The apparent benefits of ecosystem service and catchment level thinking are well trailed in examples from improved drinking water quality to flood attenuation and climate change resilience.
The key challenge is how we quantify and encapsulate these within a robust and credible appraisal that will be acceptable to quality and economic regulators.
Consideration of ecosystem services and natural capital accounting is increasingly highlighted by environmental regulators and stakeholders when making decisions, however there is a lack of clear understanding on what this means for the water sector. The focus on outcomes lends itself to wider thinking in setting out the multiple benefits from investment choices, which may extend beyond the immediate service, particularly when we think about how water catchments operate at a macro level.
Benefits and costs extend as much into Social and Human capital. A range of sustainable accounting techniques are being developed to support more effective risk management and decision making. The concept of Capitals is gaining increasing traction with policy makers and business leaders. This is the theory that effective management requires consideration of Natural, Social and Human Capitals, alongside the more traditional recognition of Financial and Manufactured Capitals. The Natural Capital Coalition, a growing consortium of international organisations, will publish the first Natural Capital Protocol in summer 2016. The Protocol will be the world’s first standardised framework for Natural Capital Assessment. Defra have recognised and shown support for this approach, for example renewing the Natural Capital Committee and committing to publish a long term Natural Capital Strategy.
Application of Natural and Social Capital assessment techniques in the water industry will enable companies to enhance risk management and decision making through quantification, and potentially monetisation, of a broad range of impact areas. Quantification and monetisation of natural and social impacts (positive and negative) is likely to support industry objectives for collaborative and innovative approaches including, for example, catchment management and storm water management.
By developing guidance and tools on the practical application of Natural and Social Capital Accounting, the water industry could demonstrate its leadership and inform external developments by Defra and others.
In 2015 project CL04 was commissioned to scope the key concerns on how Natural Capital Accounting (NCA) and Ecosystem Service Assessment (ESA) could be applied in the water sector. It was driven by the increasing interest of regulators and government, stakeholder expectations (NGOs), and explicit references to sustainable decision making in legislation such as WFD. Environmental change, and the value and resilience of systems also need to be considered, given the long term nature of our business.
This research recommended key steps in delivering catchment level case studies of NCA, utilising some of the frameworks that are being developed or are already available. From this we would propose to develop a workbook type tool to enable companies to demonstrate the capability to apply this thinking robustly to investment choices.
This would need to be a key engagement piece with regulators.