Natural Capital and Its Implications

by | May 15, 2013

Worldwide, “natural capital” has emerged as an important topic of debate. At the June 2012 Rio+20 Conference it was agreed that “inclusive green growth” was the pathway to sustainable development. Countries would therefore have to decipher “inclusive green growth” and look at natural capital with a magnifying lens, give it a proper definition and build a sense of accountability around it.

The discussions at Rio+20 revolved around the need to move beyond traditional calculations of GDP, which only include economic and financial parameters, and incorporate natural capital valuations. Environmental accountability at the GDP and economic productivity level, would give impetus to take integrated approaches towards cityscape, landscape, biodiversity, wildlife and ocean conservation. At the Rio+20 conference countries also discussed setting up international sustainable development goals (SDGs) for energy, food, and water that can shift the world to a more sustainable and measured path towards a resource constrained future. These discussions have created an extraordinary opportunity for countries to look at their natural resource wealth and assets and take practical steps towards improved decision making based on the understanding of what is the true value of natural capital.

Nature supports communities and business in countless ways but so far we haven’t been able to place a value on the resources obtained from the environment like fresh water, healthy soils, stable climates, pollination, forest cover and wildlife species. For example, if a company is operating in a water-scarce region and is not sensitive to its own water consumption and making active efforts toward water usage reduction, recycling and recharging, leaves itself exposed to long term business sustainability risks, not to mention the irreversible detrimental impact to surrounding communities, wildlife and biodiversity.

In India, ground water is treated as a free resource which can be privately accessed through manual pumps and automated borehole pumps. Many industries, due to lax implementation of otherwise stringent laws, not only access free ground water but also pump out polluted or residual water directly into the surrounding ecosystem without treating it, further endangering human, animal and plant life. It is this unfettered and irresponsible consumption and disposal of natural resources that is economically risky, unsustainable and negatively perceived by indigenous communities who have been known to resist corporate expansion since it will impinge on their access to resources they have traditionally held rights towards. These issues fundamentally arise because state and central governments have not been able to accurately put a value on nature by linking it to community, biodiversity and wildlife welfare. This is the challenge ahead.

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