Natural capital: Credible concept or spurious sustainability approach?

EXCLUSIVE: Natural capital accounting can be a "disaster" for sustainability professionals and is not an effective way of engaging the finance community with environmental issues, the head of sustainability and finance at UK brewer Adnams has said.

Speaking during a breakfast briefing held for the edie Leaders Club in London last week, Richard Carter said the process of putting a price tag on the world’s natural resources is “deeply counterproductive” and can ultimately lead to a deprecation of environmental issues in favour of other business considerations.

“There are three ways we can talk about natural capital: we can talk about it qualitatively, we can talk about it quantitatively, or we can talk about it in terms of a financial metric,” Carter said.

“I’m in favour of talking about it qualitatively – fossil fuels are a scarce resource, for example. And in some cases, you can quantify it. But once somebody tries to monetise natural capital, it is a disaster… it is deeply counterproductive.

“For example, telling me that the natural capital value of the seagulls on an island is £1m – that may be interesting and perhaps compelling, but if you then tell me that there’s oil underneath that island, and the potential value of that oil is £1bn, then what do you think I’m going to do, as an accountant?

“Therein lies a significant problem with valuing natural capital – I recognise it as a concept; I recognise that we have got scarce and important natural resources, but I would encourage people to steer away from putting a monetary value on it. Trying to put a value on nature is slightly unreal… it’s perhaps a way that environmentalists think they can capture the attention of the finance director, which I think is a bit spurious.”

On the radar

Natural capital accounting is increasing in popularity among national governments and businesses. In the UK, the Natural Capital Committee (NCC) has been helping the Government develop its long-awaited 25-year environment plan, which NCC chair professor Dieter Helm believes can act as a catapult to move the concept of natural capital into the mainstream. 

“Natural capital is an idea whose time has come,”Helm states on his website. “It takes the analysis of the environment to a new level – way beyond the conventional sustainability and sustainable development approaches which have dominated in the last couple of decades.”

At a corporate level, the global Natural Capital Protocol was established last year to offer businesses a standardised framework to identify, measure, and value impacts and dependencies on natural assets, raw materials and natural infrastructure. French luxury fashion brand Kering was one of the first adopters of the protocol, having developed its own environmental profit and loss (EP&L) programme which assigns an economic value to the environmental impacts of the group’s entire supply chain.

And other businesses are taking a keen interest in the approach – a recent survey of edie Leaders Club members revealed that 52% of sustainability professionals had natural capital accounting on the radar or were already beginning to apply it to their sustainability strategy.

Readers poll: should we put a price on nature?


For Carter at Adnams – which was shortlisted as a finalist in edie’s 2017 Sustainability Leaders Awards – firms need to undergo a more holistic cultural shift in order to ensure sustainability is more centrally embedded in corporate decision-making.

In his presentation to the edie Leaders Club, Carter revealed that the Southwold-based brewer, hotelier and wine merchant has been able to effectively separate environmental impact from business growth, with carbon emissions (kg CO2 per £k revenue) falling by 49% since 2008, while market share increased by 52% and the company achieved steady revenue growth over the same period.

“If you’re managing carbon, water, waste and biodiversity in a holistic way – as we are at Adnams – then your business strategy will naturally encompass all of those things and will recognise the value of natural resources,” Carter said.

“It’s time that we all stop looking at environmental management as ‘something over there that somebody else does’ – we don’t look at marketing or new product development in that way. If we want to save costs and make the business fit for the future, then it’s got to become a day-to-day activity.”

Making the business case

For sustainability professionals, Carter says this means making a clear and compelling business case for any project or initiative in order to set out a tangible link between sustainability and finance – a link that Carter has himself gained unique exposure to as the head of both departments at Adnams.

“My role as head of sustainability and finance here at Adnams is very unusual,” Carter admitted. “But when I put forward a business case that says we should spend £50,000 to put LED lighting in our warehouse, I’m not saying that we should do that ‘because it’s going to save the planet and that’s really important’. I’m saying that we should do it because it’s going to save us electricity costs and it’s going to reduce the maintenance requirements of our lights – and, by the way, it also happens to be good for the environment.”

In a recent blog post, Carter explained how Adnams has adopted an ‘environmental gearing’ approach to managing sustainability. This follows a similar approach to ‘financial gearing’, which involves managing the ratio of debt and equity (shares) in a business’s capital structure. Read that blog in full here.

Join the conversation at the edie Leaders Club

Richard Carter was speaking at a breakfast briefing held on behalf of the edie Leaders Club – an exclusive, member-only programme of free, informal, peer-to-peer networking and events, designed specifically for those leading their company’s sustainability strategies and those responsible for implementing them.

Membership to the CLub grants access to an annual programme of free, informal peer-to-peer networking events, CPD-certified breakfast briefings and in-depth learning events which are closed to non-members.

Find out more about the edie Leaders Club here and submit your free membership application here.

Luke Nicholls

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