natural capital, in addition to financial, human, social, manufactured and relational capitals, is commonly acknowledged as one of them: all are intertwined and cannot be isolated from one another.
Integrated Reporting Standards define natural capital -and visually represent it- as the capital which provides the environment upon which all other capitals are based.
Despite their huge potential to positively impact companies and organizations, the services which natural capital has to offer are in many cases underestimated or remain hidden. This invisibility, coupled with the “business as usual” production and consumption model, and an increasing human population in a finite planet, are a great pressure on the natural world.
Proactive management of natural capital offers a wide range of possibilities, while the lack of it creates risks which ultimately affect shareholders.
Integrating natural capital in daily accounting and the decision-making processes, is accepting to work in a market system which acknowledges the environmental reality. This approach is the only possible way to confront the climate and biodiversity crisis we are currently living in.
Benefits of integrating natural capital
As regulatory demands regarding non-financial disclosure increase, understanding and managing the impacts and dependencies on natural capital will help companies conform to law.
Being aware of and managing the impacts and dependencies on natural capital can constitute a crucial support to companies interested in promoting transparency and fulfilling their stakeholders´ expectations regarding their environmental, economic and social impact.
Improved risk management
Sustainability is more than an ethical approach; when it comes to risk management, it boosts opportunity. Measuring, assessing and evaluating the impacts and dependencies on natural capital broadens our understanding of the repercussions which different activities have on the ecosystem services.
Non-financial issues such as biodiversity, clean air or fertile and healthy soil are increasingly acquiring financial relevance. Environmental degradation, climate change and the transition towards a decarbonized economy can significantly impact the economy and finances. Therefore, financial supervisory authorities, as well as other regulatory bodies, should pay due attention to natural capital and climate-associated risks.
By incorporating the analysis of natural capital in the planning process, the corporate sector can develop quantitative, qualitative and monetary evaluation tools to assess their performance, collect information and make decisions or develop corporate sustainability strategies, detect business opportunities and improve their positive social impact and corporate reputation, among others.
Products and services
Advice on how to integrate the Natural Capital Protocol
Ecosystem services assessment. Identification, mapping and assessment of ecosystem services
Natural capital adaptation Strategies and Action Plans
Identification and assessment of impacts and dependencies on natural capital and ecosystem services
Design natural capital and ecosystem services performance indicators
Advice on goal definition, scope, relevance, work groups and timing of natural capital corporate strategies
GIS maps and ecosystem services assessment models, analysis of different scenarios
Accounting models regarding environmental assets and the positive impact of corporate strategies on natural capital
Natural capital, sustainability, biodiversity and climate change performance indicators
Matrixes of impacts and dependencies on natural capital
Distribution and planning models in key areas to develop natural capital projects and promote ecosystem services
Multi-criteria analysis and input-output matrices to generate compliance factors and sustainability indexes
Design corporate strategies and action plans from a sociological approach based on theory of change