The Natural Capital Protocol: Accounting for the value of nature in the private sector

by Dr. Kim Reuter, Natural Capital Accounting Director, Africa Field Division, Conservation International

Downtown Cape Town, South Africa business district. © Mlenny Photography

Downtown Cape Town, South Africa business district. © Mlenny Photography

The private sector in Africa is booming

Africa’s private sector is booming and the continent’s economic growth is already a defining global story and likely to remain so throughout the 21st century. With its economic growth rate for 2016 predicted to be 3.6%, above the 3.2% global growth rate and just behind Asia’s (6.3%), Africa is the second fastest growing region in the world. In Africa, the private sector accounts for about two-thirds of total investments in the economy and 90% of total employment opportunities.

The private sector is recognized as a key engine of economic development in Africa. However the negative impacts of climate change, loss of natural ecosystems, water shortages and desertification are beginning to be felt by businesses in Africa. Most recently, southern African countries have had to cope with one of the worst regional droughts seen in over 30 years. This drought has negatively impacted southern Africa’s economies.  

Businesses depend on Africa’s nature for success

Businesses both in Africa and around the world depend heavily on fresh water, healthy soil, stable climate, pollinators and other natural benefits to create their goods and services. For example, 30% of the world’s agricultural crops depend on pollination services provided by insects and other animals.

A sunflower in Tanzania. © Benjamin Drummond

A sunflower in Tanzania. © Benjamin Drummond

Businesses also have an impact on the natural environment and society, such as through extraction of raw materials and during the manufacturing process. However, the financial information that businesses have long used to guide their decisions, including balance sheets and profit and loss, has historically excluded their dependence and impact on nature, by omitting one form of capital from their assessments: natural capital.  

Natural capital is the stock of renewable and non-renewable natural resources on Earth that combine to yield a flow of benefits to people. Accounting for natural capital leads to smart business decisions and in the long-term, it helps ensure that a business is resilient in the face of current and future threats, such as climate change. For example, in Africa, accounting for natural capital could help businesses understand their impacts and dependencies on nature, lead to improved risk management, increase competitive advantage, and ultimately more informed decision-making.

Many businesses, especially in Africa, recognize the need to begin understanding their impacts and dependencies on nature. Conservation International, working in partnership with numerous organizations and on behalf of the Natural Capital Coalition, has helped to develop the Natural Capital Protocol — a standardized approach to enable all businesses to measure and value their impacts and dependencies on natural capital, and to generate information to guide business decisions. The protocol was developed via an extensive pilot testing process in partnership with over 50 companies from a range of industries, including the Dow Chemical Company, Kering (owner of Gucci, Puma, and Stella McCartney), Hoffman-La Roche, Coca-Cola Company, Hugo Boss, Natura, Nespresso, Nestlé, Olam International, and Shell.

The World Business Council for Sustainable Development (WBCSD) recently launched this new video designed to explain how business can account for the value of nature and why this is important. More than 25 of the world's top organizations working on the value of nature in business have come together behind one message in this "Pitch for Nature" video, that's available in 20 languages.

The Protocol seeks to help businesses to identify, measure and value their impacts and dependencies on nature. With the Protocol, businesses are empowered to account for natural capital, and to make efforts to sustainably use and to conserve ecosystems,  the services they provide, and non-renewable resources used in their supply chain and operations. The Protocol also enables business to better understand and manage the environmental impact associated with the distribution, consumption, recycling and disposal of products.  

The GDSA + the private sector + natural capital

The exploration of the valuation and measurement of natural capital, in both the public and private spheres, is core to the Gaborone Declaration for Sustainability of Africa (GDSA). For example, following the 2012 launch of the GDSA, Conservation International (CI) provided support in the launch of the Consumer Goods Council of South Africa, which brings together 13,000 South African companies to increase compliance with environmental standards throughout the supply chain. In addition, the GDSA Secretariat has been involved in discussions around sustainable finance in Botswana, which involve both private and public sector actors. Moving forward, the GDSA will continue to work with CI to promote the consideration of natural capital by the private sector through various programs and initiatives.

More information

The Natural Capital Coalition recently launched the Natural Capital Protocol, which is open to any business interested in understanding its impacts and dependencies on nature. The protocol is available online with additional resources available for the food and beverage industry. Scientist from Conservation International’s Moore Center helped lead the technical development of the Protocol; check out this podcast interview with Dr. Rosimeiry Portela, the technical lead of the NCP.