All businesses depend upon natural capital – directly or indirectly. Yet, natural capital is being eroded by current economic activities. Think about the demand for palm oil leading to deforestation, for example. The concept of a ‘net positive’ impact on natural capital is one that some leading companies are adopting. Members of the ACCA Global Forum for Sustainability explored the idea further.
‘Net positive’ impact
Natural capital is the stock of capital derived from natural resources such as biological diversity and ecosystems, in addition to geological resources such as fossil fuels and mineral deposits. It provides the many inputs and services that underpin human societies and economies. But unfortunately it seems that current economic activities are eroding natural capital. For example, the use of fossil fuels is driving climate change; the growing demand for products such as palm oil is a key driver of deforestation and biodiversity loss; and population growth and the need to feed growing numbers of people puts intense pressure on both terrestrial and marine ecosystems.
In view of these trends a number of forward-thinking businesses have stated publicly their aim to have a ‘net positive’ impact on various elements of natural capital. For instance, home improvement retailer, Kingfisher, aims to have a net positive impact on forests by 2050, while metals and minerals company, Rio Tinto, recognises the high-impact nature of its operations on biodiversity, and uses the concept of net positive impact to plan how it can minimise its impacts and contribute to healthy ecosystems at the project or site level. These companies have an ultimately restorative ambition – that their operations should not reduce and destroy the natural world, but contribute to, and enhance it.
The concept of net positive impact seems to be simple but remains quite complex to apply in practice. The sorts of issues described above were discussed by the ACCA Global Forum for Sustainability and have been compiled in a short paper called Net positive capital ambitions.
Natural capital disclosure
Approaches to disclosure of natural capital use by companies are reviewed in Business and investors: providers and users of natural capital disclosure, a joint report from ACCA, KPMG and Fauna & Flora International. The report reviews published information from companies with an intensive use of five key commodities with a high impact on natural capital: beef, cotton, palm oil, soya and sugar. The use of these commodities is a critical sustainability challenge and the report discusses many examples of the approaches taken to disclosure by significant users of these commodities. Standard practices revealed by these companies include: supplier certification, supplier audits, membership to industry wide sustainability initiatives and monitoring and traceability activities.
The report demonstrates a clear link between an organisation’s strategy for managing its use of these commodities and the extent to which it impacts on the natural world. The unsustainable use of natural capital can create or exacerbate corporate risk and is becoming increasingly important to investors.
Outside a small leading group the majority of companies are not reporting on natural capital impacts and dependencies. This leaves investors struggling to assess natural capital risks and opportunities.