New Metrics
Natural Capital Protocol Promises to ‘Revolutionize’ Business Value, Decision-Making

Two years in the making, the first global Natural Capital Protocol was launched today. The standardized framework brings together and builds on a number of approaches that already exist to help business measure and value natural capital. The Natural Capital Coalition suggests that by harmonizing these existing approaches, businesses everywhere can benefit from understanding their relationships with nature.

Until now, natural capital has for the most part been excluded from decisions and, when included, has been largely inconsistent, open to interpretation, or limited to moral arguments, the Natural Capital Coalition explains. The Protocol responds by offering a standardized framework to identify, measure, and value impacts and dependencies on natural capital. Thus, it aims to support better decision-making and reveal currently-unknown risks and opportunities. The Coalition asserts it is designed to “generate trusted, credible, and actionable information that business managers need to make truly informed decisions.”

“The days of defining business success by financial metrics alone are over. As we move to fulfil the Paris Agreement and achieve the SDGs, business will need to take a holistic view and start including information on natural and social capital in the definition of performance,” said Peter Bakker, the President and CEO of the World Business Council for Sustainable Development (WBCSD). “The Natural Capital Protocol will help companies make better, more informed decisions, and I am extremely proud that WBCSD has had the honor of leading the development of the Protocol on behalf of the Coalition.”

The Protocol Framework (see article’s main image, above) covers four stages – Why, What, How, and What next – broken down into nine steps. Each step contains specific questions to be answered when carrying out a natural capital assessment or otherwise integrating natural capital into business processes. The Protocol is complementary to many existing approaches for measuring and valuing impacts and dependencies, and is applicable to any business sector, operating in any geography, at any organizational level.

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“If adopted at scale, the Natural Capital Protocol has the power to revolutionize the way that businesses evaluate their operations and make decisions, helping them to reduce pollution, protect biodiversity, and limit the impacts of climate change, while simultaneously producing positive business results, safeguarding operations and supporting efforts to create a more sustainable world,” the Coalition suggests.

“The urgency of addressing climate change requires innovations across all sectors of society. This is why Conservation International strongly supports the innovations of the Natural Capital Protocol,” said Peter Selimann, the Chairman, CEO and Co-founder of Conservational International.

“Their breakthrough methodology provides Businesses with the tools to understand their dependency on nature and their impact on nature. This is essential if they want to achieve sustainability. It is a challenge that enlightened business leaders should undertake for their bottom line, as well as for the interest of humanity and the preservation of the benefits we all receive from nature: fresh air, clean water and food production.”

The Protocol was created by a core development team of 38 organizations, and received input from over 450 organizations, representing a unique collaboration between the public and private sectors under voluntary contracts. Throughout the course of the two year project, professionals from six continents offered over 3,200 comments and over 50 businesses piloted the Protocol, including Dow, Shell, the Coca-Cola Company, Kering, Nestlé, Interface, Yorkshire Water, Hugo Boss, and Olam.

“It is increasingly apparent that traditional financial accounting practices are failing to recognize all relevant business impacts and risks,” said Liz Barber, Group Director of Finance and Regulation at Kelda Group (Yorkshire Water). “The Natural Capital Protocol is a real world first in bringing structure and a standardized common framework for natural capital assessment.”

Alongside the launch of the Natural Capital Protocol, two sector guides on food and beverage and apparel were also released, developed by Trucost on behalf of the Coalition. The sector guides work as extensions of the Protocol, and guide practitioners through sector-specific challenges and opportunities.

Trucost also released a report entitled Growing Business Value in an Environmentally Challenged Economy, which discusses how companies can use natural capital data to minimize costs and increase profits. Illustrated by business case studies, the report considers questions related to raw material price volatility, resource constraints, expanding green product and investment markets, and circular economy business opportunities.

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