Global natural capital standard for business moves step closer

A valuation framework for natural capital is being developed to enable businesses to gauge their environmental impacts more effectively and build a financial case for sustainability.

The Natural Capital Coalition (NCC) has selected two consortia to draw up a natural capital protocol and apply it to two key markets - food and drink, and textiles. The protocol will act as a decision-making tool and provide a methodology for companies to assess climate risks and related opportunities.

The two consortia will be managed by the World Business Council for Sustainable Development (WBCSD) and the International Union for Conservation of Nature (IUCN).

The WBCSD consortium will bring together the various methodologies, systems and ideas currently in the market into a single measurement and framework, while the IUCN consortium will translate it into two sector specific guides for the food/drink and textiles industries.

The IUCN will also manage a central hub which will deliver business-led pilot testing of the protocol with various global corporations. It is expected that a fully tested first version of the protocol will be available by December 2015.

Natural capital depletion

According to the parties involved, the protocol could serve as the basis for future standard setting and methodologies in this field. WBCSD CEO and president Peter Bakker said that his organisation has been driving the measurement and valuation of corporate impacts and dependencies for some time. "This is the vital next stage in our ongoing efforts to improve the overall business case for sustainability."

Back in May, edie reported warnings from that NCC that natural capital depletion would leave businesses dangerously exposed unless they start being more proactive in tackling the issue. It urged chief finance officers to start accounting for natural capital in their balance sheets.

The value of natural capital has been explored in-depth by many analysts. According to research from Trucost, growing business demand for natural capital and falling supply due to environmental degradation are contributing to natural resource constraints, including water scarcity.

It argues that companies in many sectors are exposed to natural capital risks through their supply chains, especially where margins and pricing power are low. For example, the profits of clothing retailers have been impacted by up to 50% through cotton price volatility in recent years.

Maxine Perella

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