The equal treatment of the six capitals could be called into question when we consider that ‘natural’ capital represents life on earth and the ecosystem, without which the other five are rendered meaningless.
As with an evolving science, terms used and how to go about measuring nature in precise ways are not universally agreed. There is no single agreed accounting for nature process and numerous methodologies. Initiatives, such as the global biodiversity framework goals and the TNFD recommendations due in 2023 will help in the move to a global standards approach.
Nature-positive transition planning steps
The following high-level steps are designed to get you thinking about the relationships and activities an organisation will need to build and integrate into accounting for nature and their transition to a nature-positive entity.
These steps follow the same pattern as detailed in the accounting for carbon report. Emerging thinking now suggests that organisations should, because of their deep connection, create a transition plan that integrates climate and nature.78 This will move an organisation from either being net zero or nature positive to becoming a net positive entity.79
Step 1 — Start with a nature vision for your organisation to lead the way
It is important upfront that all buy into the nature positive direction of travel. An organisation’s compelling vision needs to engage internally with employees, but also externally with investors, customers and consumers, supply chain partners, and local community stakeholder groups.
Governance and executive management will need to communicate a coherent case for change and own the agenda. They must allow all stakeholders to suspend their judgements and enable them to get curious. This means upskilling employees and bringing in resources where knowledge gaps exist to build a culture to support an organisation’s transition to nature positive. Transition is a shared challenge that requires people at its core. It is worth seeking out internal influencers, and examples of other organisations in your industry or supply chain that are already on their nature-positive transition journeys.
This could include identifying the ‘keystone actors’ within an ecosystem. Keystone actors are organisations that shape global ecosystems through their activities and businesses.80 Through the identification of the influencers, collective action can change the whole ecosystem. The Seafood Business for Ocean Stewardship (SeaBOS) initiative, launched in 2016, is a practical example of the power of keystone actors working together.81 Together, the 15 SeaBOS member organisations have committed to, ‘Improve transparency and traceability in our own operations, and work together to share information and best practice, building on existing industry partnerships and collaborations.’82
In 2020, Unilever built a vision that encompassed people and nature. It was designed not only to give employee direction, but also to deepen relationships with its suppliers and partners in a united ambition of nature protection and regeneration. The ‘People and Nature Policy’ clearly articulates Unilever’s 4 principles of,
Protecting natural ecosystems from deforestation and conversion
Respecting and promoting human rights
Transparency and traceability
Being a force for good for people and planet.83
Whether internal, external, or an interdisciplinary combination, a collaboration approach leads to greater knowledge sharing and will help in building a compelling vision.
Finally, as already highlighted, the language an organisation uses to describe its accounting for nature journey needs to be consistent. The right language is important as it builds trust through transparency with stakeholders and helps encourage the culture shift to being nature positive.
Step 2 — Understand your organisation’s current relationship with and impact on nature, setting a baseline
A key step in an organisation’s transition journey is to understand its historic and current impact on nature. Defining the baseline then provides your organisation with the gap to bridge in its transition journey to become nature positive. This sounds simple, however the activity required to understand your organisation’s impact on nature is complex and needs input from across the whole business and supply chains.
A good starting position is to understand the keystone species an organisation is dependent upon.
It makes sense for the gathering of trend data to build a baseline to be led by the finance function. However, without the support and buy-in from cross-functional teams it could end in misleading metrics and conclusions that negatively impact an organisation’s transition journey.
There are also risks and opportunities in transitioning to a nature-positive business model. These need to be explored up front as part of an organisation’s Enterprise Risk Management (ERM) processes.
Step 3 – Establish a nature positive target(s)
Guidance from the Science Based Targets Network emphasises the need for time scales to what it means to be nature positive, ‘a nature-positive world requires no net loss of nature from 2020, a net positive state of nature by 2030, and full recovery of nature by 2050.84 This should follow through into establishing an organisational nature positive target(s).
The target(s) will need to be expressed as a verifiable and quantifiable set of Key Performance Indicators (KPIs). Transparency and accountability are key here as an organisation will need to be able to justify how they arrived at a nature positive target with multiple stakeholders.
