2. Natural Capital - Human Impact

Natural Capital - an article series which gives an overview of our relationship with natural capital, the business benefits of using nature based solutions, why business should increase transparency of its natural capital impact and how we can move to a net positive natural capital impact.

Human Impact

Throughout time, humanity has affected the natural world. Though partly a symbiotic relationship, it is obvious that as early humans (be it Homo Neanderthalensis, Homo Erectus or Homo Sapiens) spread, they changed the lay of the land and the prevalence of species. There is historical proof that extinctions of the world's megafauna match the time that humans arrived in certain areas. The extinction of the giant wombat and giant kangaroo in Australia, of 17 species of giant lemurs on Madagascar and the giant ground sloths in South America all match the arrival of humans. The most recent example is the extinction of nine species of Moa (giant flightless birds) and the giant Haast's eagle, which occurred within 200 years of humans settling New Zealand. 

After the switch to agricultural society we also started changing the physical landscape, clearing forests to create fields and diverting watercourses. Early on, this impact was negligible but as population grew it increased more and more. The Roman era included massive deforestation, which continued for hundreds of years all over Europe. It is estimated that deforestation in Germany after the 1500's was 50 times higher than the natural regeneration rate of forests. This also affected water levels, watercourses, soil quality and biodiversity. Flying over Europe now, one can see all the towns, villages and fields but large forests are rare. Flying over Borneo, palm oil plantations are visible as scars in the rainforest. Taken to its extreme, deforestation in the small, closed off society of Easter Island caused a complete collapse of society.
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The history of forestry is mirrored in humanity's approach to other resources. Unsustainable hunting and fishing, damaging resource extraction and unsustainable production processes have ensured that no part of the globe is left pristine. Our footprint is truly global, from the highest mountains to the deepest ocean, and even the most remote islands are covered in plastic. Our historical relation to our natural capital can be described in four words: cutting, digging, hunting and polluting. Now that we have reached, and crossed, the limits of our planet this approach finally seems to be changing. ​

Recognition of natural capital and a move to sustainability

It took until 1800 for someone to mention our destructive relationship towards services that nature provides for free, and in perpetuity. The famous scientist, naturalist and explorer Alexander von Humboldt noted the following in his Personal Narrative, based on his travels in South America in 1799-1804:

"When forests are destroyed, as they are everywhere in America … the springs are entirely dried up, or become less abundant. The beds of rivers, remaining dry during a part of the year, are converted into torrents, whenever great rains fall on the heights. … the waters falling in rain are no longer impeded in their course … they furrow during heavy showers the sides of the hills, bear down the loosened soil, and form those sudden inundations, that devastate the country." (Andrea Wulf, The Invention of Nature, 2015​)

Humboldt and his writing inspired many, including giants of biology and ecology. Darwin brought his books along on the voyage with the Beagle, Henry Thoreau found inspiration for his famous Walden and he heavily influenced the ecological thinking of John Muir, who eventually found the Sierra Club.

During the 200 years since Humboldt's writing, our position towards the environment has changed for the better, propelled by early organizations like the Sierra Club or the Ramblers' Associations in the UK who have worked on access to and preservation of our natural capital. Our natural capital has also found more and more recognition in politics. Franklin D. Roosevelt, for example, wrote the following in the 1930's:

"I happened to see an editorial…that talked about "balancing the budget of our resources." …we have lost sight of the fact that the natural resources of our land – our permanent capital - are being converted into those nominal evidences of wealth at a faster rate than our real wealth is being replaced."

A seminal moment some 50 years later was the publication of the Brundtland Report which advocated for "development that meets the needs of the present without compromising the ability of future generations to meet their own needs." Still, this forward looking thinking has not been translated yet in strong political will and regulatory action.

But in business it seems that our natural capital has been, and still is, seen as a resource to be used, not preserved and managed. It can be argued that the rise of the Limited Liability Company (LLC), first in the USA and then the rest of the world, has fueled profit seeking and the externalization of any negatives. The creation of the LLC removed personal liability from owners and directors and created a "corporate personhood" where a company could go bankrupt, but not its management or shareholders. This removal of personal responsibility in turn increased both risk seeking and destructive behaviour focused on pure financial profit. In addition, the move away from societal responsibility by corporations was enshrined in law in the case of Dodge vs Ford in 1919. While Henry Ford wanted to "employ still more men; to spread the benefits of this industrial system to the greatest possible number" the Dodge brothers, who were major investors, wanted a larger dividend. They took Ford to court and the final ruling stated that "A business corporation is organized and carried on primarily for the profit of the stockholders." (Pavan Sukhdev, Corporation 2020, 2012) There was no mention of stakeholders or society, and it supported the vast majority of companies to focus on financial gain only while disregarding society.

These developments have led to an unbridled pillaging of environmental resources without regard for biodiversity or society. Hunting for profits, negatives are externalized without taking into account the impacts business has on human health or the environment. Two great examples are leaded gasoline and tobacco. Leaded gasoline entered the market in 1923 and a year later it was obvious it could have negative health impacts as workers in direct contact with the product started falling ill. Standard Oil and General Motors fought tooth and nail to keep it around and it was only banned in the USA in 1995. In the meantime, GM and Standard Oil enjoyed tax breaks while selling a product that was clearly hazardous. Tobacco companies do the same by selling products that have proven and detrimental health effects. Having lost part of the fight in Europe and North America they are now aggressively marketing in Africa and Asia and pressuring governments there to limit any regulation that could limit smoking. The same can be said for coal producers and users, who profit while externalizing the bill for all direct pollution and CO2 emissions. This approach by corporations coupled with a political focus on economic growth and with regulators that are not focused on externalized costs has led us to the situation where the valuation of natural capital is not related to the benefits it provides, with all its negative consequences.

But now it finally seems that corporations are focusing more on sustainable ways of working, on reporting their impact through various metrics, on preserving natural capital and on reaping sustainable benefits from ecosystem services. It is tentative, and there are no massive shifts yet, but the few forerunners like Patagonia, Unilever and Kering show how sustainable business and company growth can go hand in hand. This shift not only makes business sense, it is a necessity. To quote T.C. Smout: "The human attitude to the environment…has always been shaped by the twin considerations of use and delight…Now our use has become so insensitive that not only is our delight threatened, but possibly our survival" (T.C. Smout, Nature Contested, 2000).

Next week in the Natural Capital article serie: 2. Natural Capital - Ecosystem Services

Previous chapter: 1. Natural Capital - An Introduction

Author
Honza Kerver works in consulting and is based in Oslo. He strongly believes that the inclusion of Natural Capital on the world's balance sheet will help reach the SDGs and reduce the impact of climate change while also bringing benefits to society and to businesses that are ahead of the curve.