With the UN Conference on Sustainable Development – Rio+20 – less than two weeks away, the World Wildlife Fund (WWF) is urging political and business leaders to adopt economic and accounting measures and methodologies that go beyond GDP. Natural capital, which incorporates social and environmental, as well as financial, dimensions into national accounts and corporate balance sheets, provides a much more comprehensive, robust and reliable framework for measuring living standards, the costs and benefits of economic activities and national wealth, the WWF and other proponents assert.
Economics has traditionally considered natural capital – the atmosphere, the oceans, water resources and public land – as a “global commons” and hence as free goods, the WWF notes. Current population levels and natural resource use, along with growth trends, make this fundamental premise untenable, they assert, and the Rio+20 conference affords a unique opportunity to change the way a nation’s progress, wealth and economic activities are measured and resulting policies formed.
“We need Rio+20 to deliver new environmental indicators so that we can measure what we treasure. We need indicators that go far beyond GDP, measuring environmental quality, nature and biodiversity, and social stability and well-being,” stated WWF director general Jim Leape. “We need indicators that are clear and transparent, and a clear timeline for implementation. We will not be able to build an economy that the Earth can sustain as long as GDP continues to be the sole measure of progress.”
Natural Capital: “Measuring what we treasure”
In stark contrast to conventional economic models, natural capital, aka natural wealth, views a nation’s “stock” of ecosystems upon which a renewable flow of goods and services results. Managing a natural stock of ecosystems sustainably requires that their value be properly recognized and accounted for in national government and private sector business accounts.
The challenge is to devise practical measures of natural capital. Efforts are underway around the world, though many are in preliminary stages. WWF is intimately involved in the process.
One such project is under way in the heart of Borneo, home to approximately 6% of the world’s biodiversity. There the WWF is working closely with local communities, indigenous peoples, businesses and the governments of Brunei, Indonesia and Malaysia in the Heart of Borneo Initiative, which aims to establish a practical framework for incorporating natural capital into local, regional, national and international economic decision-making and accounting.
The forest ecosystems covered in the Heart of Borneo project contain the headwaters of 14 of island’s 20 major river ecosystems, providing critical ecosystem services that benefit more than 11 million people. The area spans 70% of the island, an area spanning 54 million hectares.
“In the Heart of Borneo we aim to create practical economic and social benefit arguments for conservation of natural capital and develop solutions that show how the biodiversity, forests and ecosystems of the HoB can become the engines for green growth and sustainability into the future. WWF and partners aim to show that these forests are worth more standing than cut down,” commented Adam Tomasek, WWF’s Heart of Borneo Initiative leader.
Sustainable management of Borneo’s forests are the keystone of the Initiative’s evolving natural capital-based management model, one with a perspective that’s distinctly long-term, with net benefits accruing to both present and future generations, WWF explains.
For example, from the natural capital model perspective, maintaining forest cover and improving management of standing forests “enhances biodiversity, carbon storage and enhances water and energy security. This results in higher revenue from forest products and ecotourism, and reduced public and social costs associated with environmental degradation.”
The Natural Capital Declaration
“Under the Heart of Borneo Initiative, the three national governments are aiming to integrate the value of forests, biodiversity and watershed services into national and local development plans, and to optimize economic returns to improve livelihoods,” Tomasek continued.
“In addition to its importance for biodiversity conservation and sustainable forest management, the Heart of Borneo holds global significance in reducing greenhouse gases from deforestation and degradation, as well as potential to move economies of Brunei, Indonesia and Malaysia to a low carbon and green growth future.”
WWF and three unnamed financial institutions intend to bring the emerging natural capital economic and accounting framework center stage at Rio+20 with the launch of the “Natural Capital Declaration.”
Included is an outline of “concrete ecosystem accounting policies that governments can follow” in order to implement “strong legal frameworks for the sustainable use of natural resources that encourage compliance through mandatory national accounting and reporting systems.”
The “Natural Capital Declaration” also would require incorporation and disclosure of environmental impacts and risks in financial reports and securities filings. Bolstering regulatory and enforcement frameworks should be taken in concert with these steps.
Another key natural capital-related event to take place at Rio+20 is to be the UN University International Human Dimensions Programme’s (UNU-IHDP) release of the Inclusive Wealth Indicator (IWI) report. The Inclusive Wealth Indicator report goes beyond GDP as a measure of economic progress by reporting on the natural capital of 20 countries. These represent 56% of the world’s population and 72% of world GDP.
*Photo courtesy: Danum Valley Conservation Lodge