The Natural Capital Protocol (“Protocol”) developed by Natural Capital Coalition is a framework designed to help generate trusted, credible, and actionable information that business managers need to inform decisions.
The Protocol aims to support better decisions by including how we interact with nature, or more specifically natural capital, in decision making.
Until now, natural capital has for the most part been excluded from decisions and, when included, has been largely inconsistent, open to interpretation, or limited by moral arguments. The Protocol responds by offering a standardized framework to identify, measure, and value impacts and dependencies on natural capital.
Why does business need to include natural capital in its decisions?
The growing need to conserve and enhance natural capital is well documented. We know that we are depleting natural resources faster than the earth can replenish them, and at an accelerating rate (WWF 2014). We have grown financial capital in large part through the use, exploitation, and degradation of natural and social capital.
For most companies, interactions with nature do not yet affect their market value, the price of their products or the price they pay for materials they use, their cash flows or risk profile. If they do, they are not visualized on a company’s profit and loss statement or on their balance sheet.
They remain “externalities”, or issues without internal consequence. However there are several potential drivers that may lead to such externalities being internalized in the future including increasing regulatory or legal action, market forces and changing operating environments, new actions by and relationships with external stakeholders, plus an increasing drive for transparency or voluntary action by businesses because they recognize the significance of transparency to future success.