Step 4 – Set nature metrics, milestones and timelines in a plan
An organisation’s nature positive transition plan must outline its ambitions and activity milestones that over time lead to the entity becoming a nature-positive one. A nature positive transition plan must at least set out,
High-level targets that reduce an organisation’s impact on nature — to be net positive by 2030 and help reverse nature loss by 2050.
Interim targets and milestones.
Details of the steps and organisational actions to achieve high-level targets.
When setting metrics, it is important to try and link their impact pathways back to the global biodiversity framework goals and targets, and/or, the UN Sustainable Development Goals (6 Clean water and sanitation, 12 Responsible consumption and production, 13 Climate Action, 14 Life below water, or 15 Life on land). In September 2020, the Science Based Targets Network (SBTN) published a step-by-step guide for understanding and setting science-based targets (SBTs) for nature.85
Danone, the first big listed French company to adopt an ‘Entreprise à Mission’ model or purpose-driven company, has developed a regenerative agriculture scorecard approach to measuring its impact on protecting soil.86
In designing their regenerative agriculture scorecard, Danone believes this approach will,
be inclusive of all global farming systems: small and large, organic and conventional, crop and livestock
highlight a progressive journey in which all farms can use the assessment tool to implement real improvements
cover the three main topics in terms of impacts first: soil, water and biodiversity.87
The main goal of the scorecard is, ‘to stimulate progress regarding farming practices’, and it is being used to engage with their wider stakeholders of partners, suppliers and farmers.88
Other elements a nature-positive transition plan should look to include,
Relevant governance board oversight and their accountability for delivery.
Scenario analysis to inform an organisation’s future strategic direction and financial planning. The organisation’s nature strategy must feed into the overall business strategy.
An assessment of the nature-related risks and opportunities impacting an organisation’s plan. This must be embedded with the Enterprise Risk Management (ERM) systems and informing both organisational-nature mitigation and adaption activities.
Forward-focused and time-bound metrics and targets.
The plan should not be evolved in isolation and must cover the whole of the organisation.
Step 5 — Reporting and disclosing progress against a nature positive transition plan
The IBM Food Trust Initiative is an example of blockchain technologies being used to track, trace, record, and report on food ecosystems.89 It is providing end to end visibility across food supply chains and transparent digital records available at speed. The blockchain initiative creates a more sustainable food system by bringing all the key actors together. This includes producers, suppliers, manufacturers, retailers, and other stakeholders. For stakeholders, a blockchain solution gives reassurance in a food product’s journey, ‘where it came from, the effect of its production methods on our planet and how workers and animals were treated in the process’ through certification.90
Consensus on the frequency of reporting progress against an organisation’s nature positive plan is annually. The focus of the reporting should be on the nature-related targets and include any new targets as well as progress against existing targets. If an organisation is also on an accounting for carbon journey, it makes sense to report both on carbon and nature at the same time in a sustainability report. Many material issues cut across nature and carbon, together impacting an organisation’s mitigation and adaption activities.
Organisations should not only disclose how nature-related issues affect them, but also how their nature-positive transition journey affects the environment and society. This process helps an organisation articulate its view of ‘outside-in nature risks’ and ‘inside-out nature risks’.
Step 6 – Create nature feedback loops back into business management processes
There must be time to reflect on an organisation’s progress, update steps or even construct a new nature positive plan. It is about being adaptable to changing circumstances and the evolving science underpinning nature and biodiversity restoration. This means an organisation embracing continuous learning and creating safe spaces in which to explore and learn from failure.
The driving motivation for being nature positive must not become a box-ticking exercise for external reporting. A nature-positive transition plan must impact internal and investment decision-making processes, as well as inform future business models for an organisation.
Systems thinking and accounting for nature
Rather than seeking to integrate Nature into financial decision-making, the systemic challenge is to integrate the functioning of the financial system into Nature.91
In exploring how to transform the financial system in ending extinction, Nick concludes, ‘we are part of Nature, not separate from it.’ 92 This needs to be a leading key assumption when building or implementing any accounting for nature processes. Here a ‘systems thinking’ approach will help organisations, finance functions and finance professionals.
It is an approach to problem-solving that views issues as part of a wider, dynamic system. In terms of nature, it is the process of understanding how things influence nature individually and, also, one another as part of a whole that includes climate change and inequality. It is also important to see patterns of change and the feedback loops between these three factors.
