Companies can better manage environmental risks to their businesses and identify opportunities to benefit from the transition to a low-carbon, circular economy using the insights provided by natural capital analysis, according to a new report by Trucost.
The report, entitled Growing Business Value in an Environmentally Challenged Economy, coincides with the launch of The Natural Capital Protocol and sector guides by the Natural Capital Coalition – a standardized framework for businesses to identify, measure and value their direct and indirect impacts and dependencies on natural capital.
Until now, companies have struggled to account for environmental impacts within financial decision making due to the different units of measurement used. Tonnes of pollution are difficult to compare to capital costs and internal rates of return. Natural capital valuation solves this problem by calculating the financial cost to society of environmental damage, for example, from the health costs associated with pollution. Using natural capital valuation, environmental impacts can now be assessed on the same terms as financial capital.
Companies that want to grow need to understand the extent to which their ability to achieve revenue targets may be constrained by rising natural capital costs through regulation, social campaigns and resource shortages – and identify alternative strategies to minimize costs and increase profits.
Illustrated by business case studies, the report considers questions such as: How could environmental constraints lead to raw material price volatility? How could resource constraints disrupt operations and impair asset value? How can I capitalize on expanding green product and green investment markets? How can I benefit from circular economy business opportunities?
By providing a standardized framework, the Protocol harmonizes the many different natural capital approaches, and guides businesses towards the information that they need in order to generate, trusted, credible and actionable information around natural capital impacts and dependencies.
Alongside the launch of the Natural Capital Protocol, two additional sector guides on food and beverage and apparel will also be released, developed by Trucost on behalf of the Coalition. The sector guides work as extensions of the Protocol, and guide practitioners through sector-specific challenges and opportunities.
The Protocol has been through a rigorous piloting and consultation process, with over 50 piloting companies and 3,200 comments submitted during consultation from over 450 organizations, in 22 countries, and spanning six continents.
Dr Richard Mattison, chief executive of Trucost, said: “As a pioneer of natural capital valuation, Trucost has worked with more than 200 companies including Dell, Ecolab, Eileen Fisher, General Mills, LVMH and Utilyx. The Natural Capital Protocol and sector guides will encourage even more companies to discover the range of benefits that result from integrating natural capital into decision making, from enhanced risk management to identifying new business opportunities.”
The Natural Capital Protocol and sector guides are available at naturalcapitalcoalition.org
James Richens, +44 (0)20 7160 9800, firstname.lastname@example.org