Businesses moving in right direction on natural capital, says World Business Council
EXCLUSIVE: Companies have taken a "huge step in the right direction" over the past 12 months when it comes to measuring business impacts on nature, the director of natural capital at the World Business Council for Sustainable Development (WBCSD) has told edie.
It is almost exactly a year to the day since the launch of the Natural Capital Protocol - a framework which offers businesses a standardised framework to measure impacts on natural assets, raw materials and natural infrastructure.
The multi-stakeholder collaboration - led by the Natural Capital Coalition, of which WBCSD is a member - has attracted support from a cross-sector range of major businesses, including the likes of Coca-Cola, Tata and Olam. This positive response from the business community serves to highlight a growing corporate desire to understand the most effective methods to deal with natural capital risks, according to WBCSD's Eva Zabey.
“What’s been really positive is the reaction from companies realising that so many organisations have come together to agree on this common framework,” Zabey told edie earlier this week. “The fact that a range of actors from NGOs to businesses, to environmental economists, have come together under the framework of the coalition has been a huge step in the right direction.”
To facilitate business uptake of the framework, the WBCSD last week launched a Natural Capital Protocol toolkit - a free and interactive database businesses to use in exploring and carrying out natural capital assessments across their operations. The online resource will evolve over time to provide important data about which of the 50 or so tools are most commonly used, helping business leaders understand which methods are the most effective.
As a key architect of the toolkit, Zabey believes that its user-friendly, accessible system will provide additional value to businesses working at all levels of natural capital measurement and valuation.
“The toolkit coming exactly a year after the Protocol just makes it that bit more accessible,” Zabey said. “The companies will say ‘great, we can align with this protocol through a step-by-step process’. It aligns to any sensible impact assessment. The toolkit means that we can take it a step further.”
Monetising natural capital
While metrics such as the Protocol exist to assist businesses, some still argue that placing a monetary value on the environment could lead to a deprecation of environmental issues in favour of other business considerations.
Earlier this year, Richard Carter, head of sustainability and finance at UK brewer Adnams, claimed that natural capital accounting can be a "disaster" for sustainability professionals and is not an effective way of engaging the finance community with environmental issues.
Zabey agreed that while in some cases it can often be unhelpful to put a price on nature, she also claimed that the practise can be a useful way for sustainable companies to be recognised and rewarded by investors in the stock markets.
“It really depends on corporate culture,” she said. “Within our membership, we have some companies that are 100% behind monetary valuation because they realise that in their company, the only way the board will be able to include the impact on natural capital in the decision making. If there isn’t a monetary value, even if it’s just an economic estimate, it will not feature as highly on the agenda.
“There are other companies that we work with that say ‘absolutely no way’. That brings up the issue of which unit to use to compare risks related to the environment, versus society and financial risks. That means we need the prescriptive methodology with better coefficients so that everybody is playing by the same rules. Right now, it’s difficult to find an alternative to monetary values, but maybe we can come up with something. Right now, as far as I’m concerned, this is the best solution."
Zabey conceded that different business approaches can make it difficult to compare natural capital accounting – highlighting that two companies can provide two completely different sets of results. This methodological quagmire is only exacerbated by the creation of other metrics, such as the one recently launched by Cambridge Institute for Sustainability Leadership's Natural Capital Impact Group, which links and communicates analysis of ecosystem impacts with investment portfolio risks.
Zabey stressed the importance to move away from competition on methodology choices, towards a system that rewards forward-thinking companies for sustainability progress on natural capital.
“We definitely have more leaders today than we did two years ago, and there is now a collective need to converge efforts so that ultimately companies compete on performance, and not on methodology,” she said.