Natural Capital is all abuzz these days. In short, Natural Capital is the value-producing stock within our natural ecosystems, including air, land, soil, biodiversity and geological resources. These stocks flow, via ecosystem services, to human activities – for the production and supply of goods and services, which sustain our society, culture, and economy.
A new field of accounting has emerged to cater for this: Natural Capital Accounting. What interests Biome, is the cascade of these concepts and mechanisms, from a national to a corporate level.
Attributing value to an ecosystem service is a controversial topic at a national level – even more-so at a corporate level. Antagonists would argue that nature's value is intrinsic and priceless, while protagonists would say in order to protect nature, it must be valued appropriately.
The fear is that natural capital becomes a commodity – sold to the highest bidder, without regard for its intrinsic value. However, this is not the essence of Natural Capital Accounting – rather than commoditising nature, it assigns values to natural assets – aiming to keep asset levels above their sustainable thresholds, thereby protecting ecosystems. Keeping nature in the black: rewarding ecosystem protection and taxing negative impact.
In the corporate world, environmental accounting already exists – primarily for regulatory compliance. Over time, the compliance drivers will become stronger, integrating accounting across the full product life cycle: from design, manufacture, use and take-back – throughout the entire supply chain.
Corporate natural capital accounts that sit alongside traditional balance sheets are an inevitability. Environmental accounting will uncover the real impact of existing business models. Current consumption patterns and our fixation on GDP as an economic driver will result in our natural assets falling below sustainable threshold levels. Natural capital accounting will go some way, to building a society that places equal importance on the social, economic, environmental and cultural aspects of a business.
We must act as nature's bookkeeper: without proper accounting of natural capital (assets) and environmental externalities (liabilities), unsustainable growth ensues. At Biome, we will be following the progress of natural capital accounting, as it flows from national to corporate levels. Things are about to get interesting.