Sustainability Pathways

Natural Capital Accounting

Natural capital is the foundation of economies. Businesses, and agriculture in particular, depend on natural capital to be viable. However, in the current business model, natural capital has been largely neglected; it is ‘economically invisible’. As a result, we are witnessing the over-exploitation of our finite natural capital through climate change, soil erosion, water pollution and loss of biodiversity and wild habitats such as forests and wetlands. The increasing scarcity of both renewable and non-renewable natural resources impacts on the sustainable development of farmers, businesses and nations. The degradation of natural capital imposes external costs on society and future generations. These costs can be better understood and addressed by accounting for natural capital.

The Natural Capital Coalition (NCC) is a global, multi-stakeholder platform to advance the business case to integrate natural capital into business and investment decision making. The Coalition includes leaders from business, government, international organizations, civil society and wider stakeholders. Through the Natural Capital Protocol project, the aim is to improve our understanding of the true value and dependencies on natural capital, including the risks and opportunities that are associated with this relationship. Building on existing initiatives, the project aims to develop a harmonized framework to support natural capital accounting, so that businesses can better measure and manage their environmental impacts.

As part of a collaborative consortium (IUCN, CISL, EY, IERS, Trucost, True Price), FAO was involved in developing the sector guide for food and beverages. The guide supports the Natural Capital Protocol by focusing on natural capital accounting specifically for the food and beverages supply chain including the production of agricultural commodities. Agriculture has high environmental impacts and is deeply dependent on natural capital. Already, farmers and producers are affected by climate variability, water scarcity, soil erosion and increasing energy prices. Therefore, the food and beverage sector is an ideal candidate for early adoption of natural capital accounting, to achieve greater resilience and promote a more sustainable model of production.

FAO and Trucost have conducted an environmental materiality assessment for selected agricultural commodities - Natural Capital Impacts in Agriculture - as an input to the NCP Food and Beverage Sector Guide. Following a period of pilot testing, the Natural Capital Coalition launched in July 2016 the Natural Capital Protocol and the Sector Guide for Food and Beverages