The International Panel on Climate Change (IPPC) 2022 report defines climate change, human society inequality and ecosystem biodiversity as ‘coupled systems.’ 93 These represent grand challenges that require the engagement of a diverse range of organisations and stakeholders across the world.
The planetary boundaries model
One way to get a broader, systems view, when thinking about global environmental issues is to use the planetary boundaries model. The Planetary Boundaries Model was developed by the Earth Systems scientists Johan Rokstrőm and Will Steffen. It focuses on nine boundaries.
Climate change
Ocean acidification
Chemical pollution
Fertilizer use
Freshwater withdrawals,
Land conversion
Biodiversity loss
Air pollution
Ozone layer depletion94
These define the environmental limits within which humanity can safely operate, often referred to as the ‘ecological ceiling’.95 Climate change and biodiversity loss are identified as ‘core boundaries’ as they are both affected by all the other boundaries. If these two boundaries are crossed it is believed they will bring about the destabilisation of the planet.96
First developed in 2009, Kate Raworth, Economist and author, then added the social foundations of human well-being in 2011 to the mix and christened it, ‘the doughnut’.97 The 12 social foundations are,
Water
Food
Health
Education
Income and work
Peace and justice
Political voice
Social equity
Gender equality
Housing
Networks
Energy
Between the ‘ecological ceiling’ outer ring and the inner ring ‘social foundation’ of the doughnut is, ‘the safe and just space for humanity’ zone. This zone is characterized by a regenerative and distributive economy. The doughnut gives a visual representation that focuses on more than growth and creates a system concentrated on the health of the planet – ‘that is both ecologically safe and socially just for humanity’.98 Authors, Laine, Tregidga and Unerman note that (quote left),
Raworth’s doughnut is a powerful visual, which usefully shows us that when seeking to achieve sustainability it is essential to understand the economic, social and ecological issues are intertwined.99
A systems thinking approach, also helps in the breaking down of information silos within an organisation, and embeds interdisciplinary conversations externally with supply chains, scientists, policymakers and local communities.
Advice from The University of Cambridge Institute for Sustainability Leadership (CISL), and, the Centre for Sustainable Finance, in September 2022, that organisations, ‘need to consider climate and nature together in financial decision-making.’ 100 This approach is justified by the,
Materiality of nature-related risks, over and above climate-related financial risks.
Unintended consequences for nature when actions focus exclusively on climate mitigation and adaptation.
Dangers of disregarding compounding effects from interactions between climate change and nature loss.
Potential synergies and cost efficiencies when addressing climate change and nature.
Potential risks to the stability of the broader financial sector. 101
An example of the unintended consequences for nature when actions focus exclusively on climate mitigation and adaptation is the introduction of LED street lighting. In the United Kingdom, many local Councils, in a push to reduce their carbon footprint, have been replacing traditional sodium bulbs with more energy efficient LED bulbs. The lifespan of LED bulbs are up four times longer than the old sodium ones and can be up to 75% more energy efficient.
However, in August 2021, a UK study found that modern UK LED streetlights are having a bigger disruptive impact on the behaviour of nocturnal moths and reducing caterpillars numbers by half.102 Local councils focused only on efficiency actions to reduce their carbon footprint, without contemplate any biodiversity trade-offs.
Insects are fatally attracted to streetlights, crashing their populations through exhaustion that, in turn, affects the bat communities who feast on them. There are over 500 plant species globally that reply on bats to pollinate their flowers. Bats also provide a critical role in spreading the seeds of tress and plant. Suddenly, a change in light bulb is affecting both flora and fauna.
Had there been interdisciplinary conversations, and some experimentation with the use of warmer colours to limit the amount of shorter wavelength (blue-violet) light, the unintended consequences on nature could have been avoid. Trials around the world have found,
Red can disrupt migrating birds but is better for bats and insects. Yellow doesn’t bother insects and turtles but can disrupt salamanders. No wavelength is perfect, but blue and white are worst of all. Blue light disrupts body clocks and strongly attracts insects.103
Time to check any outdoor lighting projects that have involved a move to LEDs emitting white, blue-violet light.
