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Valuing Nature
Samuel Vionnet
Sustainability Expert and Founder
Switzerland
+41 (0)76 372 90 27

I support organisations to integrate the value of natural and social capital into decision making, by providing innovative methodologies, data and expertise.

780% return on investment

For every US dollar invested by Novartis in each of the four carbon-sink projects, an average of USD 7.8 worth of societal value is created thanks to climate change mitigation, ecosystem services,...

How sustainable is renewable hydroelectricity?

The Las Cruces hydroelectric project in Mexico might lead to a negative outcome for the Mexican if built. A natural and social capital accounting method has been used to assess the project's impact,...

There is no sustainability without a balance sheet

Measuring social and natural capital only makes sense when we consider balance sheet. So far, very few organizations have managed to do this. We only see P&L published. But P&L is like GPD, it only...

Jobs at all costs

The private sector is exploring new ways to measure its societal impact, moving beyond traditional economic indicators. We developed an innovative model based on social determinant of health studies....

Achieving net positive impact using the SDGs

If not already done, you will have to use SDGs for defining your net positive impact. But how to measure it? I discuss four steps to support you in this difficult task: your theory of change, your...

Honey is worth more than you think

The Association mellifera is developing a high impact social project around honey bees. Valuing Nature sponsored the creation of one bee colony and calculated the societal value created by the...

Solving half the world’s problems

This article explores the role of Natural Capital within the SDGs and addresses in particular the connexions that exist between SDGs targets. It provide as well some statistics on the maturity of a...

The Sustainable Development Goals and the Mont Blanc

An innovative analysis of the SDG’s targets is unlocking barriers and triggering efficient actions to reach these goals by 2030. By understanding that these targets are inter-connected and that...

The wider benefit of water recycling in a water scarce region

ENGIE, a global energy company, used a water valuation approach to assess the benefits of a water recycling project with the help of Valuing Nature. It showed that the overall benefit generated per...

Water scarcity is not a problem… Undervalued water is

This article summarizes the outcome of a session held at the World Water Week 2015, managed by Valuing Nature, which explored the benefits and limitations of the use of water valuation metrics and...

And now what? The future of Natural Capital Accounting

This article presents the results of a survey, of executives working for private companies and consultancies, on the trends and future challenges of the Natural Capital Accounting approach.

Valuing Water – The Basics

The basic concepts of water valuation as an ecosystem service are presented in this article. Water valuation can fulfil the need for a Natural Capital Accounting method for the private sector. This...

Why is Investment in Watershed Services the future of conservation?

Successful conservation projects have mostly targeted low opportunity cost areas in remote locations until now. Conservation has now entered a new phase by competing with humans needs. Investment in...

The Opportunity Cost of Biodiversity Loss in the Swiss Plateau

Measures to maintain the biodiversity on the Swiss plateau would generate 136 millions CHF of benefit for the society. It is urgent that we realize that the sharp decline in biodiversity in...

Global Land Use Dataset

Data is critical to assess the reliance of companies on natural capital. A new model is available to fill this data gap with a global coverage of land use related externalities.

The Value of Rain

A study showed how to link water footprint and ecosystem services valuation to identify the value of rain and freshwater in Santa Cruz (Bolivia) region. This study was done in partnership with Forest...

Natural Capital Accounting - An Introduction

Recognizing the benefits we obtain from nature is key to ensuring long term profit while creating shared value. This article presents shorty the interest for the methodology, illustrated by a case...

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Valuing Nature
Samuel Vionnet
Switzerland - Guatemala
CH: +41 76 372 90 27
GT: +502 4490-5633‬
sv@valuingnature.ch
 

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There is no sustainability without a balance sheet

Measuring social and natural capital only makes sense when we consider balance sheet. So far, very few organizations have managed to do this. We only see P&L published. But P&L is like GPD, it only indicates the rate of production while balance sheet inform about wealth.

