A new accounting framework developed for England’s Natural Capital Committee aims to help organisations to take better account of the natural capital1 they own, depend on or are responsible for.
Understanding and managing natural capital is fast becoming a prominent business concern and there are significant gains to be had from adopting good practice and making more informed decisions. Conventional accounting systems help measure and safeguard the capital base upon which a business relies. Corporate Natural Capital Accounting (CNCA) uses this approach to help measure and safeguard the natural environment. The framework was developed by eftec, RSPB and PwC. It has been piloted with four organisations: Lafarge-Tarmac, United Utilities, the National Trust, and The Crown Estate.The Crown Estate chose to pilot CNCA on its Windsor Estate which covers around 6,400 hectares of parkland, woodland, and gardens.
“We’d advocate other organisations undertake CNCA in order to understand the wider societal value generated by natural capital assets, and inform budgetary discussions and priority setting.” Mark Gough, Head of Sustainability, The Crown Estate.
Corporate Natural Capital Accounting (CNCA) is a ground-breaking approach to help businesses answer questions like:
- Which natural capital assets are of utmost importance for the business?
- How much of the value of the business relies on natural capital?
- How is this reliance likely to change in the future?
- How much and on what the business ought to spend to maintain the natural capital it uses?
In other words, CNCA can help strategic and functional decisions of a business, such as:
- Developing long-term strategies to identify: the risks to revenues, liabilities, reputation and customer base of not maintaining natural capital the opportunities to generate new revenues to safeguard natural capital
- Operational decision-making: for example, investing in natural versus physical infrastructure; assessing the impacts of changes to natural assets; or prioritising the allocation of limited maintenance budgets.
Reporting: on the health and performance of natural capital to different parts of the business, to investors, regulators, employees, and customers. Environmental management: supporting and enhancing overall management of natural capital.
1Natural capital refers to the stock of natural assets upon which our economies and societies are built. Combined with financial, manufactured, social, and human capital, natural capital produces value in the form of 'final goods and services' (e.g. crops, timber, fish stocks, minerals, water provision, air purification, flood prevention). Natural capital include both renewable (e.g. trees, fish, water, soil) and non-renewable (e.g. fuels, minerals, metals) assets.