This article has been submitted by Will Evison, Assistant Director - Sustainability and Climate Change, PwC.
Let’s face it, at one level, natural capital is complicated. Fiendishly so. It encapsulates the natural world in all its glorious complexity and diversity, as well as the innumerable ways that human society interacts with it.
Of course, like all great ideas, the concept of natural capital is based on a simple but surprisingly powerful insight – that the natural world, which we’ve long taken for granted as free and limitless, is actually the most valuable asset we have.
So is it really too complex for companies to effectively measure and manage natural capital?
First, let’s take a step back and look at how companies go about managing a couple of their other important ‘capitals’ - human and financial.
A typical big company with 20,000 employees and annual revenues of £8bn will likely have 200-300 people working in HR, with an annual budget of £20-40m. It will have dedicated HR, recruitment and training systems, established appraisal and reward processes, in-house HR manuals, and almost everyone in the business is likely to have some responsibility for supporting and developing the human capital of the organisation.
The same company might have 470-750 people in finance, with an annual budget of £50-75m. Many of these finance staff will have extensive technical training, often funded and supported by the business. Company finance systems will record and process thousands, perhaps millions of transactions per day.
New implementations or upgrades to these systems can cost tens or even hundreds of millions of pounds. In addition to their internal resources, HR and finance departments are typically also supported by a litany of external specialists – bankers, lawyers, actuaries, reward consultants, process engineers, software providers, IT and cyber security specialists, auditors and assurance providers.
We don’t need to dig around for comparable stats on the resources typically dedicated to managing natural capital to conclude that they’re quite a lot smaller.
My point? Managing human and financial capital is technical and complicated. Fiendishly so. It’s also a top priority. Companies dedicate a significant amount of resource, including sheer brain power, in order to overcome the complexity and get it right.
Measuring and managing natural capital is no more technical and complicated. It’s just that it is generally a much lower priority.
So let’s be honest with ourselves, when we say measuring and managing natural capital is too technical and complicated, what we mean is: ‘measuring and managing natural capital feels too technical and complicated relative to the priority our organisation gives it’.
But let’s also be realistic. From the point of view of the average sustainability manager – with five sustainability surveys hitting their inbox every week, the annual sustainability report to get out, environmental compliance issues blowing up in factories they didn’t even know existed, limited budgets and a team of partial FTEs spread across five divisions, a CEO asking why they haven’t won any sustainability awards this year, and precisely no-one banging down their door to warn about the alarming decline in the natural capital the business depends on – natural capital measurement and management is too complicated!
This highlights two related problems:
- Stewarding natural capital still isn’t a high enough priority for almost every business in the world; and
- Available approaches for measuring and managing natural capital seem too complicated for many of the business people who are trying to lead the charge right now.
As a consultant and significant contributor to the Natural Capital Protocol, I must take some responsibility for problem 2. We tried hard to synthesise and simplify things in the Protocol, and to set out a step by step approach to doing a natural capital assessment. But clearly even a relative expert would still have a tough time trying to complete an assessment using only the Protocol.
I don’t believe the answer should be to try and dumb down the methods ever further. Any results produced that way are likely to be worthless. After all, the natural world is complicated, human societies are complicated - methods that attempt to combine the two in any meaningful way are also going to be complicated.
I believe the real answer, is to work even harder to ensure that our unashamedly complicated methodologies, datasets and models produce even more ruthlessly simple, insightful outputs, with less and less demanding company data inputs required.
We’ve had a go at developing a low-cost high-insight tool to do just this - we call it the impact explorer. For more information, visit: www.pwc.co.uk/impactexplorer
Follow Will on Twitter @Will_Evison
Follow the Natural Capital Coalition on Twitter: @NatCapCoalition
Keep up to date with our series on natural capital here.