How should we use the world’s stocks of natural assets which include geology, soil, air, water and all living things?
If you spend too much of your money, you run the risk of bankruptcy. In a similar way, we run the risk of the collapse of local, regional and global ecosystem if we take out too much of the natural resources without allowing or providing nature with a change to recover. We can try to pay back our debt by planting trees or giving nature time to clean water. Also, we can embrace ideas from Blue Economy, where the aim is to get rid of the need to use resources (Green economy focus on developing methods that are environmentally friendly).
Why use a term like Natural Capital?
Is it possible to put monetary values on nature?
Natural capital is an valuation of ecosystems. There are several different ecosystem and each organism has its’ own niche, or role to play. Some ecosystems may be less obvious like the pollination of crops by insects, while others are more familiar such as the food chain.
“It is time to recognize that human capital and natural capital are every bit as important as financial capital”
Ban Ki-moon Secretary-General United Nations
Nature is priceless yet this is not a strong argument to convince companies or governments to make positive changes. Calculating the value of natural capital is one approach to show why it is important to value natural resources, for example, it is estimated that insect pollination is worth US$190 billion a year to global agricultural output, and a report by the UN in 2010 The Economics of Ecosystems and Biodiversity, calculated the value of insect pollination to £134 billion (153bn Euros). To make an impact on a more personal level, the monetary value of insect pollination could be calculated per person. Thus, different approaches could be used depending upon who is going to use the numbers. There is a need for businesses to quantify and value its impact on ecosystems, but also a need to ensure that each and every one of us realize the value. Only by working together on several levels, can we enable a better future for all of us.
Accountants have knowledge that can be used to quantify and value of natural resources. This area within the accountancy profession is important and accountants can actually help to connect the world of natural capital accountancy with how business leaders think and report their performance to the investors and stakeholders. Putting natural capital at the core of decision-making, is one approach to deliver sustainable business models.
On 23-24 of Nov 2015, there is a conference in Edinburgh about Natural Capital. Go here to read more.
There are a couple of blog posts about value on this blog, go here to read more.