Why a Finance Director cares about soil

28th March 2017

Business Breakfast panorama

Key points:

  • Natural capital accounting can help to make the case for across the business for considering natural capital in decision making, for example to the Finance Director.
  • Businesses cans start to develop natural capital thinking by considering the internal information they can make more of and thinking about the assets they are dependent on.
  • Natural capital’s importance for business decision-making is growing internationally, aided by the Natural Capital Protocol.

“My biggest victory last year was getting a Finance Director to care about soil quality." This key quote from a recent Scottish Forum on Natural Capital Business Breakfast encapsulates why the natural capital approach represents something new for business.

Organised in partnership with the University of Edinburgh Business School, Directing for Resilience: Using natural capital accounting in business attracted attendees from the likes of Jacobs, Mazars LLP, Scotch Whisky Association and Arcadis.

The event was part of the “Directing for Resilience” business breakfast series organised by the Scottish Forum for its members and invited guests.

Duchy Example

    Natural Capital Protocol
    At a glance briefing

Ian Dickie, Director at Eftec (quoted above in relation to his work with the Duchy of Cornwall on the Corporate Natural Capital Accounting methodology developed by the Natural Capital Committee) gave the keynote presentation.

The Duchy of Cornwall states in their annual accounts that: “Natural capital accounting will help organise environmental priorities across different parts of the estate and will support decision-making around strategic objectives”.

These initial accounts estimate the recreational value of the Duchy’s natural capital at more than £6 million per year. This value stems from mountains, moorlands and heath, woodlands and coastal margins.

But, the accounts also identified significant negative impacts. Carbon emissions from degraded soil create externalities estimated at £3million per year.

Understanding the soil has the potential to not only reduce externalities, through protecting and enhancing it there are financial benefits to businesses that rely on the soil. Soil health is starting to be realised as equally important for the Finance Director to understand as it is for the farmer.

A recent article in Nature on "The Business Case for Soil" provides a detailed explanation of why soil should be a boardroom issue, estimating that every year 12 million hectares of soil - an area the size of Bulgaria - is damaged worldwide. Soil is just one essential part of the natural capital on which all businesses impact and depend on either directly or indirectly. Ian's presentation highlighted the importance of the natural capital approach. This helps businesses to understand nature as assets, which they can intrinsically understand the need to invest in and keep in good condition.

The benefits to business of understanding natural capital were outlined as:

  •  Identify savings through improving efficiencies & identifying risks
  •  Sharing performance information with customers and investors
  •  Increasing returns with long-term sustainability
  •  Understanding returns beyond financial profits

Taking the first step

The session highlighted how businesses can take steps towards natural capital accounting, just using their current knowledge. Participants were asked to consider:

  • What internal information can you make more of?
  • Which assets are you dependent on?

Participants reflected on the Modern Slavery Act, which opens up a conversation between businesses and their supply chains. This process could be used by businesses to gather information to understand natural capital questions.

Natural capital’s importance in decision making within businesses is growing. Ratings agency S&P has acquired Trucost, a leading sustainability data provider. This is widely viewed as a significant development in how investors are viewing natural capital as a material consideration.

The Natural Capital Protocol was pointed to as a way to help business decision making. The Protocol is a standardised framework that allows companies to identify, measure and value their impacts and dependencies on natural capital.

Click here to access the Using natural capital accounting to manage business risk slides presented by Ian Dickie

Click here to find out about joining the Scottish Forum on Natural Capital