What is Natural Capital? WBCSD Video Explains

If you’re not already familiar with the concept of “natural capital,” take a gander at the video above, which debuted this morning to open the first ever World Forum on Natural Capital in Edinburgh.  Produced by creative studio Nice and Serious for the World Business Council on Sustainable Development (and others), the video is a great way to explain the concept of “natural capital” to a wider audience.  It also provided a an excellent opening to the conference now underway.

The fundamental concept is this: The best way to save the planet is to put a price tag on its resources.  Doing so is the only way to get business to take stewardship of the environment seriously, and only business can save the planet (after all, it’s economic activity that started the problem!).   If an acre of rain forest can be shown to be “worth” more standing up than cut down for palm oil, then it’s likely to stand.  Likewise, a business can be sent a bill for damages it causes by gobbling up land, polluting, or creating other externalities.

That’s the concept anyway.   

An impressive array of over 500 business leaders, NGOs, government folks and a handful of media are here in Edinburgh getting down to the nitty gritty details of exactly how one might go about pricing the myriad benefits of nature. They’re discussing the ways business, government, and organizations would have to cooperate in order to even begin to do so, and the possible unintended consequences of natural capital valuation. Some even question the concept of natural capital itself.

Economist Dieter Helm explained in the opening plenary that there are really two approaches to using natural capital as a change agent. The first is a “soft approach” which is simply introducing the concept of natural capital as tool of persuasion. The hope with this approach is that as companies and governments are introduced to the idea that nature in its raw form has economic value, they’ll be persuaded to begin taking it seriously. Such an approach has merit but can only go so far.  A hard line approach, with natural capital fully entwined into the economy and all its attending institutions, would have far greater effects but would also be wildly complex and controversial to install.

It’s the details of the latter that the conference will mostly focus on.  Helm explained further – there are two core principals that need to be realized in order to come up with any meaningful strategy for using natural capitalism to ensure sustainable growth.  The first is the concept of capital maintenance.  At the very least we must maintain the benefits of the natural capital we have left.  This is simple on paper but when one realizes the rate at which we’re burning through natural capital in our status quo economy it becomes clear how far beyond our means we’re living. This debt appears on no one’s balance sheet.  Getting basic maintenance on the table without other fundamental changes will be very expensive.

The second, even more radical, consequence to taking natural capitalism seriously is compensation.  We can’t possibly save every speck of natural land on the planet.  So what’s the price a developer has to pay for building a golf course on the coast of Scotland? What must they do elsewhere to offset any damage they cause? Determining this is incredibly complicated and will be fraught will all manner of politics and controversy.  However, it’s hard to argue that the alternative – that it cost nothing at all – is better.

Follow along over the next few days as we offer more details and more insights from the forum here in Edinburgh!

Nick Aster is a new media architect and the founder of TriplePundit.com

TriplePundit.com has since grown to become one of the web's leading sources of news and ideas on how business can be used to make the world a better place.

Prior to TriplePundit Nick worked for Mother Jones magazine, successfully re-launching the magazine's online presence. He was instrumental in the creation of TreeHugger.com, managing the technical side of the publication for 3 years as well as an active consultant for individuals and companies entering the world of micro-publishing. He earned his stripes working for Gawker Media and Moreover Technologies in the early days of blogging.

Nick holds an MBA in sustainable management from the Presidio School of Management and graduated with a BA in History from Washington University in St. Louis.