A New and Powerful Tool for Achieving Sustainable Development

05/22/2015 11:48 am ET | Updated May 22, 2016

Ecosystems provide for a plethora of human needs, from nutritious food, to timber, fiber and fuel. Yet, over the past 50 years, humans have degraded ecosystems more rapidly than in any comparable period in history. While these changes have contributed to unprecedented advances in human prosperity, they have come at a steep price.

Atmospheric concentrations of greenhouse gases are reaching dangerous levels, with the potential of a 4-6 °C rise in average global temperature by the end of the century. 60 percent of the ecosystems evaluated by the Millennium Ecosystem Assessment already were found to be significantly degraded or unsustainable. Recent research conducted by the Stockholm Resilience Center shows we are entering scientifically assessed risk zones in climate change, land use, biosphere integrity and biogeochemical cycles.

The Sustainable Development Goals provide a framework for action. They go far beyond the Millennium Development Goals with clear targets for all countries, to continue the effort to end poverty, but also to protect our planet. Meeting these ambitious goals, which include stopping climate change, halting biodiversity loss and protecting our oceans, will mean fundamentally changing how we do business and account for our impacts. For too long the corporate bottom line has been defined purely in financial terms, and limited to the direct activities of the company.

In order to demonstrate the will to sustain and restore, rather than consume and destroy, the ecosystems upon which all life depends, business needs to redefine how we create value and measure success.

An important step to redefine success in business and help creating a thriving, sustainable economy was taken on Tuesday. Kering published the Group-wide results of their pioneering 'Environmental Profit and Loss' account (E P&L) measuring and monetising the environmental impacts in their own operations, and across their entire supply chain. The company also open-sourced their E P&L methodology to encourage others to follow suit -- demonstrating true leadership, innovation and collaboration.

By valuing natural capital, and doing so across the full value chain, companies are better able to reduce their negative impacts, leverage their positive impacts, innovate around new processes and materials, and provide greater transparency for all stakeholders. Investors will be able to make better-informed decisions based on greater transparency of the risks that companies face and the opportunities and innovation in which they are investing. It will also help customers to select products and services based on the disclosed environmental footprint of a company. The valuation of natural capital therefore has the capacity to shift consumer preferences, and shift substantial amounts of financial capital, towards products, services and companies that have a lighter touch on our planet.

We believe the EP&L, and natural capital valuation more broadly, are critical tools for achieving the Sustainable Development Goals to be adopted in September that are so important for human prosperity, peace and harmony with our planet. Developing this approach will help drive a race to the top amongst companies investing and innovating towards a net-zero emissions economy -- and ultimately a net-zero environmental impact economy -- for the benefit of people and planet alongside profit.

Fortunately an increasing number of businesses are taking into account the true cost of their activities throughout their value chains -- from the suppliers of raw materials through to the behaviour of their customers in using the products or services. As well as Kering, Natura will finish its first EP&L this year and plans to start developing a 'Social Profit and Loss' account (SP&L) in 2016. Over 100 companies, including Kering and Natura, and groups such as the World Business Council for Sustainable Development and The B Team, are also supporting the wider development of a Natural Capital Protocol led by the Natural Capital Coalition.

The Natural Capital Protocol, which is expected to launch in the middle of 2016, aims to bring together various approaches to measurement, and create a standardized framework for business to assess and value its impacts and dependencies on natural capital. We need to scale up these efforts. We need more companies to measure and value their impacts and dependencies on natural capital, and collaborate to reduce them. Kering's open sourced platform provides a way to help other companies start the journey.

To download Kering's open-sourced methodology, click here.