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Factoring Natural Capital into Bottom Line is Key to Future Viability

Natural Capital

London – Close to 30 leading companies have underlined the need for the economic value and conservation of natural resources to be integrated more closely into global business models, in order to ensure economic viability in the face of biodiversity loss, deforestation and the depletion of other natural capital.

The findings come from a new study released by The Economics of Ecosystems and Biodiversity (TEEB) for Business Coalition.

Businesses across the world rely on natural resources and ecosystems (natural capital) that provide critical ‘ecosystem services’ such as providing fresh water and raw materials, climate regulation, water purification and flood management. For businesses to be viable in the long term, such ecosystem services need to be maintained, yet the world is currently experiencing an unprecedented depletion of natural capital.

According to TEEB for Business, the main reason for this is the economic invisibility of most of nature’s services, and their resulting exclusion from most policy and business decision making.

Natural Capital Management (NCM), as highlighted in the new study, aims to better understand these environmental externalities and integrate them into business decision making. The new TEEB for Business report focuses on the growing business case for natural capital management.

“Organisational Change for Natural Capital Management: Strategy and Implementation” is based on data from 26 businesses across nine industrial sectors (60 per cent of them with revenues of over US $ 10 billion), which are implementing behavioural and organisational changes to promote natural capital management.

The main findings of the study include:

  • A small group of pioneering companies, who recognise the growing business case for NCM, are moving NCM forward and expect to build it deeply into their business within the next 3 years.
  • Their rationale is that they will be much better positioned than other companies to manage and thrive in a resource-constrained world that could have serious implications for business in 3-5 years.
  • Delaying the measurement and management of natural capital carries a significant business risk for companies regarding the availability of key raw materials and maintaining competitive advantage.
  • In particular, the availability of freshwater, renewable energy, climate regulation, fibre and food were identified as the most important natural capital risks in the next 3-5 years.
  • Current barriers to change for business on NCM are at the macro-level (e.g., lack of government regulation and customer demand) and organisationally. In particular, challenges at the organisational level include establishing the relevance of NCM to the business, and a lack of harmonised methods to measure, prioritise and integrate natural capital into business decision making.
  • NCM is a business innovation that changes business processes, practices, systems and strategies. It is, therefore, a major driver of organisational change.

“This study provides real life intelligence from 26 businesses that supports the growing business case for managing natural capital,” said Dr. Dorothy Maxwell, Director of the TEEB for Business Coalition.

Pavan Sukhdev, Chair of the Advisory Board of the TEEB for Business Coalition, and UNEP Goodwill Ambassador, said, “This study identifies the absence of measurement of natural capital externalities as the most significant barrier in the road from recognition through evaluation to adoption and leadership in natural capital management. It lays the grounds for identifying the largest externalities of business as a first step towards their recognition and management.”

“The study highlights the activities, barriers and challenges business face in natural capital management. The data concludes that measurement is the most clear-cut challenge companies face as a barrier to development,” said Dr. Ram Nidumolu, CEO, Innovastat, who conducted the study.

At last year’s Rio+20 Summit, the UNEP Finance Initiative released “The Natural Capital Declaration”; a finance-led initiative to integrate natural capital considerations into investment, banking and lending decisions.

The declaration committed CEOs from close to 40 banks, investment funds, and insurance companies, to help build an understanding of their companies’ impacts and dependencies on natural capital, to embed natural capital into their products and services, and to integrate natural capital into accounting frameworks.


Click here to read/download the Full Study.

Source: UNEP.

About the TEEB for Business Coalition

Launched in November 2012, the TEEB for Business Coalition is a global, multi stakeholder platform formed to develop and support the uptake of natural capital accounting in business decision-making. The vision of the TEEB for Business Coalition is to support a transformative shift in corporate behaviour to preserve and enhance rather than deplete natural capital. Made up of global leaders from business, policy, practitioners and NGOs, the Coalition is the business application of the G8- and UNEP-supported TEEB (The Economics of Ecosystems and Biodiversity) programme. For more information, visit http://teebforbusiness.org/.