Release date: 28.11.2017
Client: Olam
Category: Ideas

- Co-authors: Chris Brown and Ravi Abeywardana from Olam. This blog post was initially published on the World Forum on Natural Capital conference website.

It could be argued that we are misusing the term “Capital” within Natural and Social Capital. Whilst at The World Forum on National Capital, most of the corporate applications of natural and social capital accounting are focused on the flows to and from the capitals rather than accounting for the capital itself. We believe that broadening the measurement to include the assets (capitals) and liabilities, from a balance sheet perspective, would support the uptake of natural and social capital accounting and provide insights into the current state of the capitals.

A financial balance sheet provides stakeholders with an understanding of what the company owns (assets) and owes (liabilities), and whether it is solvent and can meet short-term debts (i.e. working capital).  A natural and social balance sheet would meet similar needs, highlighting whether a company’s operations are sustainable or unsustainable when assessed against predefined boundaries such as planetary boundaries. Measuring only flows is like measuring the activity of our economy with the GDP. We observe the level of activity, but we don’t know if this relates to a reduction of capital or not. We have the choice of either creating a flow by consuming the capital or by using only the interest generated by it.

Let’s take an example to illustrate our case, land natural capital. We used a case study in Africa for a perennial crop production to derive the capital value of the related land used. The valuation technique is based on the discounted future production value or, said differently, the fertility of the soil and its capacity to sustain production. And the underlying impact metrics are based on open sourced impact measurements. The discount rate used was estimated based on the soil erosion rate, which provided an interesting insight that the soil will be depleted in under 100 years. Land capital is indeed finite, not only in term of area, but also in term of quality. We can only identify this issue by measuring stocks (i.e. the asset from a balance sheet perspective). The results obtained shows that the current value of land natural capital is roughly 9’200 USD/ha (see figure below), which is far above market value (below 1’000 USD/ha). 

Using scenarios based on agricultural practices, we estimated the value of land natural capital based on intensive production and best practices, adjusting mainly the discount rate in line with erosion rates and loss of fertility. Not surprisingly, intensive production decrease significantly the land capital, decreasing its current lifetime (see figure below).

This innovative valuation of land natural capital could have important implications depending on the link with the land and the business:

  • Land owned by the business: We can draw a direct connection between agricultural practices, land natural capital reported and even Profit and Loss because the productivity and the cost of production will vary according to the health of the soil. Indeed, a depleted soil will deliver less yield and will be linked to higher input costs to maintain the same level of production.
  • Land leased by the business: the lease relationship and conditions could potentially be influenced by the value of land natural capital. Indeed, if a company leasing the land uses good agricultural practices and maintain the value of land, it would be in the interest of the lessor to provide incentives.
  • Land not owned by the business, but which is used to supply goods purchased by a company: in this case, there is no direct link with the financial accounting of the company. However, most of the land used indirectly by agricultural/food companies falls in this category. If land natural capital is not preserved, business conditions could be affected leading to price volatility, security of supply and other negative factors.

To reflect the extent of this risk we analyzed two multi-national consumer goods companies that report the land used in their supply chain related to the production of agriculture commodities purchased. We calculated the value of their land natural capital and compared it to the companies’ book value (balance sheet). The results show the ratio between the land natural capital and the book value (balance sheet) is materially significant, reaching 70%. The analysis exposes the agricultural/food companies to land natural capital related risks. Said differently, book value could be under-valued by 70% if we wanted to account for the value of this land in financial reporting. This result shows the extent of the Value at Risk of agricultural/food companies towards land natural capital related risks.

Accounting for natural and social capital is not covered by the International Financial Reporting Standards (IFRS) or current non-financial valuation practices. We propose that alignment on the value perspective, scope and “balance sheet” stock accounting will need to happen if the private sector is to operate in a world defined by the Planetary Boundaries, the Sustainable Development Goals and the Paris Climate Agreement.

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