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NATURAL CAPITAL ACCOUNTANCY TO IMPROVE REPORTING AND ENVIRONMENTAL PERFORMANCE

Periodic Reporting for period 1 - COUNTMITMENT (NATURAL CAPITAL ACCOUNTANCY TO IMPROVE REPORTING AND ENVIRONMENTAL PERFORMANCE)

Reporting period: 2019-12-01 to 2020-05-31

The last report of IPCC on climate and land highlights the relationship between natural capital degradation, climate change and social welfare. It is well known that natural capital, as the pool of goods and services that nature provides, is the basis for a prosperous economy and a healthy society. In line with this, current legal environmental frameworks as the EU Green Deal, the EU Biodiversity strategy and the EU circular economy strategy, point out natural capital as a key aspect for sustainable development. Moreover, important investment decisions in the public and private sector are more and more dependent on companies’ environmental performance. Actually, the Commission as recently launched the EU taxonomy in order to classify human activities through its contribution to stop land degradation and climate change. At the same time that ESG criteria is gaining positions within financial markets.

Thus, companies have to disclose more complete and comprehensive information to their stakeholder and improve their external environmental reporting. In fact, more than 90% of the biggest companies around the world (G250 companies) disclose their sustainability performance. Unfortunately, almost all environmental impacts generated by the companies are simplified in terms of CO2 or water footprints, underestimating the scale of the impact and its social consequences. There is a clear need for comprehensive tools that quantify the impacts on natural capital and help to mitigate or compensate such impacts, so they keep up with the high environmental reporting standards, ultimately looking for a less intense carbon economy.

To bridge the gap between decision-making levels around no-net-loss of natural capital, we aim to design an online software that enables companies and public authorities to calculate their debt with nature (natural capital net debt), measure environmental impacts, design efficient mitigation and compensation actions, and disclose advanced environmental reports, ensuring the recovery of ecosystem services. This tool will enable private companies to reduce land degradation and to design environmental strategies that ensure no net loss of natural capital, with the subsequent positive impact to society.
To test technical and commercial feasibility of our solution as well as to address product design, 2 virtual focus groups were set. Twenty companies from mining (4), energy (6), construction (5) and food and drinks (5) sectors participated in the virtual focus groups of COUNTMITMENT project. First focus group addressed companies’ needs around natural capital. All attendees completed a survey and declared the type of decisions they would like to take with natural capital valuation information as well as their preferential activities to start or continue working on natural capital assessment. Surveys results showed that half of the companies participating in the survey had previous experiences in natural capital assessment, most of them participating in working groups or attending to events. Across sectors, companies declared that natural capital assessment will give them the opportunity to improve their environmental performance and compliance.

In a second focus group, companies complete an additional survey to evaluate how current solutions in the natural capital assessment market cover their needs. A total of five tools were presented to the participants taking into account the previous disclosure of interests. We also asked participants to reveal their preferences to buy natural capital valuation solutions in different formats: training courses, consultancy services and software tools. Survey results showed that, across sectors, companies are looking for simple-use tools and approaches that allow them to cover at the same time as much of their needs as possible. Companies´willingness to play for different natural capital valuation solutions depends on their previous experience and in-house knowledge.

With this feedback we designed the mocqups of our software tool. With the mockups we develop a video showing the user experience of the tool, through an example of calculation for an ecosystem service (carbon sequestration) in an infrastructure project. This video was shown to all participants in an online session in which we presented the results from previous surveys. In a last survey we asked all participants about the look and feel of our software, the functionalities and the changes we should include in order to fill potential client’s needs. The vast majority of companies considered that our software design cover their expectations.

In parallel with the mockup design we evaluated the technical feasibility of software development. To this end we have collaborated with an IT company in identifying the available solutions on the market that may be useful to cover the functionalities of the software we want to develop. In this sense, the analysis has been focused on:
• Server structure architecture
• Cyber-security structure architecture: Using a .com domain on which we will implement measures
• Website Application Firewall (WAF)
• Performance infrastructure architecture
• Backup infrastructure architecture
We concluded that current solutions on the market allow us to have a solid basis to start developing our software. We can use open source programming code and then use Python to implement specific functionalities in our Saas. Minimum viable product design and budget definition, required the definition of a Saas simplified architecture. This pre-architecture design of the software allowed us to define:
• Input information processing and file types
• Calculation sources
• Advanced tools for data geo-processing
• Frontend dialogue system
• Backend dialogue system
This is the first time that a beta version of natural capital valuation software is tested and developed in collaboration with its potential users. This create a clear advantage to our company to launch natural capital valuation tools to the market as far as we have detected in depth the needs and demands of our potential clients. Moreover, thanks to this feasibility study we have been able to dimension and explore natural capital valuation market and approach a cost-effective business model associated with this market. This business model enable us to scale up our consultancy services and to transform sustainability reporting market, adding value to current consultancies and consultants as well as final clients (big companies that need to report their environmental performance to their stakeholders). The development of a market around the valuation of natural capital allows transforming the business sector, thus reducing its environmental impact. Likewise, the development of products aimed at measuring the impact of companies in natural capital allows both companies and local governments to develop reduction and compensation strategies aimed at reducing ecosystem degradation and mitigating the negative effects of change climate.
COUNTMITMENT Saas Front