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Framing natural capital assessment in the right way for business

17 October 2017 – Dr Mike Sharman, outlines the growing case for businesses to understand their impact and dependencies on nature.

Do businesses appreciate the full extent to which their success depends on nature and natural systems? Many still don’t. This lack of awareness has been disastrous for the natural world, and businesses are beginning to realise that it will soon become disastrous for their continued operational success if no action is taken.

The need for a clear understanding of the complex and dynamic impact and dependency pathways that flow between businesses and nature has led to the development of the Natural Capital Protocol, a framework for ‘natural capital assessment’ that provides organisations with the tools to identify, measure and value their impacts and dependencies on the natural world.

One innovation of a natural capital assessment is to promote an integrated approach towards the way that we understand the natural world. Issues like energy, water, waste and biodiversity, traditionally addressed in isolation, are brought together in a way that mirrors the interconnected systems in question.

A natural capital assessment is also innovative in the sense that it goes beyond measuring impacts on nature, to also measuring organisational dependencies. While some traditional approaches can end after the measurement stage, a natural capital assessment goes a step further by allowing organisations to recognise the value of these relationships to them.

Among business professionals, interest in learning about natural capital is fast growing. The University of Cambridge Institute for Sustainability Leadership (CISL) welcomed over 250 corporates, trainers/technical advisors, policy, and membership organisations to join the Natural Capital Protocol Application Programme earlier this year. The programme, delivered by CISL on behalf of the Natural Capital Coalition, aimed to help professionals through the initial stages of implementing the Protocol at their organisations.

Feedback from the programme has since been shared in a number of ways, including case studies by leading players like Jaguar Land Rover, Skanska, Dow Chemical, Novartis and Akzo Nobel, which highlight the benefits and challenges of the Natural Capital Protocol. Benefits include the Protocol providing a consistent assessment framework, facilitating discussion and commitment among stakeholders, supporting transparency, enabling data-driven decisions, and helping to compare options.

One challenge which was highlighted by programme participants was the difficulty in gaining internal buy-in to put resources into developing a natural capital assessment. The Protocol introduces concepts that can be initially complex, even for those with experience in environmental business departments. Natural capital methods and metrics can be complex to analyse and understand, and it can take time before they can be integrated alongside existing initiatives and processes. In addition, measurement and valuation of these relationships can prove to be even more complex, especially when assessing multi-tiered value chains.  

It can be a steep learning curve, but the potential gains are great, as are the risks of businesses as usual. An important leap is in appreciating that sustainability data normally reported by companies post-hoc may instead be used to make future predictions. Indeed, successful assessments may not require unwieldy field data collection. Businesses are becoming aware that a wealth of useful data already sits in the public domain. While some metrics such as for biodiversity impact are in development, others such as those for benefits transfer are ready to be applied to natural capital assessment to save time and resources.

As with any initiative, natural capital has its critics. One concern is that nature’s intrinsic worth cannot be accounted for using this methodology. However, the aim of a natural capital assessment is not to provide an exact and comprehensive value for any one aspect of nature that takes into account intrinsic, subjective and abstract values in this way. The aim of a natural capital approach, in a nutshell, is to recognise the dependencies that human beings have on the natural world, and to try and mitigate our impacts in order to avoid destroying what we rely on to be successful.

Natural capital assessment offers a new strategy. As incentives and enabling environments improve, and the societal imperative for change gathers pace, more companies are beginning to see the strength of the business case for taking a natural capital approach. 

Sustainability Leadership Laboratories, including Embedding Natural Capital short course.

CISL runs a series of two-day workshops in Cambridge, offering a deep-dive into specific sustainability themes. Our Embedding Natural Capital Lab explores the systematic use of data and decision tools that provide businesses with insight into their impacts and dependencies on natural capital. This short residential course is designed to help you identify and assess natural capital, learn to create an effective natural capital strategy and understand the natural capital risks and opportunities for your own organisation.

About the author

Mike Sharmen

Dr Mike Sharman ran the Natural Capital Protocol Application Programme at CISL, with the objective of encouraging more businesses to understand and manage their impacts and dependencies on natural capital. He was an advisor to the Natural Capital Impact Group, a group of businesses leveraging research and tailored programmes to embed sustainability into their operations and decision-making.

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Articles on the blog written by employees of the University of Cambridge Institute for Sustainability Leadership (CISL) do not necessarily represent the views of, or endorsement by, the Institute or the wider University of Cambridge.