OPINION: Putting nature on the balance sheet benefits businesses and biodiversity

Thursday, 16 June 2022 03:46 GMT

Sun shines through the trees inside Banco National Park in Abidjan, Ivory Coast May 11, 2022. Picture taken May 11, 2022. REUTERS/Luc Gnago

Image Caption and Rights Information

* Any views expressed in this opinion piece are those of the author and not of Thomson Reuters Foundation.

There is a growing awareness of the value of nature for businesses and the risk that biodiversity loss poses to economic growth and stability globally

Dr Carter Ingram is executive director at climate change investment and advisory firm Pollination and has been part of a team of experts drawn from across government and the private sector to develop pilot US Natural Capital Accounts

More businesses are integrating sustainability into their organizations evidenced by ambitious goals and strategies, signature programs, and record numbers of corporations issuing sustainability reports. Reducing greenhouse gas (GHG) emissions is the major focus of many US companies' sustainability efforts.

Now, there is a growing awareness of the value of nature for businesses and the risk that biodiversity loss poses to economic growth and stability globally.

This recognition is urgently needed: $44 trillion of economic value generation – more than half of the world’s total GDP – is moderately or highly dependent on nature and its services and therefore, significantly exposed to nature loss.

Unlike GHG emissions, for which there is a common unit of measurement (tons of CO2 equivalent) and multiple frameworks to guide measurement and reporting, understanding how companies impact and depend upon nature, including biodiversity and ecosystems, remains challenging for many companies.

A lack of credible and comparable data has been a major barrier to corporate leaders and investors from taking action on nature.

In April, the U.S. government announced it will begin developing and publishing Natural Capital Accounts to regularly and consistently track and measure the extent, condition and values of the country's natural capital including ecosystems and biodiversity.

Natural Capital Accounts can provide standardized and regularly updated information and statistics on the stocks of natural capital and the flows of ecosystem services. They may also put a value on the benefits provided by ecosystems such as carbon storage, air quality regulation, or the provisioning of clean and abundant water supplies.

Putting nature more completely on the national balance sheet means companies will also be able to access to credible, consistent information needed to properly account for the resources they impact and depend upon.

For example, food and beverage companies may use the data and statistics from Natural Capital Accounts to make more informed decisions and manage risks related to where they should invest in new facilities or agricultural assets that may be influenced by land condition, water quantity or quality, and/or wild pollinator habitat, for which natural capital accounts can provide important information and trends.

For government agencies, investors and stakeholders, the accounts will provide a more complete set of information, alongside the traditional measures of GDP and jobs, for managing the country's wealth and growth.

The Accounts will also help identify where land or water resources are changing in extent or condition, and where to focus restoration or management efforts. Public and private sector decision-makers can use the data and information to evaluate potential trade-offs between natural capital and other forms of wealth, such as grey infrastructure.

For the past few years, professionals from a range of disciplines including economics, accounting, and ecology, from the US Geological Survey, Bureau of Economic Analysis, the Department of Commerce, and others, developed pilot Natural Capital Accounts for the US that demonstrate how to compile diverse data to measure, track and report trends in natural capital across a large, ecologically and economically diverse country.

Just as many believe a price on carbon will help catalyze de-carbonization efforts, understanding the health and value of nature will bolster efforts to halt biodiversity loss and set us on a more restorative and regenerative economic path.

Natural Capital Accounts provide standardized frameworks for regular, consistent measurement and reporting of nature-based assets and services, while other global initiatives such as the Taskforce on Nature-related Financial Disclosures help organizations assess the financial risks of nature loss and the Science Based Targets for Nature guide businesses on setting targets to guide actions on nature.

We need to pull all of these levers to catalyse the necessary paradigm shift in the way our economy and businesses work.

The invisibility of nature's values has contributed to a biodiversity crisis, with devastating impacts on ecosystems and species such as wild pollinators that are essential for life on Earth.

However, over the past two years, we have seen incredible momentum driving capital into investments that harness the power of nature, and efforts to restore and protect natural resources rather than degrading and undermining them.

Committing to developing and regularly publishing Natural Capital Accounts puts the US alongside other countries including the UK, Australia and the EU member states, which are adding the value of nature to their system of national accounts and, thus, enabling more informed and sustainable management of their country's wealth.

Natural Capital Accounts will help identify priority areas for action and management, as we broaden our understanding of wealth to include the valuable natural systems upon which businesses, the economy and society depend.