RE: RESOURCES
Putting a price on nature
Natural capital is a term resonating more and more in political, environmental and
economic circles – but what
does it mean and how might it impact retail? Richard Hands, CEO of ACE UK reports
Natural capital refers to the indispensable resources which occur naturally in our ecosystem. They are the elements of nature that produce value (directly and indirectly) to people, and fall into four basic generally recognised categories: air, water, land (including soil, space and landscape) and habitats (including ecosystems, flora and fauna).
From this concept the natural capital accounting model has
developed, which places a monetary value on our environmental resources. As an alternative to the traditional production-focused GDP, natural capital accounting values natural resources as accurately as possible, so that the costs and benefits of conserving or destroying them can be included in national accounts.
This system of accounting acknowledges the value natural assets bring to people and the adverse effect when these assets are reduced, damaged or lost. For example degraded soils result in decreased crop yields, and when fish stocks are over exploited falling catches are inevitable. This is why natural capital accounting recognises that the pursuit of economic growth must not come at the expense of future growth potential.
A retail priority Retail, as an industry which is heavily reliant on natural assets for food products, packaging, refrigeration and transport, has an obvious vested interest in this debate. In fact, if ranking industries where natural capital accounting might drive change most significantly, particularly as global population growth continues to put pressure on finite natural resources, retail must come near the top. Reflecting the importance placed on the idea of natural capital, the 2012 White Paper ‘The Natural Choice: securing the value of nature’ announced the creation of the UK’s first Natural Capital Committee, to ensure that government has a better informed understanding of the value of natural capital.
Chaired by economist and Oxford University Professor, Dieter
Helm, and reporting to the Economic Affairs Committee (chaired by the Chancellor of the Exchequer), the Natural Capital Committee has the opportunity to genuinely influence the economic policy of the UK for the good of the natural environment.
Business case But there’s also a business imperative. Our environment provides us with $72 trillion worth of ‘free’ goods and services each year, but its degradation costs us roughly the equivalent of 8% GDP. With our natural resources being subject to a range of pressures, such as climate change and biodiversity loss, advocates of natural capital accounting argue that preserving these assets must become an explicit, accountable, and implemented element of policy to protect our future wealth and wellbeing. This means that the concept of natural capital is of significant interest to all businesses – and placing a monetary value on these resources can help us understand the true worth of our economic sustainability. The growing importance of natural capital accounting is evident by its discussion at last year’s Rio+20 summit, and the UK Government’s subsequent promise to reform its national accounts to reflect natural wealth by 2020. Even the World Bank, hardly known as an environmental champion, acknowledged in a report that current growth patterns are unsustainable because of the accompanying environmental degradation,
40 RETAIL ENVIRONMENT | JUNE 2013
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