Natural capital valuation
Natural capital is the stock of renewable and non-renewable resources that yields a flow of benefits to people. Natural capital includes clean air, water, energy, food and raw materials, among others.
Business impacts and depends on natural capital. These impacts and dependencies carry costs and benefits for not only the business but also society. Each business has its own risks and opportunities based on these costs and benefits.
For business to make better decisions for its social and environmental bottom line – it needs better information about its environmental and social risks and opportunities. As resource scarcity pressures increase, land use increasingly comes under the spotlight, and as climate change threatens global societies and economies, the case for businesses to account for natural capital impacts and dependencies becomes more critical.
Resources
Example
Dow
Situation
- Ecosystem services such as clean air and water are currently undervalued in today’s economy, and sometimes not valued at all.
- Dow adopted a 2025 goal to apply a business decision process that values nature.
- By 2025, Dow will deliver $1 billion in value through projects that are good for business and better for ecosystems.
- By 2020, all capital, real estate, new business development and new product development projects at Dow will be screened using Nature’s Future Value assessments, a tool we developed with The Nature Conservancy to measure the value of ecosystem services.
Challenges
- Few companies have implemented natural capital valuation and, as a result, limited examples or models exist.
- The range of methodologies, data sets and tools make natural capital valuation difficult to conduct and compare
- Companies must select the correct scope for the project.
Solution
- Dow participated in the Natural Capital Coalition that developed the Natural Capital Protocol (NCP) with WBCSD.
- Dow also conducted a deep dive pilot of the NCP, analyzing the water-use opportunities and risks in site-specific locations.
- Dow works with the Nature Conservancy to validate tools and models that value ecosystem services.
Key Benefits
- Dow’s Seadrift, Texas project yielded over $280 million in net present value by using reconstructed wetlands for wastewater treatment.
- The company now has better clarity on which sites are at most risk for future water access.