Tag Archives: sustainability

Natural Capital Accounting: An Interview with Prof. Jane Stout

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“Natural Capital underpins all other capitals – it is fundamental to human life and society. Without it, we wouldn’t be here…’’

Natural Capital Accounting (‘NCA’) is a fascinating tool for risk evaluation that can potentially aid the fight against climate change. TBR correspondent, Petro Visage, recently spoke with Jane Stout, an ecologist and Professor in Botany at Trinity College Dublin to learn more about her work with NCA. Stout is Trinity’s Vice President for Biodiversity and Climate Action, where she works with the Provost to oversee the development, coordination and implementation of Trinity’s Sustainability strategy.

Background

In 2012, Stout invited Prof. Gretchen Daily to give a lecture on natural capital in Trinity. Prof. Daily worked with a small group to raise the profile of NCA in Ireland, chairing Ireland’s first conference on natural capital and co-founding the Irish Forum on Natural Capital in 2014. She oversaw the transition of the Forum to Natural Capital Ireland CLG in 2018, and chaired the Board of Directors until 2022. During this period, Prof. Stout organised a major Natural Capital conference in 2016, and co-convened the National Biodiversity Conference in 2019. She is the Principal Investigator for the first project to develop Natural Capital Accounting at catchment scale in Ireland (funded by the EPA), which is led by Trinity, in partnership with UCD, UL, UoG and NCI.

Natural Capital Accounting

What is natural capital accounting and why is it important?

NCA is a framework for systematising environmental information and the benefits we derive from nature. The information is then linked to economic accounting systems. Firms can benefit as it makes otherwise invisible impacts and dependencies on nature salient on the balance sheet. NCA can help businesses identify risk and to track change over time. 

Examples of firms that benefit from ecosystem services

All companies, regardless of sector, have impacts and dependencies on nature, but these are often indirect and unrecognised. It is easy to see how primary industries rely on ‘free’ services from nature. For example, agricultural production needs healthy soils, pollination, and climate stability – all of which are supplied by nature. However, secondary and tertiary industries also rely on nature for the products they process, use or sell. For example, a beautician may use a product that contains shea butter, which comes from shea fruits from trees that grow in the parkland of West Africa, which need insect pollinators to visit flowers in order to produce fruit. In the past, the role of nature in providing these ‘free’ services such as soil structure and functioning, carbon sequestration and climate regulation, nutrient cycling, natural pest control and pollination, was excluded from economic models. Instead, practices that damaged the delivery of those services were considered ‘externalities’ – an indirect cost to society. NCA allows the full costs and benefits of business, not just in financial terms, but in biophysical terms as well, to be quantified and tracked over time.

How exactly does it tackle climate change?

While NCA does not directly tackle climate change, it allows nations and companies to determine the impact of their activities on carbon sequestration and storage and to modify their approaches as a result. It thus informs sustainable strategies. 

Natural capital is one of the 6 capital types of the integrative reporting framework (IRF) – could you elaborate on how natural capital affects other capitals?

Natural Capital underpins all other capitals – it is fundamental to human life and society. Without it, we would not be here. We would have no primary industry; nothing to eat, build with, trade or sell. The economy is bound by the environment, not separate from it, and infinite growth is not possible on a finite planet. In the past decades, whilst other capitals have grown, natural capital has shrunk. If the stock of natural capital (consider it as an asset) shrinks, then the flow of goods and services we derive from it also declines. 

Most students walk out of accounting and finance modules with no knowledge of integrative reporting frameworks or natural capital. Do you believe such classes to be outdated ? 

Yes – in the future, understanding all forms of capital is going to be crucial. Human populations are continuing to grow, increasing demand for resources more rapidly than they can be supplied by nature. Even biologically renewable resources need time and space to renew. We are reaching tipping points in some of the world’s biggest ecosystems, and this will have consequences for society and economies worldwide. For example, deforestation of the Amazon rainforest and global climate change has changed local weather systems in the Amazon basin, drying the soils and causing trees to die. In a few years, rainforest can turn into grassy scrub permanently- the implications of this happening are far reaching, affecting not only local agricultural production, national socio-economic stability, and global food markets, but also global weather systems, wildlife, and society. 

Looking forward

Stout suggests that the biggest challenge for firms looking to adopt NCA is the lack of immediate financial returns. However, decisions should not be based purely on financial cost-benefit analysis. The risks associated with such a narrow approach are massive. In the past, it has rendered several  issues, inter alia,  climate change, biodiversity loss, pollution, freshwater depletion, and ocean acidification.  It is essential to include the costs and benefits of nature.

With more firms realising this crucial fact, NCA may soon disrupt the status quo of reporting. However, for NCA to make a true impact, more firms need to adopt it rapidly and use it to guide balanced, more sustainable decision-making. 

See www.naturalcapitalireland.com www.incaseproject.com and www.for-es.ie for more. 

