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Natural Capital

Natural Capital

Companies, society and individuals all depend on ecosystems for vital services. Human activities are having a significant impact on ecosystems.

Companies, society and individuals all depend on ecosystems for vital services.

Natural Capital

Business and government leaders from around the world are increasingly sounding the alarm about the significant impact of human activities on the natural environment – affecting its capacity to provide the goods and services we rely upon, and consequently resulting in a clear cost to business.

Such is the concern of business and government that the recent Rio+20 UN conference on sustainable development saw CEOs of financial institutions, including banks, investment funds, and insurance companies, make a formal commitment to work towards integrating natural capital considerations into their products and services.

Shareholders are also becoming more engaged with the issue, while governments are exploring regulatory or policy changes to encourage the sustainable use of biodiversity and ecosystem services (BES) through the development of frameworks for national ecosystem services accounting. In addition, the business and NGO communities are helping to harmonise approaches through a number of global initiatives such as the Natural Capital Coalition and the Natural Capital Declaration.

The commitment at Rio+20 demonstrates the growing realisation that all economic activity is either directly or indirectly linked to natural capital, and action is needed. Nonetheless, this link has yet to be measured and addressed widely by the corporate sector. As all aspects of business are ultimately linked to and influenced by trends in natural capital, this highlights a risk to business, which could ultimately lead to business failure.

The question remains: how do we effectively measure, assess and report to business on the economic impacts of natural capital on business?

KPMG member firms have been active in helping their clients answer the above question. Clients use KPMG services to:

  • Determine the materiality of natural capital to business and consider the development of accounting mechanisms to quantify the financial impact of BES. For more information see Is natural capital a material issue? - a joint publication between ACCA, Fauna & Flora International and KPMG in the UK.
  • Understand and evaluate the financial impact of natural capital lost, over companies as part of KPMG’s True Value work.
  • Help companies develop or apply ready to market tools such as the World Business Council for Sustainable Development’s(WBCSD)’ Ecosystem Valuation Initiative.
  • Identify innovative investments and new business relationships (eg between water companies and land managers). For more information see Sustainable Insight, published by KPMG in the Netherlands. 
  • Identify approaches to dealing with natural capital and/or specific constituents of it. For more information see Certification and Biodiversity, published by KPMG in the Netherlands.

5 Key questions

  • Is the natural capital a material issue to your organisation or your suppliers?
  • Do you know how to evaluate the financial impact of natural capital lost, over your organisation and your value chain?
  • Do you need guidance on what market tools to apply?
  • Do you have the accounting mechanisms to quantify the financial impact changes in BES to your organisation?
  • Do you know what approach to dealing with natural capital is most suitable to you?

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