Valuing Natural Capital in Construction

Szilvia Zakar, Sir Robert McAlpline

I recently completed a research project into “Valuing Natural Capital in the Construction Industry” thanks to a sustainability scholarship funded by the CIOB, the Worshipful Company of Constructors and the College of Estates Management.

This was a wonderful opportunity for me to take a deep dive into a subject that has interested me for a long time: how we reconcile the apparently conflicting requirements of a thriving construction industry and environmental protection and regeneration.

I was able to explore in detail the Natural Capital Accounting (NCA) paradigm developed by Dieter Helm and others which seeks to approach the maintenance of the natural capital on which we all depend from an economic and financial perspective.

My research also helped inform Sir Robert McAlpine of the prevalence of NCA in the construction sector and its use by other industries.

As resources become scarcer and climate change impacts on global supply chains it is increasingly important that the use of natural capital is fully recognised as a key strategic concern for businesses in all sectors.

This is particularly true for the construction industry which is wholly dependent on natural capital for its operation.

NCA provides both a set of mechanisms and a theoretical framework by which the relationship between the use of natural resources and services can be linked to financial performance at a national, company, project, systems and product level.

It is increasingly important that this link is made explicit, both for the preservation of the natural environment and for the future prosperity of the construction industry.

The Natural Capital Protocol (NCP), which was launched in July 2016, provides companies with a method and guidance to undertake NCA. The development of a NCA construction Industry sector guide is in the pipeline.

Coinciding with my research, Sir Robert McAlpine, in collaboration with our client Hammerson plc, jointly commissioned Trucost to utilise NCA concepts to compare a traditional and alternative more sustainable approach to the design of energy systems on two project sites.

The study found that when factoring in all the environmental costs, the alternative energy design system will be more beneficial to install in the long-term than the baseline energy system.

On the back of this project, a joint workshop was held for architects, cost consultants, contractors, other landlords, investors and finance experts to share and discuss the project’s finding. The workshop looked to understand the key building elements that have the greatest natural capital impact, how the reporting of natural capital can sit alongside financial reporting, and the opportunities and challenges around its integration across the industry. The importance of incorporating NC thinking in the design process was a recurring theme.

Going forward I’ll be watching with great interest the Natural Capital Coalition work on the development of the protocol and the various sector guides that are in the pipeline to be developed, one of which may be embedding a natural capital accounting framework for the construction sector. This presents both Sir Robert McAlpine and Hammerson Plc with a chance to help form a sector guide for the construction industry in the future.

My research paper “Valuing Natural Capital Accounting in the Construction Industry” can be downloaded from the CIOB website here.

The SRM, Hammerson plc and Trucost full report and executive summary can be downloaded from the following websites:

Sir Robert McAlpline
Hammerson