Environmental commitments are on the agenda of public and private sectors alike. It’s evident that in order to secure a Green New Deal and a just environmental transition, all social actors must be in alignment, pushing in the same direction. One way to do so is through the creation of a more transparent system for reporting on environmental performance, with reliable indicators for environmental decision-making.
Improving this reporting system was one of the commitments adopted at the COP in Katowice. It is also one of the pillars of the European Green New Deal, which states that we cannot continue using GDP as a measure of progress. This idea was recently supported at the World Economic Forum by economist Klaus Schwab, who advocated for the adoption of independent monitoring tools to measure progress in commitments related to the Paris Agreement and the SDGs.
The question on this point is, what should these measurement tools and environmental reporting include? Currently, the most ambitious measurement and reporting systems are those based on natural capital. We call natural capital the set of goods and services that provide natural and semi-natural ecosystems, and which are the foundation of the economy and social well-being.
On a country-level, a natural capital reporting system must include a mapping of ecosystems and their conservation status in order to later quantify the ecosystemic services they provide and estimate their economic value. In this regard, the Wealth Accounting and the Valuation of Ecosystem Services (WAVES) project was launched, which attempts to advance natural capital accounting on a global scale. In Spain, the equivalent would be the Mapping and Assessment for Integrated Ecosystem Accounting (MAIA) project, which aims to incorporate natural capital in government accounting.
On a second level, natural capital must be included in companies’ accounting through specific tools. These tools should connect the decision-making models of boards of directors and corporate governance bodies with environmental assessment systems.
The private sector is increasingly convinced that the valuation of natural capital is currently the primary option in order to create a common language that starts to consider environmental issues in economic terms. For this reason, some Spanish companies have started to allocate resources toward developing their own metrics and measurement systems. These systems allow them to measure their impact more efficiently; design mitigation and environmental risk management strategies, and report these advances to both boards of directors and investors.
Specifically, the company Ferrovial, in collaboration with the Spanish startup Creando Redes and the University of Salamanca, has developed a methodology that makes it possible to calculate the loss of natural capital from civil construction. This methodology is based on natural capital classification and quantification standards developed by the European Environmental Agency. These standards were used to design algorithms that make it possible to assess environmental services and transfer this environmental measurement to financial language.
Ferrovial’s project, presented at Natural Capital Week, represents progress toward efficient asset management, providing the company with a tool that generate quantitative data to curb the degradation of ecosystems in terms of natural capital. As reflected in the IPCC Special Report on Climate Change and Land, it is one of the biggest contributors to climate change, representing 20 percent of greenhouse gas emissions.
However, fulfilling the climate change commitments that have been made means that the public and private sectors will need to make a greater effort. Many more of these tools will be required to reduce emissions 45 percent by 2030 and have a carbon neutral economy in 2050.
Let’s get started. It’s time for action.