The UK faces major challenges, from a slowing jobs market to public finances and depleted biodiversity. Mark Gough makes the case for a more holistic approach in which our economy actually supports the planet.
The economy depends on an obvious and yet often overlooked hierarchy. Nature sustains people, people build society, society enables financial markets, and together they shape the economy.
At its core therefore, an economy should serve people and the planet. Yet, our current system measures success almost entirely through financial growth, as if this were the sole indicator of wellbeing.
It flips the hierarchy upside down and leaves out the very things that people consistently say matter most: a healthy environment, strong communities, secure livelihoods, and a sense of fairness. Nature, people, and society are sidelined, yet they are the assets we care about most and also depend on.
Natural systems provide clean air, water, food, and climate regulation, but they appear on no balance sheet until they are damaged or depleted. Human capabilities – knowledge, skills, health – are fundamental to prosperity, yet they are often treated as costs rather than assets. Social trust and cohesion underpin stable societies and functioning markets, but these too remain invisible in economic accounts until they break down. The problem lies in what we choose to value, or, more accurately, what we fail to value.
Take the UK as an example. It is among the most nature-depleted countries in the world, nearly one-third of children are living in poverty, and public trust in economic and political institutions is fragile to say the least. These realities reflect an economy that does not represent what people really care about. It’s a narrow view, rewarding short-term returns, that has led to a range of systemic issues, from environmental degradation to social inequity, which threaten our collective well-being and long-term economic prosperity.
To address these profound challenges, we need to adopt a more holistic approach. It should not be just about money; it can no longer be. An economic system that truly represents our aspirations and necessities needs to measure and manage value across all forms of capital: natural, human, social, and produced. It would recognise that financial wealth is dependent on, and meaningless without, the health of people and the planet. Until we adopt this broader view of value, we will continue to see a widening gap between economic statistics and lived experience.
The good news is that financial markets and the economy were both created by us and therefore we can change them. Recognizing and valuing all forms of capital offers a powerful alternative, a strategic imperative for businesses and organizations: relying only on financial information alone gives an incomplete picture, failing to account for the true costs and benefits of an organization’s activities.
By understanding how their success is underpinned by nature, people, and society, leaders and investors are indeed empowered to make decisions that offer the greatest value across all capitals. This helps to foster broader resilience and competitiveness.
The idea of capturing the other capitals is not new. Natural Capital for example is now embedded in global policy through the UN’s System of Environmental-Economic Accounting (SEEA) and in business practice via the Capitals Coalition’s Natural Capital Protocol.
This has then been taken into target setting through Science Based Targets for Nature (SBTN) and into boardrooms and investment portfolios through the Taskforce on Nature-related Financial Disclosures (TNFD).
The message is clear: the health of nature is the foundation of the economy and ignoring it is the fastest way to erode both. Understanding how others capitals demonstrate risk and opportunity is essential, but the real test comes when one tries and put this into real life decision-making, comparing and combining information across all these data.
This is where integrated decision-making come into place. It is the practice of making choices and taking decisions by considering all relevant forms of value across all the capitals rather than treating them separately or prioritising one at the expense of others. It recognises that natural, human, social, and produced capital are interconnected, and that decisions in one area can create risks or opportunities in another.
In business, this means leaders and investors use consistent, comparable information on financial performance and impacts on nature, people, and society to guide strategy, risk management, and resource allocation. In short: it’s about breaking down silos so that decisions optimize outcomes across all capitals, building resilience and long-term prosperity rather than short-term gains that only end undermining the entire system.
To enable this, the Capitals Coalition has recently launched the Integrated Decision-Making Framework providing practical guidance on how to value these assets and generate consistent information on an organisation’s full range of impacts and dependencies that give confidence to leaders to make better decisions.
The Framework builds on a decade of global research and development. It offers a valuable roadmap and a practical approach to navigate the complex landscape in which we live and is a testament to the power of systems thinking and the importance of considering the interconnectedness of all aspects of our world.
The Capitals Protocol and Governance for Valuation, that constitute the Framework, provide the necessary guidance and tools to ensure that the capitals assessment is done effectively, transparently, and with confidence. It is already helping pioneering companies around the world enhancing their financial and risk management – proving that valuing what matters is not just possible, but essential for a thriving future.
For example, Ørsted, a Danish energy company undergone a radical transformation and now a global leader in renewable energy. By integrating an understanding of natural and social impacts into its strategy, Ørsted has not only become more environmentally sustainable but has also significantly improved its financial performance and market position.
Similarly, the Brazilian cosmetics company Natura has built its business model around the four capitals. Its success is inextricably linked to its commitment to biodiversity conservation and its relationships with local communities.
To drive systemic change in how businesses, investors, and regulators make decisions, we need to combine efforts and a commitment to collective action to move beyond the illusion that financial capital exists in a vacuum.
In this scenario, the Capitals Coalition recently announced a strategic merger with International Foundation for Valuing Impact (IFVI) and is working tirelessly on new future partnerships that will build a resilient economy that values what matters, further and faster.
Mark Gough is CEO at Capitals Coalition, global collaboration working to ensure the capitals approach is included in decision-making.
Image: Gildardo RH / Unsplash