Natural capital risks to firms

24th November 2015


Related Topics

Related tags

  • Natural resources ,
  • Biodiversity ,
  • Ecosystems ,
  • Business & Industry

Author

Phillip Richardson

Business-critical operations of UK companies are at risk due to diminishing stocks of natural capital, according to a study by consultancy AECOM and non-departmental public body JNCC.

It warns that overexploitation, increasing demand and the effects of climate change threaten natural capital and could have a significant impact on the bottom line for many UK businesses unless they take steps to understand their dependency on natural assets. Companies in the electricity supply and agriculture, forestry and fishing (AFF) sectors are particularly vulnerable, the study says.

Electricity suppliers draw on natural resources to generate power as well as wider ecosystem services, such as water for cooling power stations, while the AFF sector relies heavily on natural capital, with soil quality and a secure water supply vital to business operations.

Petrina Rowcroft, AECOM associate director, said: "When examining natural capital, UK companies have typically focused on reputational impact rather than business continuity and the bottom line. It is therefore vital that finance departments are involved in discussions about the risks and rewards around natural capital."

Improving understanding of natural capital could help companies realise new revenue streams, says the report. "Incorporating natural capital into business decisions is an important step to reducing risk and realising value," said Rowcroft.

Potential commercial opportunities highlighted in the study include generating revenue streams from stranded assets, such as contaminated land, as well as measures such as carbon or biodiversity offsetting and payments for ecosystem services.

In May, AECOM and JNCC produced a joint report, Realising nature's value in UK businesses. The new study aims to help companies operating in the electricity supply and AFF sectors to incorporate natural capital into their decision-making.

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