Transformation Economics: Understanding Natural Capital

Transformation Economics
Transformation Economics

The success and survival of every business are dependent on the Earth’s natural assets: freshwater, fertile soil, clean air, nutritious plants, fish, and animals.

Many of these resources are finite and yet our economic activity, which has advanced in scale and pace since the industrial revolution, is consuming, depleting, or degrading our precious natural resources at a disturbing rate.

The sustainability of this approach is increasingly called into question as leading business commentators and scientists investigate the resultant risks to economic and societal stability.

A study by Trucost suggests that greenhouse gas emissions, diminishing natural resources, loss of nature-based services such as carbon storage by forests, climate change, and air pollution-related health costs equate to costs of around US$4.7 trillion a year.

As the An Economy That Works campaign asserts, if we continue to see GDP growth as a sole benchmark of a successful economy, we risk another crash.

In this context, it is perhaps not surprising that each year more investors, companies, and cities use CDP to better understand the impacts that a changing environment is having on their business, as well as how their business impacts the environment.

And every year, a growing number of people consume the business intelligence that CDP produces on climate change, deforestation, and water stress or scarcity.

The growing recognition that companies must account for their natural capital impacts could rewrite the relationship between businesses and the environment. It may transform human impact on biodiversity and ecosystems.

If corporations – possibly the most dominant institutions of our time – accept board-level responsibility for natural capital management and assess and respond to the business risks created by their dependency on natural capital, they could become influential stewards of these resources, instead of unsustainable consumers.

Further, they will be better positioned to take advantage of the available opportunities arising from taking a responsible approach. For example, in just this past year alone through CDP’s water program, companies have identified more than 1,500 business opportunities from the improved management of water.

However, as An Economy That Works establishes, if the required change is to be catalyzed at the necessary pace and scale, economic policy must align with environmental policy. It is imperative that we all work to move the markets ahead of where they would otherwise be on these issues.

With the right information, such as the unique global insight from CDP data on economic natural capital impacts and dependencies, and the research produced by the likes of The Aldersgate Group, we can all help to improve our relationship with nature.

We can shift from taking from our ecosystems to contributing and nurturing them. The reward could not be more vital: better growth, long-term prosperity, and enhanced wellbeing.

Paul Dickinson is the founder and Executive Chairman of CDP, an independent non-profit organization that has pioneered the only global environmental disclosure system. Prior to CDP, Paul founded and built Rufus Leonard into a multi-million turnover corporate communications company.

He also helped develop the Environmental Law Foundation and Stonewall Lobby Group. Paul has authored numerous articles and books, including Beautiful Corporations (2000 Financial Times Prentice Hall).

CDP is an international, not-for-profit organization providing the only global system for companies and cities to measure, disclose, manage, and share vital environmental information. CDP works with market forces, including 767 institutional investors with assets of US$92 trillion, to motivate companies to disclose their impacts on the environment and natural resources and take action to reduce them.

CDP now holds the largest collection globally of primary climate change, water and forest risk commodities information and puts these insights at the heart of the strategic business, investment, and policy decisions.