How to spot a nature crisis – and why we should use natural capital to combat it

A range of global crises occupy our limited attention and demand action, from geopolitical upheaval and growing polarisation to cost-of-living crises.

What drives these crises to the top of the global agenda? Generally, three features make global crises actionable:

Global crises are eminently visible. They occupy your notifications, statistics and immediate surroundings.

The pain of global crises is always immediate, creating a sense of urgency. The West Africa Ebola outbreak in 2014, for example, led to the development of a safe and effective vaccine in just two years.

Global crises are measurable and easy to understand, giving evidence for action. Most people intuitively understand, for instance, that when prices rise faster than wages it creates a cost-of-living crisis and they calculate the pinch at the grocery store.

By contrast, nature loss receives less attention. It doesn’t typically feature at headline multilateral events, such as the G20 or the UN General Assembly, or in national conversations on growth and trade. It is usually discussed at intergovernmental forums to address environmental crises.

Even then, climate change and biodiversity loss are addressed at separate summits. The climate COP process generally receives greater attention and funding, according to many international experts. The Kunming-Montreal Global Biodiversity Framework, signed in December 2022 at UNCBD COP15, was heralded as the 'Paris Agreement' for biodiversity, but it hasn’t received the ubiquitous international coverage that the climate agreement has received since 2015.

So, why is this? Nature loss threatens over half of global GDP. Billions of people suffer its increasingly devastating effects daily, including in agricultural communities, overheated cities, indigenous lands and on vulnerable coastlines. Climate change and nature loss are deeply connected, sharing common drivers – but decarbonization alone will not solve both challenges.

The problem is that, despite nature loss being visible, it is not visible everywhere. Tropical forests, glaciers and the ocean – major theatres of global nature loss – can feel far removed. The impact of nature loss is immediate – but often it isn’t framed with urgency. In fact, experts across the international community view nature loss as a 10-year risk, generally agreeing that technological changes, economic uncertainty and conflicts are more pressing issues. It’s also measurable, but hard to understand how it impacts well-being and business. What should a department head or senior executive make of data on dwindling forest cover or falling fish stocks?

The good news is that the ever-evolving 'natural capital' approach can help address these challenges.

The natural capital approach extends the notion of capital to the environment, conceptualizing nature as assets worth restoring, maintaining and enhancing for productive value. Think of 'stocks' of natural resources – land, watersheds, forest cover, soils, various species – providing productive 'flows' of ecosystem services like food, fibre, protection from extreme weather and cultural value, to name a few. Many of these essential benefits are not captured in economic indicators like GDP or financial statements.

Natural capital accounting is the process of recording changes in specific natural assets or resources over time and, by extension, the benefits nature provides us. Valuation takes this one step further. It converts physical environmental accounts and flows of benefits to decision-relevant metrics, including monetary terms. Together, accounting and valuation can give us a clearer picture of nature’s benefits today and its future value.

To illustrate, imagine an agricultural company that accounted for its land footprint as below:

In other words, healthy farmland stock reduced by ten hectares and degraded land increased by ten hectares. And here’s how it was valued in its area of operation:

Such data typically does not entirely appear in corporate balance sheets, particularly the liability for degraded land – which is currently an 'externality' to the business.

Similarly, while the cost of restoring land may register as an expenditure on a profit and loss account, the positive 'externalities' can fully be accounted for and valued only using the natural capital approach. Greater flood resilience, water supply and pollinators generate cost savings and future productive value.

Such critical data can make decisions on nature far more accessible for policymakers and business leaders alike. If deployed at scale, it can help make the nature crisis more:

• Visible – by bringing nature loss into actionable statistics. On a national or global scale, a balance sheet for nature may help evaluate tradeoffs between nature and growth better. Natural capital per person – our global stock of natural resources – has declined by 40% over 1992-2014 (while GDP per capita more than doubled).

• Immediate – especially if governments and businesses have to act on disclosed accounting data. To illustrate, Olam’s Sunny Verghese, in 2022, described Temasek’s internal carbon price on its portfolio companies as crucial to making emissions reduction his “number one priority as CEO,” as it affected half of their after-tax profits.

• Understandable – by consolidating data on various forms of nature loss and providing simple (even monetary) metrics to gauge performance. Degradation of land alone costs us up to $10.6 trillion annually (around 17% of GDP in the year of valuation).

This approach has gained traction amongst policymakers, business leaders, accountants, economists, civil society and academia alike. Try finding a more diverse group of professionals (largely) agreeing on something this transformational!

Natural capital approaches, while not new, are not mainstream. Stakeholders across the global economy have an important role in elevating natural capital:

• Governments can begin exploring deploying natural capital accounting and valuation, aligning this with national and local development plans and biodiversity strategies and evaluating the feasibility of requiring large businesses to use natural capital standards.

• Academics and standards bodies can work towards greater harmonization between competing standards and making methodologies more accessible for businesses.

• Corporates can begin evaluating their impacts and dependencies on nature via available standards and prepare to adopt natural capital strategies.

• International organizations can enable multistakeholder collaboration to deepen the adoption of natural capital approaches.

• Innovators can help solve data challenges – by measuring the extent and condition of key natural assets in-situ, including land, water, air, soil, waste streams and more.