World Forum on Natural Capital kicks off

The World Forum on Natural Capital took off in Edinburgh this morning and was opened with a video of HRH Prince Charles making a heartfelt call to action on accounting for natural capital.

Sustainability reporting stakeholder engagement processes identify ESG risks

He was followed by Nicola Sturgeon, First Minister for Scotland, the Scottish Government being a key sponsor of the event. She spoke of the importance of Scotland’s natural capital both to the economy and the well-being of the country’s people.  She also linked the natural capital debate to fairness and equity – both between and within generations. She has some interesting facts: the benefits of natural capital that can be quantified contribute 20 billion pounds per year to the Scottish economy; a loss of 1% of Scotland’s peat lands would be equivalent to a whole year of human activity; and, in 2011 Scotland became the first country in the world to develop a natural capital index.  Aware of debates about whether we should be accounting for natural capital at all, the First Minister noted that whilst not all natural capital can or should be quantified but stressed the importance of knowing what it contributes to the economy.  The Scottish Government, she said, aims to develop the economy whilst maintaining and enhancing Scotland’s natural capital, combining the preoccupations of two great Scots Adam Smith (moral philosopher) and John Muir (19th Century environmental activist).  Interestingly Scotland’s natural capital was found to have declined significantly between 1950 and 1990, but since then, with awareness and management, there has been a partial recovery.

Inger Andersen, Director General, International Union for Conservation of Nature (IUCN) spoke of an increase in government action globally and increasing government recognition of the economic value of natural capital.  She also talked of the problem of quarterly corporate reporting in detracting companies from natural capital management.  She nevertheless stressed that it was something companies needed to manage long term – particularly in the supply chain – even though the benefits of doing so are difficult to measure.  “Our current economic model eats away at natural capital”.  She argued that there was a need to innovate to develop “tools” and a need to bring the large numbers of “streams” of solutions together to have more impact.

Pushpam Kumar, Chief, Ecosystem Services Economics, United Nations Environment Programme (UNEP) started by pointing out that more than 190 countries adopted the 17 Sustainable Development Goals and that to achieve these integrated goals we need to decouple growth from natural capital.  Britain’s Environment Minister had put a value on Britain’s forests, soil and rivers of £1.6 trillion and other national and global numbers were noted and concern expressed that there was a lack of consistency or clarity in the calculation of these numbers.

I wondered to what extent these keynote speakers are talking to the converted, those already making an effort where they can in their roles to inspire and create change.  Most of the audience will know what the problems are – no easy answers so far.   Then I heard someone leaving the room at the break excitedly saying it had given him an idea.

What conversations should CEOs be having with their boards? 

This was the title of the first breakout session I attended chaired by Jochen Zeitz, Co-founder and co-chair of the B Team.  Katherine Garrett-Cox a supervisory board member of Deutsche Bank argued that the discussion with the Board is easier than the discussion with investors, despite the fact that research shows that investing in sustainability brought stronger returns.  This reflects academic research, that short term investor time horizons limit longer term thinking – itself a prerequisite for concern about natural capital.

John Lelliott, Finance Director, The Crown Estate on the other hand stressed that sustainability is a business must – it is about creating value and building reputation.  He declared his support for integrated reporting, his belief that reporting drives change and argued that integrated reporting allowed them to show how natural capital leads to value creation.

The experience of Roland Jonkhoff, Managing Director, Desso Group said that when you talk about natural capital in the board room you are also talking about leadership.  Also, critical in convincing customers to pay an increased price for their product (carpets) was communicating the benefit of doing so.

On the issue of leadership, Jochen Zeitz spoke of the challenges he’d had from those opposed to measuring the contribution of natural capital.  (He is former CEO and Chairman of Puma which developed an Environmental Profit and Loss Account). Philippe Joubert, Executive Chairman, Global Electricity Initiative stressed the need to assess senior executive performance on natural capital in order to change behaviour.

Which comes first: the reporting framework or the decision matrix? Where do these lie in the policy landscape?

Jane Stevensen, Director, Climate Disclosure Standards Board (CDSB) stressed that we don’t have the 150 years or so it took for financial reporting to get a robust reporting framework in place.  CDSB believes that working with the financial sector is important to achieve change within organisations. Neil Stevenson, Integrated Reporting Council also emphasised that reporting can and does change behaviours and helps organisations achieve their wider goals. Integrated reporting leads to integrated thinking and longer term thinking. Michael Meehan, CEO, Global Reporting Initiative spoke about the use of sustainability data for decision making purposes.

There was some discussion about how to increase the effectiveness of reporting through ‘soft regulation’ rather than mandatory requirements about which there were concerns about stifling innovation.

All in all an interesting day.  Interesting to see the challenges that people from all walks of life face in implementing sustainability initiatives and integrating into natural capital thinking into decision making – something often not considered or understood by academic researchers and writers who fall back on theories not fit for the complexity of the contemporary business environment.  Interesting also is the range of people the event has attracted, people coming at it from diverse specialities and functions.

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