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Following a visit to Stockholm, Jonathan considers the role of Sweden in understanding and applying the concepts of Natural Capital, both by research institutions and by corporates taking action.
After a recent trip to Stockholm, I realised that this is a city that can legitimately claim title to ‘natural capital’ of the world.
It’s strikingly beautiful, nestled in a forested landscape on the edge of the clear waters of a thousand island archipelago. The knock-out beauty of the region has inspired business practices that reflect respect for the ‘natural capital’ of Sweden’s environment.
Now ‘Natural Capital’ is a concept that has evolved to better define the challenge of sustainable development. It is described in The Encyclopaedia of Earth as an extension of the economic notion of capital (manufactured means of production) to environmental goods and services. While Economic Capital is a stock that yields a flow of valuable goods or services into the future, Natural Capital is the stock of natural ecosystems that yields a flow of valuable ecosystem goods or services into the future.
Stockholm is home to two institutions, the Stockholm Resilience Centre and Stockholm Environment Institute, which have done a great deal of research to better understand and apply the concepts of Natural Capital to the way we manage ecosystems and the economy. Johan Rockström, Executive Director of the Stockholm Resilience Centre, and a group of 28 academics proposed a new Earth system framework in 2011 for government and management agencies to use as a tool to support sustainable development.
The framework posits that there are planetary system processes that have boundaries or thresholds which should not be crossed. The extent to which these boundaries are not crossed marks what the group calls the safe operating space for humanity. The group identified nine "planetary life support systems" essential for human survival, and attempted to quantify just how far seven of these systems have been pushed already. They have estimated how much further we can go before our own survival is threatened; beyond these boundaries there is a risk of "irreversible and abrupt environmental change" which could make Earth less habitable. Boundaries can help identify where there is room and define a "safe space for human development", which is an improvement on approaches which aim at just minimising human impacts on the planet.
With a stunning natural environment and world-leading research into Natural Capital, it is no accident that Sweden is home to a number of notable corporate sustainability leaders. From Arla in dairy farming, to Electrolux with some of the world’s most recyclable white goods, to IKEA’s commitment to renewable energy, H&M with its focus on sustainable fashion and fair-trade, and SEB, a bank pioneering in green bonds.
My recent visit to the city was at the invitation of the Nordic division of our client, CHEP. While CHEP is not a household brand, its business is at the heart of the two forces that have shaped Stockholm – international trade and sustainability in business. It’s the largest provider of pooled pallets, containers and crates used in sea, land and air distribution of industrial and consumer products. CHEP already has strong sustainability credentials as its service optimises distribution efficiency, and the packaging assets are re-used, repaired, and recycled in a system that is almost a continuous closed loop. CHEP offers CarbonNeutral® solutions to its customer base to measure and compensate for greenhouse gas emissions that escape their close loop system, using The CarbonNeutral Protocol to underpin the credibility of the action.
Paul Hawken’s Natural Capitalism: Creating the Next Industrial Revolution identified closed loop systems as one of four key principles of Natural Capital:
- Radically improved resource efficiency to save money and fund other natural capital initiatives;
- Closed loop, industrial ecology to eradicate waste;
- Shift from products to services to avoid waste; and,
- Reinvest in natural capital to build resilience in environmental provisioning.
In a seminar with CHEP clients, we explored how these principles are being used by an increasing number of corporations to align business and environmental interests, and through which businesses can better satisfy their customers' needs, grow, and help solve environmental problems all at the same time.
My visit coincided with Water Week – an annual event which draws thousands of people from government, business, NGO, and communities around the world to water resource rich Stockholm where they share solutions for areas where limited or degraded water resources stand in the way of economic and social development. Rockström’s research has already identified fresh water provision as a planetary system increasingly under stress and requiring management attention. One of the events at Water Week marked the launch of the Water Benefit Standard – a unique application of methods and lessons from carbon finance to water resource protection. See our blog for more on this unique extension of results-based finance for environmental protection.
Stockholm gave me the opportunity to explore how the concepts of Natural Capital are being put to work by clients like CHEP, and how the methods we have used in climate protection are now being deployed to accelerate protection and repair of other natural capital systems – specifically in water provision.
Next week, New York hosts The Climate Summit. In addition to the high level Summit of national leaders convened by Ban Ki-Moon, Secretary General of the United Nations, a number of events will explore how a price on carbon can be established so that the principles of Natural Capital can be put to work to maintain a stable climate. More in my next blog from NYC.