What is natural capital?
During the development of the Natural Capital Protocol, the Coalition and our partners worked to distil the many working definitions of ‘natural capital’ into a single, harmonised definition that encompassed the core themes and messages of its previous iterations.
This harmonized definition was formally established through an extensive consultation process:
- Natural capital is another term for the stock of renewable and non-renewable resources (e.g. plants, animals, air, water, soils, minerals) that combine to yield a flow of benefits to people.
All this means is that any part of the natural world that benefits people, or that underpins the provision of benefits to people, is a form of natural capital.
Natural capital is a stock, and from it flows ecosystem services or benefits. These services (where service is defined as ‘a system supplying a public need’) can provide economic, social, environmental, cultural, spiritual or eudemonic benefits, and the value of these benefits be understood in qualitative or quantitative (including economic) terms, depending on context.
Biodiversity is an essential component of natural capital stocks and an indicator of their condition and resilience. Biodiversity itself provides benefits directly to people.
The model: Natural capital thinking for better decision making:
At the heart of a natural capital approach is the understanding that nature underpins human health, wealth, culture, identity and happiness, and that the ways in which it does so can be complex and little understood. A natural capital approach works to illuminate this value, and helps decision makers to understand the complex ways in which natural, social and economic systems interact, impact, and depend upon one another.
Without an understanding of their relationships to natural capital, many decision makers will be at least partly ‘flying blind’, and can consequently make decisions that are ineffective, inefficient or counterproductive.
Decision makers often do not have the luxury of being able to make decisions based purely on their beliefs, opinions, or gut feelings. Decisions in these contexts must be based on information. A natural capital approach broadens the quantity and quality of information available to decision makers, leading to better informed decisions with co-benefits for economies, societies and the natural world.
We understand the relationships that organizations have with the natural world in terms of their impacts and dependencies on nature.
The fundamental question for organizations to ask themselves is; how dependent is my business model on the health of the natural world, and how are my actions impacting on nature’s ability to provide what I am dependent on?
This simple exercise can be a watershed moment for management teams, who often realize that their success, and ultimately their profitability, is dependant on the health of a number of natural organisms, ecosystems and phenomena that had never been considered before.