Natural Capital - And Why It Matters

By Jonathon Porritt

Natural capital is often defined as the stock of renewable and non-renewable natural resources (plants, animals, air, water, soils and minerals) that combine to yield a flow of benefits to a country’s citizens. The neglect of the value of the natural capital has led to a more and more severe depletion of these stocks and related flows.

Somewhat belatedly, more and more politicians and business leaders are coming to realise that all future endeavours to improve people’s material standard of living will fail, miserably, unless and until we secure the physical foundations on which these improvements depend – namely, the natural wealth contained within our soils, forests, rivers, oceans and flora and fauna. It is this which underpins all economic activity on this planet.

Young people today, set to inherit a severely degraded and dangerously overheated planet, are already asking how this self-evident physical reality has been systematically set aside by political parties of almost every persuasion for nearly 50 years. After all, the concept of ‘natural capital’ was first referred to in Fritz Schumacher’s ‘Small is Beautiful’ back in 1973, and from that point on, scientists across a host of different disciplines have provided increasingly authoritative insights into what exactly the concept of natural capital means and how best to classify and measure it, and, most importantly, into its deteriorating state.

Their evidence tells us, in more and more alarming terms, that every form of natural capital has experienced cumulative decline during that time, and continues to decline today. Each country and each region’s particular mix of natural capital assets has been remorselessly drawn down on to ensure a constant (and constantly growing) flow of raw materials into our industrialised economies, with a view to delivering more energy, more jobs, more food and fibre, more homes, and more infrastructure of every kind – in short, more of the economic growth (measured in terms of GDP per annum) which stands today pretty much as the sole proxy for material progress.

At the turn of the millennium, the UN not only launched the Millennium Development Goals (the forerunner of today’s Sustainable Development Goals), but committed to a new programme making the case for a radically different approach to the environment. Kofi Annan, Secretary-General of the United Nations at that time, initiated the Millennium Ecosystem Assessment (MA), a four-year intensive study involving more than 1,300 experts from many different disciplines in drawing up a ‘state of the art scientific appraisal of the conditions and trends in the world’s ecosystems’.

Unfortunately, however, governments the world over are still understandably susceptible to the constant call for more ‘pro-poor economic development’, even if it is at the expense of their nation’s natural capital. This is not helped by the paucity of economic advice available to them regarding the critical importance of protecting natural capital, both for short-term and long-term reasons. Many would now argue that it is this failure to understand the foundational significance of natural capital that perpetuates today’s confrontational framing around ‘economic growth versus the natural world’.

But things are changing.  All that groundwork undertaken through the Millennium Ecosystem Assessment back in 2005 has led to a marked increase in government engagement around the world.  This was tellingly reflected in the first-ever ‘Government Dialogue on Natural Capital’ held during the 3rd World Forum on Natural Capital in November 2017. It was hosted by the Scottish and Dutch Governments, with a view to promoting the idea of every country creating ‘an enabling environment’ to promote the concept of natural capital.

But what of the business community? From the mid-1990s onwards, leading companies around the world have been intent on finding ways of reducing their negative impacts on the natural world, first in terms of their own direct ‘footprint’, more recently through their supply chains. The direction of travel has become clearer and clearer during that time, with companies more interested today in ways of becoming ‘net positive’ in terms of their use of natural capital. 

The most important initiative for business today is the Natural Capital Coalition. Established in 2014, it has done much since then to establish common principles and practices around the concept of natural capital. More than fifty companies took part in the piloting of the Protocol, and many are now embedding it more and more in their sustainability strategies. 

So there’s no shortage of government or business-led initiatives to promote natural capital as a powerful and important concept.  But it’s all very slow still.  Which means that many NGOs are increasingly critical of the failure to translate all this into practical changes in the way both governments and businesses conduct their affairs. This is particularly true of the failure of most governments specifically to base new policy on the hard-edged science now available to them, or even to live up to their own theoretical commitments to protect natural capital in high-level statements and plans.

That is why what is happening right now in New Zealand is so important.  The Aotearoa Circle is a world-leading initiative, designed to put this country’s astonishing natural capital at the heart of a new narrative about how best to measure progress for New Zealanders today and for tomorrow.

October 19, 2018