Taking nature for granted can have serious consequences. We all rely on natural capital; our atmosphere, oceans, ecosystems and minerals. We also depend on the goods and services this natural capital provides – goods like food, fuel, fibre and medicines; and services like climate regulation, water filtration and erosion control. But all too often these goods and services are unpriced. At best this means they are under-valued by business, at worst, they may be economically invisible. These unseen dependencies on natural capital result in unmanaged business risks. Risks which can have material impacts on the bottom line.
Similarly, many of the impacts we have on Natural Capital currently bear no cost. Our emissions to air, discharges to water and use of land and other natural resources frequently impose impacts on others for which they are not properly compensated. These uncompensated environmental impacts are called ‘externalities’ and they too can result in serious business risks. New regulation, legal action, consumer boycotts and brand damage can all lead to externalities being ‘internalised’, resulting in costs to the business. As a result they need to be treated like any other serious ‘off balance sheet liability’. Carefully understood, measured and managed.
Of course where there is risk there is opportunity. By understanding and embracing natural capital dependencies, companies can frequently get more value at lower cost, whilst enhancing rather than degrading natural capital. Similarly, understanding environmental impacts can also create new value, by enabling innovation, reducing costs and enhancing reputation.
Managing natural capital risk and opportunity starts with assessing which of your company’s interactions with natural capital could warrant assessment. At PwC, our established team of environmental economists, scientists, ecologists and data analysts, can help you work out where to start, or help you refine your existing natural capital assessment approaches if you’re already underway. From there, we can support you as far as you want to go on the journey to sophisticated spatial natural capital assessment and valuation. We can build bespoke tools to help you manage your interactions with natural capital, and support you to integrate results into management information systems and decision processes.
Access the methodology here.