Nature’s balance sheet is moving from green to red. Reversing this trend relies on better understanding our reliance on the natural resources that often invisibly, power businesses and our economy. But equally important is understanding the value that is relied on, and derived from, nature.
In this month’s Partner Perspective we hear from Carl Obst, co-founder of IDEEA Group, a leader in natural capital accounting and measuring the benefits of nature.
Despite growing awareness of nature-related risks and the opportunities arising from investing in nature, many organisations are yet to respond. Moving from awareness to action requires a shift in mindset: an acceptance that organisations operate within, and depend on, natural systems.
This shift to recognise a connection to nature means that environmental and financial considerations can no longer be treated as separate conversations held in different parts of an organisation. The shift may not sound enormous, but it is meaningful. This shift also requires leaders across business, government, and communities to step forward together.
This is where an accounting lens becomes powerful.
At its core, accounting is a way of describing systems consistently and comparably over time. Financial accounts describe business systems, national accounts describe economic systems. By extending system boundaries to include natural capital, organisations can begin to integrate environmental and financial data in a coherent way and thus describe their connection to nature. It starts with understanding stocks - what assets exist - and then flows - the services and benefits those assets provide.
Framed this way, natural capital accounting is not an abstract concept; it is a practical tool for description, analysis, comparison, and decision-making. The UN System of Environmental-Economic Accounting (SEEA) now provides the internationally agreed framework for doing this. Thus, natural capital accounting motivates and supports the recognition of each organization’s connection to nature.
The demand for information then becomes immediate and practical. Questions emerge: How significant is our connection to nature? What are our risks and opportunities? What are our options for investment? How can we assess the alternatives? What are others doing?
Until organisations decide, these questions are critical. The information needed to answer them often remains fragmented, unused or uncollected.
The current opportunity for Aotearoa New Zealand lies in developing a shared understanding of natural systems and using a common language to describe them.
In financial and economic contexts, this use of common language for things like income, profit and GDP is often taken for granted. Applying the same discipline to describing our natural capital would enable more consistent, transparent, comparable and informed decision-making across sectors. Natural capital accounting has a key role to play.
Across the Tasman, the picture is both promising and fragmented. In Australia, as in New Zealand, there are numerous initiatives that embody natural capital accounting principles. However, these initiatives often sit in isolation - well-intentioned but disconnected. The challenge for both countries is the same: leadership that can bring these efforts together, creating scale and coherence.
There is also a deeper opportunity and responsibility to better recognise and incorporate indigenous knowledge into decision-making. Both countries are rich in this knowledge, yet it remains underutilised. Recognising and incorporating this knowledge would accelerate progress and lead to more grounded, effective and locally relevant solutions.
Aotearoa New Zealand has a unique opportunity. With its scale, its interconnected landscapes, and its depth of environmental and cultural knowledge, it is well positioned to lead in natural capital accounting. The ambition is not just to measure differently, but to support decisions that secure the health of our environment and thus enhance long-term wellbeing for many generations to come.
