Businesses have always relied on the Earth’s natural capital: the fertile soil, fresh water, clean air and finite resources that we consume as part of every-day economic activity. But this activity, which has in our modern era advanced at an intensive and industrial scale, is depleting these valuable resources at a disturbing rate.
That this approach to our natural resources is unsustainable is a concern increasingly expressed now by economists, accountants and academics that recognise the huge systemic risks facing investors, businesses and the environment. According to one study, by Trucost, natural capital risks are costing the global economy some US$4.7 trillion a year.
The growing understanding that companies must account for their natural capital could rewrite the relationship between businesses and the environment. Further, it may transform human impact on biodiversity and ecosystems. If corporations, possibly the most dominant institutions of our time, begin to assess and respond to the business risks created by their dependency on natural capital, they could become influential stewards of these resources, instead of unsustainable consumers.
The impacts and threats of climate change are already alerting industry to the need to address environmental performance. CDP’s work on climate, water and forests now covers around 80% of natural capital, by value.
Yet while companies are making use of these programmes in increasing numbers, CDP’s data shows too many are taking an outdated and narrow view of how to manage their environmental risks. For example less than two fifths of companies using CDP’s water programme require suppliers to measure and manage water risks.
In order to move away from this myopic view of environmental impacts, businesses and investors need to address natural capital risks at a boardroom level. There are some industry leaders paving the way for such an approach, for example by implementing water stewardship strategies that take into account wider business impacts on the long-term availability of water resources, as Nestle are doing in North America.
Work is moving ahead to smooth the barriers holding businesses back from embracing natural capital accounting. Standardising the reporting of natural capital is critical. The Climate Disclosure Standards Board (CDSB), a special project of CDP, is working towards this with plans to launch the world’s first framework for natural capital disclosure in mainstream company accounts.
CDP has always worked to move the markets ahead of where they would otherwise be on these issues, and will continue to catalyse action that gives investors a more complete picture of the natural capital impacts and dependencies of companies. This will enable businesses and investors to rewrite their give-and-take relationship with nature, and transform our current human impact on our ecosystems.
About Paul Dickinson
Paul Dickinson is founder and Executive Chairman of CDP, an independent non-profit organization that has pioneered the only global environmental disclosure system. Prior to CDP, Paul founded and built Rufus Leonard into a multi-million turnover corporate communications company. He also helped develop the Environmental Law Foundation and Stonewall Lobby Group. Paul has authored numerous articles and books, including Beautiful Corporations (2000 Financial Times Prentice Hall).
CDP is an international, not-for-profit organization providing the only global system for companies and cities to measure, disclose, manage and share vital environmental information. CDP works with market forces, including 767 institutional investors with assets of US$92 trillion, to motivate companies to disclose their impacts on the environment and natural resources and take action to reduce them. CDP now holds the largest collection globally of primary climate change, water and forest risk commodities information and puts these insights at the heart of strategic business, investment and policy decisions. Please visit www.cdp.net or follow us @CDP to find out more.
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