What is Natural Capital?

What is natural capital, and why do businesses need to incorporate that concept into their decision making? The FGV-EAESP Center for Sustainability – GVces – explores

With kind acknowledgements to our partners FGVces Center of Sustainability, FGV-EAESP, Brazil. Script: Magali Cabral. Voice over: Cíntya Feitosa

Naturally so

Natural capital is a term used to refer to renewable and non-renewable natural resource stock on Earth. For example, the air, plants, animals, water, soil, minerals… It started being called natural capital when people realized those elements are critical for economic activities, just like people, machines and financial resources are. It is a way to justify conservation of natural capital to decision makers.

An example, backed by figures, can be seen in the case of conserving wetlands located close to the city of Kampala, capital of Uganda. The contention is that preserving them would be more beneficial than using those areas for agriculture. Wetlands act as a natural sewage treatment, saving resources in sanitation. And they offer the extra benefit of acting as a natural barrier in case the sea level rises. Not to mention their value as a nursery and source of food for the marine life – which is very valuable, even economically speaking, for the fishing industry.

As such, to bring attention to the importance of natural assets, the same expressions used in the mainstream economic and political models worldwide were applied. Combined, those natural assets provide services that are called ecosystem services. Take, for instance, the balance in rainfall regime…natural vegetation that offers clean water, pollination performed by animals, CO2 capture that helps regulate the climate, forests that protect the soil and slopes against erosion…

Business activities depend on natural capital

So how does all this relate to the business world? All business activities directly or indirectly depend upon natural capital. And as all business activities cause impacts on the environment and in the wider sense on society, there is a need to know them in order to manage risks as well as business opportunities. The impacts can be positive (investment in local restoration or improvement in the quality of water, soil, surface…) or negative (air pollutant emissions, waste generation, excessive water consumption, effluent emissions…). The challenge is to create business practices and strategies that generate value for the organization and at the same time promote ecosystem preservation and the society well-being.

To highlight the importance of natural capital, te Brazilian online magazine P22_ON, will be featuring a series of 16 case studies as part of the Natural Capital Business Management call for cases that demonstrate how companies are managing natural capital. The initiative was promoted by FGVces, in partnership with the TEEB Regional-Local project and the Trends in Ecosystem Services (TeSE) business initiative, supported by the Boticario Group Foundation. Our goal is to show business best practices to inspire other companies. Watch this space!

View the GVces video (subtitled in English)

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