In a few weeks time, several thousand water experts, scientists and campaigners will come together again at the annual World Water Week in Stockholm to catch up on the latest challenges and brainstorm how to secure ‘water for sustainable growth’.
The Coca-Cola Company is one of the global businesses willing and working to make a real difference to water resource management and sustainability, both inside our own bottling plants and outside in the watersheds. After years of tremendous efforts, we were able to announce last year that we are on track to achieve our global water replenishment goal (to replenish all product water back in the environment) 5 years ahead of our 2020 target.
This year in Stockholm, we will have the opportunity to celebrate another big milestone of the Replenish programme and I am already looking forward to a great few days in Stockholm with our partners.
Cheerful occasions like these, however, are also a good opportunity to reflect on what can be done differently going forward, taking up the latest insights and thinking in the field. And one of the most pressing questions in the corporate world is this: How can we be more efficient in what we do, i.e. how can we create a bigger impact with the same or fewer resources?
One of the potentially most strategic pieces of work that has recently come to life is the Natural Capital Project. Its aim is to help companies properly value natural capital and to integrate these values into their decision-making process. As founder and CEO of Intel, Andy Grove, remarked: “You manage what you measure.” With Natural Capital Project, we are better able to measure our natural resources and therefore, we are better able to value and preserve these resources.
Over fifty companies, including Coca-Cola, tested the first Natural Capital Protocol this year.
Bringing nature into the heart of decision making
Some stakeholders see Natural Capital as an abstract ‘accounting’ exercise, completely disconnected from the real world. Others criticise it as a mislead attempt to translate the inherent value of nature into money. I can totally understand that skepticism, but the reality is that our current system is working on the ‘profit & loss’ principle. Sustainability leaders inside and outside corporations have tried for years to add another dimension to this bipolar view, with mixed overall results, as the current state of the world’s water, climate and biodiversity confirms.
For me, the concept of Natural Capital can be a catalyst to drive the internalisation of external impacts into corporate decision making. It is both visionary and practical because it helps bring the value of nature from the CSR fringes into the heart of the modern organisation, i.e. into its financial mindset. By quantifying the value of natural resources and inserting it into the overall understanding of the health and wealth of an organisation, nature can finally get seat at the table of other big resource allocations, like labour and money.
Getting a better return on investment for nature
Besides quantifying (often negative) impacts of business on nature, there is another (more positive) dimension that Natural Capital accounting can offer: It can also help to more objectively evaluate the benefits of current conservation investments.
How effective are they? Do they provide a positive value (profit) to the ecosystem or do they destroy more value than they create? How do different interventions compare in terms of return on investment for the environment? What key elements need to be in place for an ‘optimised’ return on investment for ecosystems?
And here is the link back to water: Having worked extensively with my colleagues and partners across Europe on water conservation and resource protection projects as part of Coca-Cola’s global water stewardship programme, I was keen to explore how these projects contributed to enhancing the ecosystems and building the natural capital of water.
And I wanted to improve future action: Can the Natural Capital help drive better conservation results and help us make build better water interventions in the future?
Learnings to date
I will share a short report on this work in time for World Water Week, but here is the upshot of what I learned so far from applying Natural Capital thinking to concrete water conservation projects:
1. NatCap can provide a critical new perspective on the overall success of projects.
Organisations tend to define the key deliverables of a project quite narrowly, often related to specific KBIs important to them and are tracking success accordingly. However, what is left outside the field of vision are all the effects (positive and negative) that are not deemed important but that might be absolutely critical to the survival of an ecosystem. For example, if the only interest in a project is to enhance water storage, you might need to remove vegetation and ignore the fact that you reduce the ability of an area to act as a carbon sink. We will build these insights into our water projects going forward.
2. It is possible to establish the overall ‘Value’ and ‘ROI’ indicators for ecosystems.
Based on a priority list of relevant ecosystem services, it is possible to determine the net present ecosystem value of each project, before and after the intervention. Hence, the baseline and improvements of an intervention become quantifiable. The Net Present Value in relation to the investments involved with each project can express the ‘Return on Investment’ (ROI) of the intervention for the environment. This might be seen as a most cynical approach to conservation, but if we want to get more investment into conservation and ultimately achieve a measurable impact, we need to start positioning our story in these terms.
3. Here is the ‘But’: these values might be misleading.
At this point in time, the methodology to evaluate ecosystem benefits depends heavily on assumptions. The availability and quality of data is not yet sufficient to come to any meaningful conclusions or is biased towards a certain type of intervention. For example, as most of the currently available data on ecosystems valuation has been sourced for wetlands, the results are extremely skewed towards supporting wetland projects over grassland or forest interventions. They often also ignore the trade-offs between water and climate benefits.
4. There needs to be a robust multi-stakeholder process to move this agenda forward.
NatCap is a promising method to take nature into the heart of decision making. There needs to be a broad alignment across the stakeholders as to which Natural Capital we want to drive (and what are the trade-offs we are prepared to accept) and to work together on assumptions and data that underpins this common goal. This is a highly political issue and can only be done in a broader multi-stakeholder process.
In summary, we are at the beginning of a journey, albeit an exciting and intellectually challenging one. I definitively look forward to how the Natural Capital work evolves going forward. We will already start integrating the thinking into the Coca-Cola water stewardship and other sustainability work.
One last word: Natural Capital thinking should not stay confined to the world of corporations. Every stakeholder engaged in conservation and water protection, public or not-for-profit, should be concerned with achieving the best possible outcome from the investment - for our planet.
This article originally appeared on LinkedIn. Ulrike Sapiro is director of sustainability for Western Europe at The Coca-Cola Company.
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