Accounting for natural capital: Recognising nature’s contribution to human welfare and wellbeing

The contribution and value of nature to human welfare and well-being – our natural capital – tends to be overlooked in many policy decisions and business choices. As a result, ecosystems are being degraded and natural resources are being used in an unsustainable way. It is, therefore, essential to give visibility to and accounting for the natural capital that underpins human societies and economies.

According to the analytical framework developed in the context of the EU ‘Mapping and Assessment of Ecosystems and their Services’ (MAES) initiative, natural capital includes non-renewable resource stocks, renewable natural resource flows and the ecosystems that provide humans with ecosystem services, which are all essential to human well-being and the economy.

The integration of natural capital in decision-making is fundamental to ensure that economic, social and governance systems operate within planetary boundaries and is key to the success of the Sustainable Development Goals (SDGs). Over the years, efforts to account for or assess natural capital have increased significantly at the national, European and global level.

For the November’s Beyond GDP newsletter, IEEP’s Natural Resources and Circular Economy Programme explored the different existing and ongoing initiatives on natural capital and ecosystem accounting and assessments (NCA), as well as the relationship with the Beyond GDP debate.

NCA is carried out according to the System of Environmental Economic Accounting (SEEA), a guidance system developed by a group of experts led by the United Nations Statistical Commission (UNSC).

Important developments are ongoing on natural capital and ecosystems accounts for the EU in the context of the Knowledge Innovation Project on an Integrated system for Natural Capital and ecosystem services Accounting (KIP-INCA), following the guidance provided by SEEA-EEA. Lisa Waselikowski, Statistical and Scientific Analyst at Eurostat, explains in an interview what KIP-INCA is about and discusses the importance of natural capital and ecosystem services accounting.

Additional efforts have been made in the application of the UN System of Environmental Economic Accounting also at the national and sub-national scales. For instance, the MAIA project, funded by Horizon2020, aims to support and promote the application of Ecosystem Accounting in the EU, following the framework of the UN SEEA. Lars Hein, Professor in Ecosystem Services and Environmental Change at Wageningen University and coordinator of the project, provides more information on the MAIA project and its applications in an interview with the European Commission.

An increasing number of initiatives have been developed also with the aim of better accounting for natural capital in companies’ processes and supply chains. Assessing and quantifying such dependencies and the associated impacts enables businesses to make more informed decisions and reduce the pressure they place on natural assets, which in turn may generate economic benefits for their sector.

While its applications are increasing, NCA is still an innovative approach which needs to be further developed to overcome methodological and data challenges. With time, it will increasingly support the achievement of the SDGs by providing consistent and comparable indicators to monitor trends, allow comparisons among countries and companies, develop scenarios, and unveil the links between economic, environmental and social objectives.

Subscribe to the Beyond GDP newsletter which explores the different forms of measuring and assessing natural capital, as well as recent news on Beyond GDP indicators, and an agenda of forthcoming events.

For more information on IEEP’s work on indicators please contact Susanna Gionfra or Daniela Russi.