Cop-27: A Meaningful Step in the Fight Against Climate Change

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While some may consider Ireland’s unprecedently warm weather in early November as an excuse to forget the jacket when going into college or get in a few more outdoor pints before we head into the depths of winter, this weather is quite a harrowing glimpse into the future of our planet.  This warmer weather coincided—almost mockingly—with the beginning of COP-27, the 2022 United Nations Climate Change Conference.  As if nature’s way of saying “go ahead, give it your best shot.”  While unfortunately this view is extremely foreboding, as the generation gearing up to bear the burden of rising sea levels and increases in both natural disasters and air pollution, it’s difficult not to be experiencing heightened levels of climate anxiety.  

COP-27 brings together world leaders to brainstorm and negotiate a global approach to tackling climate issues.  This year, the conference took place in Sharm El-Sheikh, a beautiful city in Egypt that boasts lush beaches sat nicely on the coast of the Red Sea.  The city is nicknamed the ‘City of Peace’ due to the large number of international and diplomatic conferences that it has hosted over the years.  While it is easy to get overwhelmed with the future implications of climate change, it is important to push forward and take each win as it comes.  That being said, it is important to acknowledge the historical decision made this year at COP-27 to establish a “loss and damage” fund.  This fund will assist developing countries who have unjustly fallen victim to the adverse effects of climate change that have been mostly perpetrated by developed countries.  The idea of a loss and damage fund has been on the COP agenda for over a decade, so this monumental decision is a significant point of progress.  It is clear that this year’s COP conference has taken a more action-based approach, with commitment to the implementation and adaption of programs to tackle climate change.  This is a refreshing change to past years, where the conference has seemed to focus more on discussing and planning rather than taking immediate and tangible action. 

To further examine the role of business in the context of sustainability and adapting to a more climate friendly business world, it is stimulating to take a look at sessions hosted by EU COP-27 Side Events.  COP 27 Side Events is a series of sessions held by observer organisations, such as NGOs or IGOs, giving a platform for these groups to lead discussions or present their current projects all while engaging the audience through interactive discussions and Q&As.  

One noteworthy Side Events session was titled ‘Documenting the Multiple Benefits and Engagement Mechanisms of Nature Based Solutions: Applying a Common EU Impact Assessment Framework.’ The event was led by Verónica Ruiz, a Resilience Programme Manager at the International Union for Conservation of Nature (IUCN).  Nature based solutions (NBS) “involve working with nature to address societal challenges, providing benefits for both human well-being and biodiversity.” This virtual and interactive NBS Side Event discussed the importance of measuring the impact of NBS, using the EU handbook on impact assessment as a helpful guide, as it will support additional projects and the ongoing development of more sustainable cities and business activities.  

The discussion opened with a description of the EU Evaluating the Impact of Nature-Based Solutions: A Handbook for Practitioners and the associated Appendix of Methods and Summary for Policy Makers.  This handbook provides a detailed description and guidance for developing and measuring the impact of NBS plans.  Five guest speakers talked through NBS projects they have been working on and how they have been measuring and evaluating their impacts.  Among the speakers was Trinity’s very own Mary Lee Rhodes, Associate Professor of Public Management at Trinity Business School.  Rhodes talked through her work on the Connecting Nature Project, focusing mainly on the economic impacts of the plan.  Connecting Nature “co-works with local authorities, communities, industry partners, NGOs and academics who are investing in large scale implementation of nature-based projects in urban settings.”  The results of the project found that NBS in front runner locations not only increased net jobs in the areas, but also increased the number of new businesses in the surrounding NBS area.  Rhodes explained that measuring the impact of imbedding nature into activities of the cities has led to the discovery that firms in front runner locations are engaging in new ways of planning business in a more sustainable way.  

Projects such as those discussed by Rhodes and her colleagues are inspirational and lay the foundation for the future of a more sustainable business world. NBS is a key tool that can be used to engage local communities and businesses under the common shared goal for increased climate action and responsibility. EU Side Events allow those working in the field to engage with everyday observers, providing a bridge between the general public and the deliberations of global leaders at the COP 27 conference.  This helps to make the content more digestible and relevant to the average person’s everyday life.  The recordings of the EU Side Events session are still available for viewing on their website.

To conclude, given the current backdrop of global energy and debt crises, natural disasters, and increases in the spread infectious disease, it is important to consider one’s role and what each individual can personally achieve in regard to tackling climate change.  The projects discussed at this year’s EU COP-27 Side Events are inspiring and give a glimpse into the future of a more globally sustainable business world.  As a business student eager to enter the workforce, it is crucial to understand the importance of encouraging sustainable business practices.  Employing NBS in future business endeavours should be a fundamental consideration as the next generation steps into management and leadership positions.  COP-27 and the associated Side Events help to shine a light on an otherwise bleak and anxiety-inducing matter, calling for action by global leaders, businesses, and local communities alike.

NBS definition: 

https://www.naturebasedsolutionsinitiative.org/what-are-nature-based-solutions

Connecting Nature Project:

https://connectingnature.eu/

EU Side Events:

https://digital.cop27eusideevents.eu/event/eu-side-events-cop27