Valuing natural capital or devaluing nature?

Coins hammered into a tree in Wales
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Coins hammered into a tree in Wales: literally natural capital

"To press non-economic values into the framework of the economic Calculus… it is a procedure by which the higher is reduced to the level of the lower and the priceless is given a price. It can therefore never serve to clarify the situation and lead to an enlightened decision. All it can do is lead to self-deception or the deception of others; for to undertake to measure the immeasurable is absurd and constitutes but an elaborate method of moving from preconceived notions to foregone conclusions…The logical absurdity, however, is not the greatest fault of the undertaking: what is worse, and destructive of civilization, is the pretence that everything has a price or, in other words, that money is the highest of all values." E.F. Schumacher – Small Is Beautiful (1973, p.27)


The first World Forum on Natural Capital was held in Edinburgh, Scotland (November 21–22), and organised by the Scottish Wildlife Trust in partnership with the United Nations Environment Programme, the International Union for Conservation of Nature (IUCN), the World Business Council for Sustainable Development, TEEB for Business Coalition and The Wildlife Trusts. It had been promoted as "the world’s first major global conference devoted to natural capital". "Let’s get down to business!" was clearly the attitude at the Forum, which was funded by the Royal Bank of Scotland, sponsored by dozens of groups and attended by 500 delegates from more than 30 countries. Coca-Cola, Rio Tinto and KPMG were in attendance, among others. The Forum was a chance for "bringing together all sectors of society to present their views, concerns and hopes around the concept of natural capital", said IUCN Director General Julia Marton-Lefèvre during the opening plenary, adding that this forum was "an opportunity [...] towards a sustainable future economy that values and conserves nature."

The "natural capital" concept has recently been promoted by numerous conferences, publications and efforts in the national and international arenas. Thus, the natural capital declaration adopted by 39 banks, investment funds and insurance companies at the Rio+20 summit in June 2012 is "a finance-led and CEO-endorsed initiative committing financial institutions to integrate natural capital considerations into financial products and services, accounting, disclosure and reporting." The Edinburgh World Forum was the follow-up to the Rio+20 summit.

The Forum aimed to go beyond the analysis and evidence of natural capital depletion in order to focus on "practical implications". The issue is taken for granted, and therefore the concept of natural capital was not discussed further during the two-day Forum. Messages from Prince Charles and David Cameron were welcomed by some as proof that "everybody is in favour of natural capital", as had Dieter Helm, the Chair of UK Natural Capital Committee, who works for the Department for Environment, Food and Rural Affairs. But very few scientists were in Edinburgh to bring scientific facts and analysis into the discussions. And very few plenary panellists observed that more scientific analyses on natural capital were needed. The purpose of the Forum was definitely not to discuss the strengths and limits, if any, of the natural capital concept.

In the open plenary, Marton-Lefèvre brought together all these issues when she stated, "We need to put natural capital at the heart of our society and economy." Different panellists emphasised that what is at stake with a natural capital approach is nothing less than a real "revolution". Could natural capital be a revolution? "Yes, it should be" was the answer given in the financial sector workshops. Participants argued that 70 years ago, GDP accounting was key to setting up modern economies in our countries. According to this approach, "natural capital accounting" is one of the key tools for implementing a new 21st century economic model for the sustainable management of natural resources.

But how does natural capital accounting really work? Does it need to be regulated? What kind of value should be given to both the stock of natural capital and the goods and services provided by it? How will the costs and benefits of its use be valued? Will it be priced? By whom? Very few of these questions received clear and accurate answers in Edinburgh. The objective of the Forum was rather to deliver good practice examples in order to learn from natural capital approaches that are supposed to work in practice.

One example from the Philippines was raised by Jonathan Hughes, Director of Conservation at the Scottish Wildlife Trust: "If sold for wood the value of mangrove is £1,000 per hectare. But if you factor in storm protection, the fact fish use them to breed in, the carbon they absorb – the mangroves are worth around £21,000 per hectare to the local communities."

Internalising the natural capital externalities into the supply chains is a huge challenge. According to Jochen Zeitz, former CEO and Chairman of Puma, valuing natural capital in business would require a very clear strategy that includes targets, incentives and innovation along the supply chains. He calls for new natural capital metrics to ensure that business will "institutionalise it into day-to-day actions". Since no commonly accepted metrics exist, he argues that open source data would be key to standardise the natural capital accounting metrics.

But why would business participate in this? Because "the new price of doing well [financially] is doing good" said David Jones, CEO of Havas. And it seems that many companies have jumped in with both feet, including companies that are not known for their environmental commitments. One of the main event sponsors was the Royal Bank of Scotland, best known for financing the fossil fuel industry (tar sands in Alberta, oil and gas in the North Sea, etc.) rather than protecting nature. Rio Tinto, a British-Australian multinational metals and mining corporation, explained to those in attendance how they act to make "a net positive impact on the world" by restoring or preserving some areas around their mining fields. Peter Bakker, President of the World Business Council for Sustainable Development, strongly encouraged business leaders to engage with the increasingly important topic of natural capital and to take action because "it will reduce the costs of operations, will reduce the waste in the value chains and will create much better performance not only for nature and natural capital, but also in financial terms," adding that these are "very exciting new avenues for business to explore." The Edinburgh Forum was the moment chosen by the World Business Council for Sustainable Development to become an official Natual Capital Declaration supporter

One of the pioneering companies of natural capital accounting is the sports brand Puma, which published its first environmental profit and loss account (EP&L) almost two years ago, which is quite different than a traditional Corporate Social Responsibility report. Rather than only measuring emissions or energy use, this was an attempt to put a monetary figure on the natural capital used in Puma’s supply chains. Greenhouse gas emissions, water use, land use, air pollution and waste in 2010 were valued at €145 million, which is an estimate of the company’s environmental debt. More interesting is the figure that only 6% of this valuation came from direct business operations, such as offices and warehouses. The remainder came from its supply chain, including the production of raw materials (57% or £152m) and negative impacts on biodiversity and ecosystems caused by suppliers (26% or £31m).

In a world where resource scarcity is becoming a hot issue for companies, natural capital accounting is a strategic way for evaluating their environmental risks and predicting what impacts it might have on their businesses. Managing this risk, like any other, is becoming critical in business terms. We can wonder if firms will price natural capital voluntarily, and if doing so reduces their profits. And who would reduce their environmental impacts if they could offset them and pay for preserving their business models as they currently work?

The next World Forum on Natural Capital is planned for 26–27 November 2015, just before the UNFCCC climate conference COP 21 in Paris.


This report is based on plenaries and workshops of the World Forum on Natural Capital that I attended in Edinburgh, Scotland (November 21–22), but also on what I read before, during and after the forum in relation to "natural capital" and the case studies presented in Edinburgh. This report is necessarily limited and partial.