In the post-war period we started a process whereby nature was disconnected from economics and calculations of growth, as if it was separate from the world that we inhabit. Nature was not factored into business cases, or accounted for in national or global wealth and rarely were the impacts of economic activity on nature factored into regulation. While there are many reasons why this was the case and why nature continues to be undervalued, this is not the fault of economics but how we have used and continue to use the discipline for decision making and how we account for our wealth.
Supporting nature in the UK, or for that matter on Earth should be seen as essential maintenance for our home. Currently we are not paying for the necessary upkeep and as anyone who has lived in one place long enough knows, if you don't make repairs it becomes a worse place to live and the cost of repairs only increase. Supporting UK wildlife is an investment that increases the natural capital of the UK and with it our collective wealth. It is as essential as pension savings for our retirement or a good education for our children in ensuring their prosperity.
Last year the UK Treasury published a review on the economics of biodiversity (The Dasgupta Review) that highlighted the importance of reframing how we view growth and value creation. The current use of GDP as a measure for growth encourages the use of natural assets for short-term gain over long-term wealth as it doesn't have a mechanism to account for their long-term value. A simple example of this is that we could cut down all the trees in the UK and sell the timber. This would raise GDP that year by the value of the timber sold, but we would have destroyed the natural regenerative value of our woods. This woodland could have created far more long term value by providing an unlimited source of timber, carbon sequestration, amenity use and homes for wildlife, if harvested at the same rate as our woodland's ability to regenerate.
Globally, while productive capital (the things we make and use) has increased exponentially and human capital (education and health) have grown, natural capital (forests, biodiversity, fish stocks and the planets ability to absorb carbon and nitrate pollution) has declined by 40% in just 20 years. So, while we have become more efficient at using natural capital, we are continuing to use a resource faster than it regenerates in order to fund growth. This is not sustainable.
Managi and Kumar (2018).
To overcome this issue in economics, The Review introduces the concept of 'Inclusive Wealth', which takes into account the value of productive, human and natural capital. Unlike GDP this model looks at all the resources available to a country not just what has been converted to productive capital in a single year. This approach is much better at accounting for the value of natural capital in the long-term and forces us to think about our usage in ways that are compatible with the planets absorptive and regenerative capabilities.
Dasguptha 2021
The office of national statistics recently concluded that the value of natural capital in the UK is £1.2 trillion and that each year it supports multiple industries from farming to renewables and fishing to transport to the tune of billions of pounds. We also know that we are using up our natural capital faster than it can be replaced and are fast approaching tipping points from which it will never be able to recover. In the UK we are particularly vulnerable, the UK is placed 12th from bottom out of 240 nations globally for biodiversity intactness and if you look at just England, it is 7th from bottom.
Natural History Museum 2021
One of the main problems is that we don't currently attribute the appropriate value to the resources we use or the pollution we cause. The OECD concluded that tax breaks for the oil and gas industry amount to nearly £10 billion annually while the £2 billion of farm subsidies paid each year incentivised farmers to manage their land in ways that were harmful to nature. Furthermore, while regulation and penalties exist to penalise pollution they are not enforced. This has led to the recent scandal of water companies dumping raw sewage into rivers and for farmers not managing nitrate and phosphate run off from their farms as it is cheaper for them than investing in new infrastructure . Ultimately the cost is picked up by the country as the value of our natural capital is diminished thus reducing our inclusive wealth.
Nature is as important to our future health and wealth as healthcare, education and pensions, all areas that companies and government spend on significantly. However, compared to these three sectors the UK spends a fraction of its GDP on nature. For context combined government and corporate spending on nature accounted for just 0.035% of GDP*. This compares to 11.9% of GDP spent on healthcare (338 times more) and 2.8% (80 times more) of GDP spent on pensions. Ironically, most people's pensions invest in companies that are having a large negative impact on natural capital as a result of extraction, pollution and damage to human health thus undermining the future benefits of their financial value.
Joint Nature Conservation Committee 2019
In order to hit the UK's target of reversing biodiversity loss by 2030, The Green Finance Institute has identified that an additional £5.6bn of annual funding is required and the government is expecting private finance to cover this gap. Markets and models are being developed to help organisations account for their impact on nature and to provide the market for them to invest in nature based solutions. Biodiversity Net Gain comes in to force next year, but most markets won't be developed until 2025. That is over 2 years away and it will be several more years before this market is functioning at scale. In the meantime, virtually every business in the UK will consume some part of the UK's natural capital without having to pay for it or account for their use of it.
Wildlife organisations are developing projects for nature based solutions that place biodiversity at their heart. However, these require both capital and operational funding for them to start the projects. There is a huge amount of value to be gained by companies by partnering at this early stage, be it understanding where their funds can have the most impact, how nature based solutions work in practice or as an example and embodiment of their brand values and purpose.
These projects are ready. Waiting for these new biodiversity markets to be established should not become an excuse for inaction among businesses. Leaders can decide to make biodiversity a board level topic and agree a metric to measure and funding, as some already have. Even if this isn't agreed at a board level other senior managers can link it to existing business metrics and start to fund nature in order to kick start the process in their business.
Operational teams can look at how nature based solutions can be used to support project delivery or reduce business risks.
Infrastructure teams can work support local wildlife organisations to deliver biodiversity net gain
Product and marketing teams could give a % of product or service sales to nature.
HR teams could include the ability to support environmental organisations through their benefits packages as a way to encourage talent and engage employees.
Executive and team away days could be run at or include visits to wildlife projects to learn about natural capital and as a mechanism to encourage its inclusion in strategic projects.
CSR teams can create volunteering partnerships can be developed with local wildlife organisations.
Communications teams can use their position to explain to employees and customers the value and importance of nature to society and ways they can help protect it.
Procurement teams can work with their suppliers to be nature positive.
Or a business could simply use philanthropy as a way to demonstrate the value it places on nature and as a commitment to the UK's future.
Ultimately for us to reverse the decline in biodiversity, nature needs to become part of the decision making process throughout all parts of a business and businesses need to give much greater sums of money to wildlife restoration. Waiting for regulation of standardisation is not an excuse for inaction when there are so many obvious ways businesses benefit from nature and so many simple ways to start to move the dial from negative to positive impacts. The accountants will have their day and markets and standardised metrics will be hugely valuable. In the meantime companies need to start the process of funding and learning about biodiversity in partnership with wildlife organisations, otherwise the problems and costs will only get bigger.
If you would like to know more about how companies and wildlife organisations can partner more closely please email ashley@wildbritain.org
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