What is Natural Capital?

Any business depends on nature for success. This is the obvious case of industries and other segments that use natural resources as raw materials, and not as obvious as in the case of the third sector. The relationship is not always clear, apparently financial institutions and offices depend less on natural resources, but still use paper made from cellulose, water for everyday purposes, energy generated in hydroelectric plants, etc.

This shows that, in cases of natural resources crisis, everyone is harmed. A clear example of this situation was the recent Brazilian electricity crisis, caused by the severe drought that hit the southeast of the country, and which threatened the supply of companies, resulting in production losses and even the availability of drinking water for the population.

Unfortunately, until recently, the general population and large corporations did not realize the consequences of the unrestrained use of natural resources. It was always thought that the resources would be there, given free of charge by nature and that they could be used according to our will.

Today we are affected by the impacts caused to our way of life, due to the misuse of these resources: we have lost land with agricultural potential to desertification; we lost hydroelectric potential due to water scarcity and siltation; cities suffer enormous losses due to flooding and landslides; among others.

Thus, from this legacy of intergenerational debt with nature and society, which threatens our own model of life, it is necessary to rethink the way companies and the population deal with natural resources. Aiming to adapt the representation of nature to a world based on capital, a new social, environmental and economic arrangement was developed for interaction with nature: the Natural Capital.

Understand what Natural Capital is and – believe me – your business will thank you!

What is Natural Capital?

It is a concept that sees, from the perspective of production costs, the value of natural resources in relation to a product or service. The idea is to stop considering such inputs as free assets and start valuing/pricing them, treating them as capital, in the same way as we treat economic resources.

If a company depends on nature for its success, it must think about these natural assets as part of your capital. After all, any shortage of these resources will directly affect the productivity and financial health of businesses, also causing risks for investors.

Why should you care about Natural Capital?

Using the concept of Natural Capital and the tools available today, it is possible:

  • – Anticipate future difficulties, such as the lack of a certain natural resource, for example;
  • – Develop opportunities to optimize the use of natural assets in order to save costs and attract more investments;
  • – Understand which resources are essential for your business and prioritize them;
  • – Know which resources are most impacted by your company’s operations;
  • – Understand the risks that a possible shortage of resources may bring to your business;
  • – Generate a report with objective data and results of possible financial, social and environmental impacts, improving analysis at the time of decision making.

What are the challenges of Natural Capital?

This is a concept that has been gaining weight in recent years and can help integrate natural resources into the process of evaluating companies' investments and operations, helping to involve sectors that traditionally did not have this concern, such as the financial department and high company directors.

In the past there was only one approach focused almost exclusively on ecological aspect. It seemed that taking care of nature was a matter for environmentalists and governments, through conservation units. Such an approach did not reflect the real needs of a corporation, being overlooked in decision-making moments, since its results did not generate practical information for the company.

It was essential, therefore, to develop a methodology that would prove the impact of poor management of natural assets in the company's capital, without diminishing the importance of its ecological aspect, in order to reach senior management and captivate the attention of leaders and decision makers.

Aiming to break this barrier once and for all, a group of renowned international institutions, brought together in a coalition – Natural Capital Coalition, worked on the preparation of the Natural Capital Protocol.

What is the Natural Capital Protocol

The Natural Capital Protocol is a standardization document that helps business managers to have a reliable reference in order to help them stipulate their own reports reliably. Such records take into account important points for the insertion of the Natural Capital as part of the company's production logic.

Each business has its own particularities in relation to the environmental and social impacts it generates in the community in which it operates, as well as having its own political relevance and positioning itself uniquely within the society in which it operates.

Therefore, it was important to develop a standard report that can be reused by different entities in order to identify risks related to natural resources, as well as opportunities for growth through these assets.

The steps of the Protocol are:

  1. Why or because": There is no point in writing the report in an empty way. So, ask yourself: “Why do you need a natural capital assessment?
  2. What or what": understand how natural capital is assessed and discover concepts such as: risk relationships, dependencies, impacts and opportunities arising from your analyses;
  3. How or “how”: The time has come to make the practical application of the protocol, measuring and financially evaluating the concepts defined in the “stage”what”, such as risks, impacts and opportunities;
  4. What Next or “what comes next”: This involves preparing an action plan based on the data collected with the aim of inserting natural capital into the company's production.

O Natural Capital It is still a concept that is gaining strength, it is true, but it is increasingly palatable for businesses of all sizes. And, over time, the need to rethink the natural resource management becomes more evident.

The Protocol can be accessed free of charge here, but it is interesting that you have a consultant specialized in Sustainable development to facilitate your understanding of the subject.

If you have any questions, leave your comment and continue following our blog!

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