Applying Natural and Social Capital Accounting

What natural and social capital accounting means for finance

Natural and social capital can be thought of as similar to financial capital. It’s about the natural and social resources – as well as the financing – that you have access to.

• Natural capital aims to capture the environmental resources that companies impact and rely on, from access to specific resources (such as water) to environmental infrastructure (such as flood protection).
• Social capital comes from your relationships, your staff and the communities that you work in.

Natural and social capital accounting allows companies to integrate environmental and social concerns into business decisions. The approach is about identifying, quantifying and – as far as it makes sense to do so – monetizing business activities.

It offers a more comprehensive approach to thinking about the capitals that companies need and have access to. The skills that finance teams have are crucial to making this change.

Expanding how you think about capitals

We now know that natural resources are limited. Rethinking how we work responsibly within our environment is an urgent issue that affects the long-term sustainability of our businesses and our world.

It’s also clear that you can’t run an organization without your staff, but this is only one part of social capital. The communities that you work in will have a big impact on how you can operate and the skills that you can access.

Neither of these capitals has a traditional market value, so often they have been left out of corporate decision making. This leads organizations to underestimate their risks and opportunities. It also means that they are less likely to make decisions that maximize all capitals.

Natural and social capital accounting enables you to make better decisions and build more resilient business models, based on a fuller understanding of your impacts, risks and opportunities. You can apply it to a range of business areas, including risk management, options appraisal, supply chain management and reporting.

What next

Our Essential Guide to Natural and Social Capital Accounting offers practical examples, a set of principles and a simple three step process to help finance teams understand and apply this approach. Use the maturity map to see what different levels of integrating natural and social accounting into your organization could look like.

We have also developed short briefing paper for finance professionals on what biodiversity means for businesses.