When will your company begin accounting for nature?

When will your company begin accounting for nature?

Forest image by Stephane Bidouze via Shutterstock.

Corporate accounting may not sound like a domain that intersects neatly with environmental metrics. While this disjuncture has been historically true, it may be undergoing a 180-degree change.

The Dow Chemical Co. and other corporate decision-makers are looking at environmental metrics as important for incorporating into corporate accounting and spreadsheets. Advocates argue that this work would provide a more complete and accurate picture of the investments and flows of natural resource inputs, as well as goods and revenues from a company over time.

This more comprehensive picture of the business realities is contingent upon introduction of new metrics of how mutually dependent business, built infrastructure and natural systems are functioning today and in the future. Once the analytical approaches are developed in the coming years, this work may well become the norm for business.

In many ways, this shift is what futurist Peter Schwartz would dub an "inevitable surprise." Dave Batker of Earth Economics asserts that we are at a fundamental inflection point in how we track and measure economic and financial "well-being" and flows. In their book "What's the Economy for Anyway?" he and co-author John de Graaf assert:

"We're not in the 20th century anymore. ... The climate is changing, with potentially disastrous consequences. Useful water is less available, while floods are increasingly prolific. Unlike in the 1930s, when roads and indoor plumbing were scarce [in the U.S. and Europe] and forests, water and wetlands were abundant, now roads [in many parts of the world] are abundant and natural systems and their services, such as flood protection, are increasingly scarce and more valuable. Yet neither our economy nor our measures of economic progress reflect these realities."

We need significant changes in what is measured and managed by both the private and public sector alike.

Dow now is trying to identify a pathway forward that can be operationalized in corporate accounting. The company and The Nature Conservancy announced a collaboration in January 2011 to help Dow and other companies recognize, value and incorporate nature into global business goals, decisions and strategies.

Forest image by Stephane Bidouze via Shutterstock.

"There is no longer a choice between economic growth and ecological conservation -- they are interdependent," Dow CEO Andrew Liveris said at the time. "Protecting nature can be a profitable corporate priority and a smart global business strategy."

The two organizations will use scientific knowledge and experience to examine how Dow's operations interact with nature. The aim is to incorporate the value of nature into its business and to take action to protect the earth's natural systems and services they provide for people, business and society. They will share the tools, lessons learned and results publicly and through peer-review so that other companies, scientists and interested parties can test and apply them.

The collaboration will use scientific models, maps and analysis for biodiversity and ecosystem services -- the benefits that nature provides for people, such as clean air, water and food -- and apply them to Dow's business decisions. It will provide important information for setting new policies and approaches in the areas of land and water management, siting considerations, the benefits of natural resources on Dow lands and waterways, and more explicit management of biodiversity. Scientists from both organizations will implement and refine ecosystem services and biodiversity assessment models, initially, on at least three Dow manufacturing sites. These pilot sites will go through a process, as illustrated in Figure 1, with deep dive analytical processes into key ecosystem services upon which the company is reliant, such as water (illustrated in Figure 2).


 

Forest image by Stephane Bidouze via Shutterstock.

Dow currently is focused on developing and validating tools and models that can assign a value to various ecosystems services -- particularly related to water, land, air, oceans and a variety of plant and animal life -- in order to support Dow's decision-making when it comes to designing, constructing and operating its manufacturing sites.

The hope is that these findings will inspire replication across other companies and balance sheets.

Early findings are interesting. For example, trees remove ambient ozone precursors, such as NO2, in a way that can be quantified. Tree planting is an EPA-approved measure for inclusion in state implementation plans (SIPs) for ozone. Using reforestation may become a cost-effective abatement strategy, while providing broader benefits to communities and wildlife.

If companies working on the issue of integrating natural capital and ecosystem services into corporate accounting can show feasible and robust pathways forward, the perceived value of nature may never be the same again.

Forest image by Stephane Bidouze via Shutterstock.