Natural capital is the world’s stock of natural resources, which includes geology, soils, air, water and all living organisms. Some natural capital assets provide people with free goods and services, often called ecosystem services. All of these underpin our economy and society, and thus make human life possible. It is an extension of the economic notion of capital (resources which enable the production of more resources) to goods and services provided by the natural environment. For example, a well-maintained forest or river may provide an indefinitely sustainable flow of new trees or fish, whereas over-use of those resources may lead to a permanent decline in timber availability or fish stocks. Natural capital also provides people with essential services, like water catchment, erosion control and crop pollination by insects, which in turn ensure the long-term viability of other natural resources.
Since the continuous supply of services from the available natural capital assets is dependent upon a healthy, functioning environment, the structure and diversity of habitats and ecosystems are important components of natural capital. Methods, called ‘natural capital asset checks’, help decision-makers understand how changes in the current and future performance of natural capital assets will impact human well-being and the economy. Agreed standard concerned the environmental-economic accounts provide the conceptual framework for integrated statistics on the environment and its relationship with the economy, including the impacts of the economy on the environment and the contribution of the environment to the economy. A coherent set of indicators and descriptive statistics can be derived from the accounts that inform a wide range of policies. These include, but are not limited to: Green economy/green growth, Natural resource management, Sustainable development.
Fundamental dependency and economic activity: Economic activity fundamentally depends on natural capital, the world’s stock of natural assets. But today, natural capital is being rapidly depleted, which has increasingly tangible consequences, from water shortages to a nitrogen crisis. The economic sectors depending on and affecting it, and the opportunities for companies to help reduce those demands. Size the actions corporations could take to act as catalysts to return the planet to a “safe operating space for humanity.” The issue is a critical one, natural capital is in decline across multiple dimensions. By one estimate, current demands require resources at least 1.8 times greater than what the Earth appears to be able to sustain at this point. Yet fatalism would be misplaced. One of the key findings is that while a range of economic sectors contribute to this depletion of natural capital, specific actions taken by companies using current technologies and supported by broader enabling actions of the whole of society could not only reverse the trend but also generate positive return on investment (ROI) in a substantial number of cases.
Planet outside a ‘safe operating space’ and four planetary boundaries: A safe operating space for humanity with respect to the systems and processes that govern the stability of the Earth’s atmosphere, oceans, and ecosystems. While climate change and some of its cascading impacts are now more familiar, the planetary-boundaries framework outlines eight additional Earth systems that, if destabilized beyond a defined level, could trigger a tipping point and lead to irreversible environmental changes, according to what we know today. Impact of human activity is already extending beyond the safe operating space for at least four boundaries: biodiversity loss, chemical and plastic pollution, nutrient pollution, and greenhouse-gas (GHG) emissions. For two other boundaries forest cover loss and freshwater consumption, the current impact of human activity is deemed to be in the “zone of uncertainty.” It is evident that terrestrial biodiversity loss stands out, at an estimated 2.7 times beyond the planetary boundary as currently understood and 1.4 times beyond 1970 levels. This raises an alarm not only because of its direct impact on humanity but also because of the feedback loops between biodiversity and the other planetary boundaries. Another standout boundary is chemical and plastic pollution. Evidence shows the estimation that the world economy currently emits 2.6 times more plastic into water sources each year than it did in 2010 negatively affecting species, ecosystems, and food webs, and reducing the ability of oceans to sequester carbon.
Current understanding-agriculture is the largest contributor to exceeding planetary boundaries: While analysis of the planetary boundaries, it has estimation that the contributions of economic sectors to the current position of each boundary. Empirical analysis shows that the agriculture sector in particular has the single largest direct impact. The retail sales and services sector—which includes retail, accommodation and food services, IT, finance, insurance, professional and support services, education, health, and entertainment is also a major contributor to the nature impact across multiple boundaries, notably chemical and plastic pollution. Food systems have the most significant impact on the environment: they are the largest contributing sector for five of the nine planetary-boundary as of control variables. The disproportionate estimated impact of agriculture stems from its direct land footprint and the strong influence of downstream sectors such as the food-processing industry. Therefore, many actions that would address the impact of agriculture on natural capital would require sustained behavioral and operational changes from downstream actors, from individual households to buyers of agricultural products, including food processing companies, groceries, and restaurants.
