How To Manage Natural Capital In Your Business

How To Manage Natural Capital In Your Business

What is one of the fundamental features of sustainable business?

If you said the concept of the triple bottom line, you’re absolutely correct.

Rather than just focusing on growing financial profit, a sustainable business will take into consideration its social and environmental impact as well. This requires recognizing the value that lies in both social and natural capital, in addition to financial capital.

The late Ray Anderson, former CEO of Interface, once described this in a post titled “Is Interface’s Sustainability Strategy Still Relevant?”:

Soon, ‘green’ was becoming mainstream, a crowded field of corporations, governments, academic study, and celebrity endorsement. Today, it’s mostly a healthy mix of doing the right thing and good old capitalism in action, in which ‘natural’ capital takes on value along with financial capital.”

What is Natural Capital?

According to the International Institute for Sustainable Development, natural capital“Natural capital is the land, air, water, living organisms and all formations of the Earth’s biosphere that provide us with ecosystem goods and services imperative for survival and well-being. Furthermore, it is the basis for all human economic activity.”

Natural capital is continually providing us with something of value, whether it is the air that we breathe, the water that we drink, or the raw materials that we use in our products.

The problem is that we have not traditionally placed a financial value on these natural resources. By not placing a financial value on them, it became easy to destroy forests, pollute rivers, endanger species and habitats, and otherwise plunder our natural resources.

Now, however, we are starting to recognize the value of natural capital.

In fact, one early study estimated that the value of natural capital worldwide is $33 trillion per year. In 2008, humans destroyed $6.6 trillion worth of natural capital – equivalent to 11% of the global GDP. The top 3,000 companies by market capitalization were responsible for $2.15 trillion in environmental costs.

Unfortunately, under our current economic system, these costs are externalized, which means that while these companies caused this damage, they are not footing the bill for it. In many cases, it is the local communities and taxpayers that ultimately pay the price.

If these costs were represented by cold, hard cash, we would be appalled to see them squandered so recklessly.

However, because these costs aren’t factored into our current economic system, this waste goes largely unrecognized. That’s why natural capital is important: it has value, and once we recognize that, we have a responsibility to spend it wisely.

Three Ways to Manage Your Natural Capital

The calculations for placing a financial value on natural capital in a business are still being developed, but here are a few ways that you can begin to consider natural capital in your business, from easiest to most challenging:

  1. In general, any steps that you take to reduce waste, conserve water,  and improve energy efficiency will move you in the right direction. You can begin with easier steps, such as switching to recycled paper if you haven’t done so already, setting up double-sided printing, and eliminating the use of all disposable items such as paper plates in the office kitchen.
  2. From there, you can move on to areas of bigger impact. For example, removing waste from your production process will conserve natural resources – while also possibly providing cost savings to you as well. Using materials that are rapidly renewable, such as bamboo, will ensure that the most scarce of our natural resources are preserved – while also protecting you from risk in the long-term because it is more likely that the resource you rely upon will be available.
  3. You may eventually want to begin accounting for natural capital in your business by using the Natural Capital Protocol, a framework designed to help businesses better manage their natural capital.

One of the best parts about considering natural capital in your business is that it makes good business sense. When you conserve resources and eliminate waste, you save money, which directly benefits your bottom line.

The businesses that begin to consider natural capital in their decisions now will be the ones to gain a competitive advantage in a future of constrained resources.

Next Steps

Conduct a quick sustainability audit to see if your business is using its natural capital wisely by conserving resources.