Natural Capital - more valuable and simpler than it seems

Even though I’m an environmental scientist, I truly understood ‘natural capital’ only after joining Arcadis. In fact, I was not alone.

Numerous times my colleagues and peers asked: “What is natural capital anyway?" Well, natural capital is the air we breathe, the food we eat. It is in nearly everything around us, including the chair you are sitting in. However, since it is everywhere, we tend to take it for granted. But, if we are constantly managing our financial ($) capital, why aren’t we managing our natural capital? In case natural capital is still not clear to you, I have good news: “it’s simpler than it seems!”

What is capital? 
First things first. According to Costanza (1997)  'capital' is a stock of materials or information that exists at a point in time. Each form of capital generates a flow of services that enhances the welfare of humans. The Oxford Dictionary states that capital is “wealth in the form of money or other assets” and a “valuable resource of a particular kind.” Capital can take different forms such as human labour, which is considered social capital, currencies, which are financial capital or from nature, such as trees, minerals and  ecosystems that we call natural capital. Although we are used to buying items or being paid for hours of work, how many of us understand the value of the atmosphere? Let's say, for example, one hour of breathing clean air? In fact, natural capital is often out of the equation. Thus, one of the ways of valuing natural capital is to consider the cost to replicate it artificially. For instance, desalinating ocean water to produce drinking water.

What does our behavior tell us?
The term ‘natural capital’ refers to the ‘stock’ or ‘inventory’ of physical attributes in the natural world such air, land, water, flora and fauna, and the direct and indirect ‘services’ that these provide. From the Brundtland Commission  to the Paris Agreement  , we have focused on mitigating the impacts of humans and business on the stock of natural capital. However, our human nature is to maximize benefits and reduce costs, whether it causes an impact or not. For business (here comes Arcadis’ and its clients’ concerns), the pattern is not different. In fact, our day-to-day decisions are a result of constantly managing risks. From avoiding a rainstorm to not get wet or ill, to complying with legal requirements to not risking being arrested or having our business shut down.

Why talk about Natural Capital?
Natural capital thinking allows you to identify trends and changes in nature, and how these may relate to your business operations. In science, a lot has been done from an impact perspective, while, in reality, risks and opportunities are the ones driving business. The key points are  that natural capital (1) encompasses the valuation of natural resources and the ecosystem services that these provide; and (2) not only includes the impacts of using it in business, but minimizing consumption to reduce risks of its scarcity. For instance, the production of a smartphone can cause diverse impacts on natural capital, such as soil depletion due to mining and extraction, in fact of the 17 rare earth metals, 16 are included in phones, which are being overexploited. For example, the stocks of cobalt are likely to end in 20 years, putting the production of smartphones at risk.

The importance of the value chain
Arcadis is already expert in site impact assessment and management. Nonetheless, it is clear to our natural capital experts that, due to global trading and climate change, natural capital issues aren’t purely site located. These issues also apply to value chains. More and more, business and sectors are investigating their value chain. And why? Because there are hidden risks and opportunities in each part of it. For instance, Amnesty International  released a groundbreaking video and report of how the extraction of cobalt has been strongly dependent on the labour of child miners in Congo. Major brands such as Apple and Samsung were identified and linked to human rights abuses.The report results went viral and highlighted by major news channels such as BBC , The Washitgnton Post , and The Guardian . Adttionally, several consumers joined Ammnesty twitter campain questionning Apple’s CEO with the following: “@tim_cook Tell me if my phone is powered by #childlabour ”. At this case, child labour is an example of social capital dependency, while the overexploitation of cobalt is an example of natural capital dependency. Identifying issues along the value chain are fundamental for the business continuity of smartphones manufacturers. By doing so, they are setting an example within the industry. If not, they are compromising society, nature, and their sales and reputation.

What have I done and what can you do?
My internship in Arcadis was focused on an approach to map and identify impacts and dependencies on natural capital throughout a business’ value chain. We expect that the companies opting for our approach, will leverage their business and create value. For me, the most important, is to demonstrate that investing in natural capital means investing in business continuity and our planet.

We all need to recognize that  quality of life is indispensable. But, we can’t dispense with natural capital, which stocks maintain the production of nearly all we consume. Neither, with the rights of children with whose labour powers our phones. Arcadis is at a leading position in natural capital, and hopefully, with this blog post, you will understand why natural capital is simpler and more valuable than it seems.

1Costanza, R., et al. (1997).The value of the world's ecosystem services and natural capital. Nature, 387(6630), 253-260. 
2World Commission on Environment and Development. "Our Common Future". Brundtland, 1987
3Paris Agreement. United Nations Treaty Collection. Paris, 2015.
4Amnesty International accessed in May 2017. 
5BBC accessed in May 2017
6The Washington Post accessed in May 2017. 
7The Guardian accessed in May 2017.
8YaleNews accessed in May 2017.

Raquel Serôa

Natural Capital researcher Ask me a question