Mark Hillsdon looks at three leading companies that are incorporating biodiversity into their balance sheets
“We needed a numerical link between sustainability and finance,” explains Ria Bakshi, who manages the dedicated Finance for Sustainability (F4S) team at commodity company Olam.
The team was created in 2019 specifically to use natural capital accounting as a way of incorporating biodiversity and nature onto the balance sheet, moving it into the hands of decision makers, rather than leaving it siloed with the sustainability team.
Olam also wanted to take the rigour associated with accounting and apply it to natural capital, says Bakshi, “so that we can better identify risks and opportunities and ensure that all these non-financial capitals are part of our business decision.” Think capital costs, investment ratios and depreciation values, being applied to forest canopies, free-flowing rivers and fertile soils.
With interests that girdle the globe in crops such as cocoa, coffee and palm oil, Olam is a major agri-business and, as such, can have a huge impact on natural capital. The F4S team uses Olam’s Integrated Impact Statement (IIS) to provide a more holistic picture to business units so that they can see the impact their decisions make on natural capital creation and erosion.
Bakshi’s team avoids using simplistic metrics such as productivity per hectare, which can ignore the wider impacts of natural capital and prevent the business taking a longer-term view.
One use has been to find the hidden cost of water consumption within cocoa processing. The system allows Olam to apply a specific value to water, rather than a global value as is the case with carbon. This takes into account that every watershed is different, a regionalised approach that allowed them to deliver more effective solutions and reduce their water-related impacts, says Bakshi.
When money is involved, she says, it is easier to show the benefits of regenerative farming practices such as no tillage and reduced fertiliser use.
“We only have a limited influence over a supplier,” says Bakshi, “but by using natural capital accounting we can show in dollars the effect that doing things differently can have.”
Natura & Co
Natura & Co is the world’s fourth-largest beauty business, having taken over the Body Shop in 2017, and most recently bringing the 135-year old Avon brand into the family.
“Being a Brazilian company, we have a duty to engage society for this giant effort of protecting the Amazon forest,” explains sustainability director, Keyvan Macedo.
The business currently preserves 1.8 hectares of rainforest – roughly half of the Amazon cover that was lost in 2020 – and this is set to increase to 3m ha by 2030.
The company is committed to sustainably using local ingredients from the forest, says Macedo. Sourcing teams work with communities to show that harvesting natural ingredients such as ucuuba tree seeds, which can be used for skin care, and patua, a fruit used in haircare products, is more profitable than cutting down the trees on which they grow.
The company has also pioneered a system for growing palm oil that avoids traditional monocultures, using native tree species to act as a barrier to pests.
Speaking at Reuters Events' Transform USA virtual event in May, Andrea Alvares, Natura’s chief brand, innovation, international and sustainability officer, said the 7,000 families in forest communities “see the value of the forest and its wealth in a different way” because of the economic and social benefits they get from it.
The result is dramatically lower deforestation rates in those communities – ranging from one-fifth to one-10th of adjacent areas where Natura does not have sourcing programmes in place.
Last year, Natura announced its Sustainability Vision 2030 Commitment to Life, a plan that steps up its actions to tackle issues around climate change, human rights and circularity, as well as protect the Amazon.
Natura works closely with governments at local, regional and national levels, including contributing to development of Brazil’s biodiversity law, which was introduced in the early 2000s, Alvares says.
“We have a very ambitious target to halt deforestation by 2025 in the Amazon regions, and we know we can’t do it alone, we have to work with civil society and governments,” Alvares says.
Natura is about to publish its first integrated environmental profit and loss (EP&L) account, modelled on Kering’s work on the pillars of environmental, social and human impact, a process she says began in 2014 but has taken five years to get completely right.
“This is stakeholder capitalism brought to life, because you make different decisions when you look at more variables than just financial.”
Kering, the company behind luxury brands such as Gucci and Alexander McQueen, has been turning heads in the sustainability space for some time.
In 2011, it launched its ground-breaking environmental profit and loss (EP&L) system, a natural capital accounting tool that allows the company to measure, monetise and monitor the full environmental impacts of its business activities. Kering also made the software available open-source in a bid to help push natural capital accounting into the mainstream.
This January, Kering announced the Regenerative Fund for Nature, a new partnership with Conservation International that is set to switch 1m ha of farmland currently producing raw materials in fashion’s supply chains to regenerative agriculture over the next five years.
“When we look within our own supply chain, we believe regenerative agriculture is one of the most promising ways to protect and restore biodiversity,” says Katrina ole-MoiYoi, sustainable sourcing specialist at Kering.
“For the most part, regenerative agriculture is not yet a priority – or even well-recognised, among consumers. Yet, because we know it brings about positive outcomes, we want to proactively champion it in our sector to drive real change on the ground.”
Operating in 17 countries around leather, cotton, wool and cashmere, the fund will support farmers who are looking to move away from agricultural practices that have high impacts on climate and nature. The company also operates a mitigation hierarchy in its sourcing strategy, which avoids particular types of raw material, such as leather that has been tanned using heavy metals.
The new fund is designed to trigger change at the farm-level and will focus on projects that can generate clear outcomes around soil health, carbon sequestration, biodiversity, livelihood improvements and animal welfare, says ole-MoiYoi.
However, she adds: “While it is vital to restore the health of working agricultural lands, this is only half of the strategy. If, as a society at large, we are to truly address the interlinked biodiversity and climate crises, we must also protect regions that are rich in biodiversity and home to critical carbon stocks.”
The company has also committed to protect an additional 1m ha of habitat outside of its direct supply, by safeguarding them from deforestation through investments in programmes like the UN’s REDD+.
This article is part of The Ethical Corporation summer 2021 in-depth briefing on natural capital. Click on the cover to download your digital copy for free.
Main picture credit: Maheder Haileselassie/Reuters
Olam International cocoa coffee Palm Oil natural capital accounting Natura biodiversity tropical rainforest Kering fashion leather cashmere sustainable farming