Corporate action to path set natural capital on a path to recovery by next two decades: It is suggested that the companies have the potential to shift the world’s trajectory on natural capital and usher in a return to a safe operating space for humanity by 2050. It also suggests that they could do so through a set of targeted actions that use existing technologies and, in many cases, could provide positive returns on investment. Study shows that the effect of 47 potential corporate actions across five planetary boundaries: biodiversity loss, forest cover loss, freshwater consumption, chemical and plastic pollution, and nutrient pollution. Overall, corporate action could potentially return the world to safe levels in three of the planetary boundaries: forest cover loss, freshwater consumption, and nutrient pollution. The sized levers could also address forty eight percent of the projected overage of the boundary for biodiversity (getting close to a pre-1970 level) and sixty percent of the identified boundary for chemical and plastic pollution.
While corporate action can make a difference, it is not sufficient on its own. “Whole of society” levers such as nature conservation or consumer dietary shifts could help close the remaining gaps, as could technologies that are not yet widely available, including those that can break down plastic or extend the shelf life of foods. Opportunity is, where feasible, pursued systematically and completely across the world; that there is collaboration and coordination between upstream and downstream partners (for instance, between farmers and the buyers of agricultural products); and that policy makers and other stakeholders create enabling conditions.
Abatement potential could provide a positive return on investment: The levers include switching to regenerative agriculture, reducing food waste, and implementing new delivery models (such as returnable and reusable-container programs) to reduce plastic production and pollution. Four levers i.e., precision agriculture for cropland, regenerative agriculture in pastures, construction plastic recycling, and mechanical recycling could deliver the identified mitigation potential. Other levers, they include agroforestry, biological pest control, drip irrigation, water-efficient manufacturing techniques, and biodegradable plastic for packaging. These rough ROI estimates are bound to change over time. New technologies can reduce costs, and new policies and investor expectations could encourage a greater accounting of nature impacts. Conversely, costs may be higher, or returns lower, due to localized adoption challenges or slow adoption. Actions to address loss of natural capital overlaps with decarbonization activities that companies are already contemplating or pursuing. The costs above exclude the total cost of action on climate, but there are synergies.
Agriculture and other sectors versus abating loss of natural capital: Agriculture is the largest contributor to the depletion of natural capital, followed by retail sales and services (which includes retail, accommodation and food services, IT, finance, insurance, professional and support services, education, health, and entertainment), and the power sector. Requires collaboration across the supply chain, but the agricultural sector could implement four directly: Regenerative agriculture, which includes planting cover crops and using no-till farming, could address three out of five planetary boundaries by minimizing soil disturbance, limiting consumptive water losses, and enhancing habitats. Agroforestry, which includes planting trees in cropland and pastureland and implementing buffer strips of natural vegetation cover, is the largest lever for biodiversity, according to our estimates. We assume it would be implemented in a way that does not affect output. Water-efficient agriculture techniques, including alternate-furrow irrigation, optimized-drip irrigation, and water-efficient seeds, could reduce freshwater consumption to address.
Water efficient agriculture could provide in net value globally each year from reduced water consumption when fully implemented. Manure management techniques, including anaerobic digesters on large farms and manure sequestration on smaller farms, could potentially address the projected nitrogen surface runoff overage and the projected phosphorus pollution overage. Both techniques would involve increased investment in necessary infrastructure and operational costs. Four additional levers could affect the agriculture baseline but would require close partnership between the agriculture sector and downstream sectors. Also required plant-based alternatives for meat and dairy; advanced seed technology, including genetically modified seeds; and the reduction of food loss and food waste through supply optimization could help pull the economy back toward the boundaries. Simultaneously generating net savings for companies. Advanced seed technology and food-waste reduction would be ROI positive, with an estimated net annual savings opportunity. Corporate-driven adoption of plant-based alternatives (which would require pricing at a loss to achieve parity with animal-based products and to drive adoption) is currently estimated to be ROI negative and could cost billion dollars annually.
