CAPITAL BUSINESS, NATURALLY
Launch of the Natural Capital Protocol
Launched at a conference in London in July, the Natural Capital Protocol’s mission is to aid the shift towards a world where business puts a value on nature. Turns out, human and social capital are equally important, as our K magazine reporter found out.
As obvious as it seems, there is a fundamental fact about the world that we seem to be ignoring: that nature is what makes human life possible. The world's resources: air, water, soil – every living being depends on them, but they're being denuded at an alarming speed.
We also tend to forget that businesses cannot survive without nature. But natural capital has been difficult to measure. Since 2010, Kering has been working on an Environmental Profit & Loss account (more on this later). And there’s now a new initiative called the Natural Capital Protocol, which was officially launched on 13 July at the London Institute of Chartered Accountants. The conference gathered leaders from Nestlé, Burberry, Shell, Walmart, WWF, Tata, the World Bank, government officials from the European Commission, NGOs and academics from Cambridge University – as well as Kering.
Four years ago executives of leading corporations met with directors from the fields of conservation and science to look at the impact businesses are having on the planet's natural resources, both positive and negative. This meeting evolved into the Natural Capital Coalition. In its own words, the Protocol offers ‘a standardised framework to identify, measure and value impacts and dependencies on natural capital’.
The members of the Coalition realised something practical needed to be done – and fast. The World Wildlife Fund has repeatedly stated that around half of the world's forests have disappeared, taking the same proportion of the animal population with it. This depletion of natural resources has serious repercussions on businesses. To avoid these losses they must understand what is happening along their supply chains; NGOs, stakeholders and consumers are increasingly demanding this information too.
One company which has achieved success this way is Natura, one of South America's top cosmetics manufacturers. At the launch of the Protocol, sustainability coordinator Andreza Souza explained the actions the Brazilian firm has taken: changing transport methods and switching to recycled packaging has reduced carbon emissions by 33%; it has also replaced animal and synthetic ingredients with plant-based ones through sustainable farming.
Which demonstrates how much of a priority natural capital has become. Thanks to the collaboration of a large number of corporations, investors and experts, the Coalition established the Protocol in just two years; the framework will ensure businesses put nature at the forefront of their decision-making. "It's what the NGOs have been telling us" spelled out Mark Gough, executive director of the Coalition. "There's a moment now where organisations are coming together and we can really make this work."
All delegates emphasised how unique the Protocol is because, rather than being an add-on, it's a single approach for businesses to implement. Gough said, "Every organisation talking about natural capital will be using it now. This is how we'll get it to scale at national and international level."
Following a pilot scheme by its sportswear brand Puma in 2010, the Kering Group has since developed a tool for all its brands, called the Environmental Profit & Loss (EP&L) account. It measures and puts a monetary value on the environmental impact of its own operations and supply chains, from the sourcing of leather and the mining of metals to water pollution, carbon emissions and its use of chemicals. Making its findings visible in this way had an influence on the creation of the Protocol.
By open sourcing we encourage others in our industry and beyond because we rely on them.
The Group also chose to make the methodology open-source for it to be adopted by other companies. Michael Beutler, Kering's sustainability operations director, explained: "By open sourcing we encourage others in our industry and beyond because we rely on them. We rely on steel, agriculture, mining and transport. We can't make a difference by ourselves."
Others are already starting to apply this model, and not just big conglomerates but small firms too. "We've actually been approached by an apparel company. They're not competitors; they're in another part of the world. They're a very small business but they want our help because we're considered a global leader."
Now that the Natural Capital Protocol has been created, it is hoped that human capital will follow. Pavan Sukhdev is ambassador of the Coalition and founder & CEO of GIST (Green Indian States Trust), as well as the former head of the United Nations Environment Programme's Green Economy Initiative. He pointed out that human capital is a huge area, making up around 70% of most of the developed countries' national wealth; while in the developing world it isn't growing fast enough and natural capital is being lost.
He believes work on a human capital protocol should start now. "Much like Kering did many years ago in the case of natural capital, I think this is the time for that leadership. This is the time for those pilot projects and hopefully within five years we should have equivalent protocols for human and social capital."
Social capital – giving local communities an economic boost by providing educational opportunities and developing local infrastructure – is inextricably linked to human capital.
It's also of tremendous importance to business. This way, opening up markets in poor areas of the world can increase the inhabitants’ welfare. These are also beneficial aspects for stakeholders.
What the Protocol is doing is integrating nature into our decisions, because at the moment it's invisible.
Gough stresses these are not separate bolt-ons: "Natural capital is the fundamental basis. Without air people cannot breathe. What the Protocol is doing is integrating nature into our decisions, because at the moment it's invisible. We don't want there to be different social and human protocols".
Beutler again: "We're not only doing this because it’s imperative in light of our global challenges. We're doing this because it is the only way to ensure our businesses thrive for the long-run.”