Last week, UEA researchers published a study calling for more companies and governments to begin putting a price tag on the value of environmental assets that they use.
This is known as accounting for “natural capital”. Lead researcher Matthew Agarwala defines natural capital as “the elements of nature that produce value to people – such as ecosystems, plant and animal species, freshwater, land minerals, the air and oceans, as well as natural processes such as climate regulation”.
The researchers refer to Puma as a company which is pioneering in the kind of accounting that incorporates natural capital into financial plans. When the company published its first Environmental Profit & Loss Account in 2011, its executive chairman pronounced that “A new business paradigm is necessary and a transformation of corporate reporting will be central to this – one that works with nature and not against it”.
Environmental profit and loss accounting requires for Puma to record the environmental value of the land it needs to produce its leather footwear. Recently, its footwear has been estimated to have an environmental impact costing €34m. The company has attempted to offset this impact by using 100% recycled polyester fibres (which reduce energy requirements by 80%).
On a planetary scale, natural capital has been given a staggering valuation: the World Bank estimate that it contributes over $40.2tn, which is half the size of the entire global economy, or equivalent to ten times the amount it cost America to fight in the Second World War.
Several prominent figures, such as Prince Charles, have previously suggested that environmental crises pose a greater economic danger than any challenge presented in the 20th century. After the extreme winter floods this year, the prince warned that “The threats to economic stability we face to today are arguably far greater than those faced in 1939, with climate change already making parts of the world uninhabitable”.
To provide advance warning of these environmental threats, the UEA-based study recommends that data from the public and private sector be incorporated into national economic measures such as GDP. Many organisations already account for their contributions to climate change, by including their own CO2 emissions. This is a helpful start, but Argarwala’s team argue this needs to be expanded.
A full copy of the study, “Natural capital accounting and climate change“, is now available in the journal Nature Climate Change.