Corporate efforts on nature: Given all the demands facing companies in a challenging macroeconomic environment, it can be hard to know where to start. Four steps could help companies find their way. First, companies can assess their nature footprint—that is, the types, magnitude, and materiality of their impacts and dependencies on nature. Before defining a nature strategy, companies would need transparency to ensure they can mitigate risks, address impacts on natural capital, and identify business opportunities. Companies can select metrics that broadly address impacts across their footprints from numerous indicators that are already available. Second, companies can identify which of their activities have the potential to both reduce impacts on nature and improve company performance. For each potential company-specific lever, companies can determine the abatement potential, how long it would take to have impact, sources of financing, and possible returns, among other factors.
The “mitigation hierarchy” an international framework from the World Bank’s International Finance Corporation could provide guidance on the priority order of actions to take. Third, companies could set initial targets for nature and levels of commitment, define a set of actions, and integrate them into a broader portfolio of initiatives. Companies may look to organizations such as the Science Based Targets Network for guidance on how to set time-bound, science-based, and quantitative targets in line with the planetary boundaries.4 They could create a portfolio of initiatives that includes implementing abatement levers and potentially investing in nature or biodiversity credits. Fourth, companies can closely monitor progress against their goals and may prepare to disclose their progress. Various organizations are working to develop standardized voluntary reporting metrics, and the Taskforce on Nature-related Financial Disclosures has developed detailed guidance across four pillars of disclosure: governance, strategy, risk management, and metrics and targets.
Concluding remarks and attention: Restoring natural capital can help reduce extreme poverty. A close look at the goals shows that most of the 17 SDGs relate to poverty and hunger. This is because these two topics are inextricably linked to inclusive economic growth, climate change, and the management of marine and terrestrial ecosystems. Achieving the ambitious SDGs depends on designing integrated policies to improve the lives and livelihoods of people and ensure a safe and sound planet for all. Poverty, whether relative or marginal, is an extreme form of deprivation. It is an involuntary situation faced by people at the margins of political, economic, ecological and social development. It is a form of deprivation where people lack access to resources and are unable to exercise their basic rights.
One of the greatest challenges facing policymakers is the complex relationship between extreme poverty and the pressure this can exert on ecosystems and natural capital. The Millennium Ecosystem Assessment provided clear evidence of the dependence of human wellbeing on different types of ecosystem services. Scientists have since gone on to quantify this in an index of people’s dependence on ecosystems (PLOS One). Conventionally, poverty and the environment are linked as follows: Poverty causes degradation of ecosystems (the poor overwhelmingly rely on ecosystem services for their survival), Degraded ecosystems cause poverty (reduced natural capital leads to higher costs for basic goods), Perverse economic policies cause poverty (for example subsidized irrigation leads to overexploitation of ground water), The relationship between the incidence of poverty and the status of natural capital nevertheless remains unclear and is greatly influenced by local conditions.
What is beyond dispute is that a well-functioning ecosystem will help decision-makers put in place the right policies to lift people out of poverty. Ecosystems such as forest, fresh water, cultivated farmlands, and mountains provide services to people and are a source of subsistence for poor people. The contribution from nature sustains and nurtures communities and is a source of well being as it provides income, health and spiritual fulfillment. Needless to say, a paradigm shift in development planning and implementation is required.
It is observed over time is that short-sighted development policies deprive poor people of their traditional entitlement to natural capital. This situation is further exacerbated when rich people appropriate their resources, or when they have to sell their scarce resources to cope with emergencies, or when they are obliged to share resources with family members. Technological advances can lead to higher productivity and incomes. Countries with large numbers of poor people need to harvest economic output in which employment generating potential is higher and where the capital requirement, that is incremental capital output ratio, is lower. Building an inclusive green economy can help achieve sustainable farming and ensure better watershed and coastal management. Similarly the restoration of ecosystems provides an excellent return on investment, with favourable cost-benefit ratios.
Restoration of natural capital like degraded ecosystems include activities such as : restoration and rehabilitation of impaired terrestrial, coastal, and aquatic ecosystems, improvements to production systems on arable lands and other lands or wetlands that are managed or exploited for human purposes, improvements in the ecologically sustainable utilization of biological resources, and enhancement of socioeconomic systems that incorporate knowledge and awareness of the value of natural capital into daily activities and public policy. Policies to restore natural capital include wetland banking, biodiversity offsets and compensation for ecosystem service losses. Such policies have the potential to generate funds which can be used for natural capital maintenance and poverty alleviation. Poverty alleviation requires job creation programmes and the restoration of natural capital can reinforce and support this goal.
