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Natural Capital Valuation Could Help Water Firms Achieve Sustainability Plans

richens, james, trucostNatural capital valuation offers water companies a powerful tool to identify sustainability challenges, engage stakeholders such as the chief financial officer and drive innovation in low-carbon technologies, a recent meeting of water industry executives concluded.

The findings were made at a meeting hosted by The Crowd (formerly Green Mondays) and Trucost to discuss the potential of natural capital valuation in the water sector. The event was attended by senior executives from a dozen water companies, trade bodies and expert advisers. To encourage open debate, comments were unattributable.

The event was inspired by Yorkshire Water, which in May became the first UK water company to use natural capital valuation to create an EP&L to help identify and communicate the most important strategic sustainability issues the company faces.

Natural capital valuation is a way of putting a monetary value on natural resources such as water, clean air, a stable climate and plentiful land, forests and oceans. At present, our economic system takes these natural resources for granted, yet we all rely on them for our continued prosperity and well-being. By putting a price on natural resources that reflects their real value, we can encourage business and society to use them in a sustainable way.

Yorkshire Water’s EP&L is a type of natural capital valuation that adds up the costs and benefits of a company’s business activities to the environment – a sort of green financial account. The EP&L showed that water abstraction and greenhouse gas emissions were by far the company’s biggest impacts.

Yorkshire Water used the findings of the EP&L to support plans to invest £10m in a new plant that will cut carbon emissions by generating renewable energy from sewage sludge biogas. The EP&L helped the company secure a further £1m in government funding for the plant which will start to operate on 23 June.

Delegates at the meeting agreed that EP&Ls were a useful strategic business planning tool to identify the main environmental risks and opportunities facing a company. While water companies are already well aware of the broad implications of climate change, population growth, energy and resource price volatility for their businesses, they agreed that being able to put a monetary value on these challenges could help grab the attention of the company board – especially the chief financial officer. Gaining the CFO’s support for sustainability initiative is vital to secure investment.

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