GUEST POST: By Dr Joël Houdet, Integrated Sustainability Services, South Africa

The Natural Capital Declaration was released on June 20th at the Rio+ 20 Earth Summit by the financial sector, with the aim of demonstrating its commitment to work towards integrating Natural Capital considerations into their financial products and services for the 21st century.

The Natural Capital Dialogue was opened by the United Kingdom Deputy Prime Minister Nick Clegg, the CEOs from finance voiced alongside heads of state and other political leaders their commitment at the highest level to work towards the development of methodologies to value and account for nature’s vital role in the global economy.

39 banks, investors and insurers backing the Natural Capital Declaration hence joined forces with more than 50 countries including Botswana, the Philippines, South Africa and the United Kingdom, as well as corporations such as Unilever , Puma, Dow Chemical and Mars Incorporated, to make today a collective call for natural capital valuation and accounting at Rio+20.

The Importance of Natural Capital

Natural Capital comprises Earth’s natural assets (soil, air, water, flora and fauna), and the ecosystem services resulting from them, which make human life and business operations possible. Ecosystem goods and services from Natural Capital are worth trillions of US dollars per year and constitute food, fiber, water, health, energy, climate security and other essential services for everyone. Neither these services, nor the stock of Natural Capital that provides them, are adequately valued compared to social and financial capital. Despite being fundamental to our well being, their daily use remains almost undetected within our economic system. Using Natural Capital this way is not sustainable. The private sector, governments, all of us, must increasingly understand and account for our use of Natural Capital and recognize the true cost of economic growth and sustaining human well being today and into the future.

The Natural Capital Declaration therefore calls upon governments to develop clear, credible, and long-term policy frameworks that support and incentivize organizations – including financial institutions – to value and report on their use of Natural Capital and thereby working towards internalizing environmental costs.

This can be achieved by:

  • Requiring companies to disclose the nature of their dependence and impact on Natural Capital through transparent qualitative and quantitative reporting;
  • Using enforceable fiscal measures to discourage business from eroding Natural Capital, while at the same time offering incentives to companies that integrate, value and account for Natural Capital in their business model;
  • Endorsing and implementing international agreements, including but not limited to, those agreed through the Convention on Biological Diversity;
  • Setting an example through requiring public spending and procurement to report and eventually account for its use of Natural Capital.

This development provides support to the recent position paper released by Integrated Sustainability Services and Synergiz, which summarizes existing corporate accounting / reporting approaches for Natural Capital. Indeed, to reach the aforementioned goals, every effort should be made on developing integrated financial – natural capital reporting / disclosure models so as to integrate Natural Capital considerations into standard corporate decision-making frameworks and models.

About Dr Joel Houdet:

Dr Houdet’s cross continent experiences throughout Africa, Australasia and Europe have provided him with the opportunity to acquire both ecological and accounting skills – a rare combination. Currently, he is managing Integrated Sustainability Services, based in Johannesburg (South Africa), which offers integrated sustainability advisory, accounting and reporting services for firms facing strategic challenges.
He is also the President co-founder of Synergiz, a NGO which addresses urban ecosystem challenges and develops biodiversity footprint standards. To know more about him, click here