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Date
A recent e-article on Redd News talks about the inclusion of “natural capital” when figuring the profits and loss of a company. Pavan Sukhdev, a former Deutsche Bank AG banker and current board member of Conservation International, a U.S. based environmental group, “estimates that the top 3,000 companies fail to account for $2.1 trillion of charges related to the use or pollution of natural assets – say by releasing carbon dioxide into the air or waste into a river. That figure nearly doubles to $4 trillion, or about 6.7 percent of global GDP, when the world’s entire corporate sector is included.” He also had another interesting quote in the article. He said “We cannot continue to do business thinking we are adding value to stakeholders while at the same time destroying value for stakeholders. This is bad management.”
So what is natural capitalism and how does it affect what we do? The first part of the question is easier to answer than the second part. Natural capitalism is defined by various sources as considering the environment in profit calculations. In other words, taking into consideration either income from natural substances or losses due to damages to the environment, during the course of doing business. There is an important assumption that there is a monetary value to the environment (profit or loss). For the purpose of this blog post, I ask that you embrace that assumption. I know, to a PM an assumption is a risk, so I am asking you tio take a little risk.
It is happening according to Sukhdev. “Exchanges worldwide are working on ways to include carbon emissions in the basic information that publicly traded companies must provide shareholders, he said. Common standards for world companies are likely to be ready in three to five years with implementation coming within about seven years. Such accounting wouldn’t just add to losses," he said.
“You could get 10, 20, 30 percent extra to your GDP because you’d be finally measuring the services of nature,” Sukhdev said. “But you’d also get losses because you’d have to account for the natural capital that is lost.”
The interesting thing is that if we start measuring these things, if follows that we’ll be able to manage these things. If we can manage these things, then we may be able to make a difference in how the resources are used and therefore can be used more efficiently and effectively. The more we know about something like the use of natural resources, the more we will be able to protect those scarce resources. I’m backing into this a little by saying that if we can protect the scarce natural resources, it only follow that we can better protect the other scarce resources on a project, time, cost and human resources. This is one of the connections between natural capitalism and project management.
Another connection between natural capitalism and project management is in fact stakeholders are becoming more and more interested in how companies are addresing their positive and negative affects on the environment. Stakeholder's envrionmental interests have always been a major emphasis for us at EarthPM. Stakeholder management is so important that PMI® added it as a new knowledge area to the 5th edition of the PMBOK®. It is critical that as part of the Identify Stakeholder process, stakeholders who care about companies that consider the revenue and loss of environmental capital be considered.
It may not be a direct connection, but I believe it is part of the growth process for the PM, that is self-enlightenment. With more and more stakeholders, including consumers, team members, and company executives, becoming aware of the effect of natural capitalism; it only holds that in order to continue to be relevant, the PM should also become more aware of that effect.
Posted
by
Dave Shirley
on: January 10, 2014 09:00 AM |
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