Natural Capital

Natural capital is a term utilized to identify the economic value of natural resource stocks and environmental processes that yield goods and services. Maintaining natural capital through wise, productive, and efficient use of resources is considered essential to ecological sustainability, but is also argued to be able to positively contribute to an individual, firm, or state's income earning potential. Natural capital has become a core green business theme, as demonstrated through the use of the term to unify ecologically responsible consumers, nonprofit organizations, green firms, and sustainability consultants within various online communities and interactive web spaces.

Capital is considered to be a stock of materials or information that exists at a period of time and that can yield a flow of valuable goods and services into the future. The use of natural capital as a concept complements the definition of other types of capital, like human capital, social capital, or manufactured capital. Ecological economists argue that quantifying natural capital helps internalize potentially external costs, such as pollution or the depletion of stocks of nonrenewable resources that are not regularly counted in economic transactions. They even suggest that the value of the vital services that nature provides should be calculated in national accounts such as the gross domestic product (GDP), with subtractions occurring if natural stocks, cycles, and balances are not maintained. While the accurate valuation of ecosystems services, such as nutrient cycling, pollination, waste treatment, climate regulation, and freshwater supply, can be difficult, it is important to estimate prices in order to demonstrate the important and often indispensible role of such processes. Assigning values can also be used to clarify additional cost-benefit equations. For example, the cost of maintaining wetlands as storm buffers may be [Page 373]less expensive than paying for hurricane damage when wetlands are lost, or the price of rehabilitation to re-create natural storm buffers.

The influential book Natural Capitalism published in 1997 predicted that a new industrial revolution would inspire the greening of industry. The book's authors make an economic case for environmental protection and also create biological and social framework to transform commerce. The authors essentially argue for a revolution that would emerge from within the business sector, rather than in response to pressure from outside. Nonetheless, independent green seals of approval that assuage consumer sustainability concerns, such as the Forest Stewardship Council and the Marine Stewardship Council, have also been effective in influencing corporate shifts to green behavior. Another factor that has played a role in some instances has been the potential threat of consumer boycotts of unsustainable or immoral practices.

A number of interesting applications of the concept of natural capital have emerged in the past decade in business and nonprofit sectors alike. For example, the Natural Capital Project is a joint venture between the Woods Institute for the Environment at Stanford University, the Nature Conservancy, and World Wildlife Fund. The organization's goal is to align economic forces with conservation and to educate the public about how destroying nature ultimately also sacrifices human life-support systems. The project aims to improve human use of the world's lands and waters by making clear the economic and life-sustaining services they provide.

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