Natural Capital Protocol

What It Is

The Natural Capital Protocol, published by the Capitals Coalition (formerly the Natural Capital Coalition) in 2016, provides a standardized framework for businesses to identify, measure, and value their direct and indirect impacts and dependencies on natural capital. The Protocol helps organizations understand how they interact with nature and integrate this understanding into business decisions.

Natural capital encompasses all natural assets — water, soil, air, biodiversity, minerals, and ecological systems — and the ecosystem services they provide. The Protocol recognizes that businesses both depend on natural capital (water for production, pollination for agriculture, stable climate for operations) and impact it (through pollution, land use change, resource extraction).

The Protocol follows a four-stage "Frame, Scope, Measure and Value, Apply" approach that guides organizations from initial framing of the assessment purpose through to applying results in business decisions.

Who Uses It

• Companies in nature-dependent sectors — agriculture, food and beverage, mining, forestry, real estate, infrastructure
• Companies conducting TNFD assessments — the Protocol provides methodology for the "Evaluate" stage of TNFD's LEAP approach
• Companies preparing CSRD disclosures — ESRS E4 requires assessment of biodiversity dependencies and impacts
• Financial institutions assessing nature-related portfolio risk
• Companies pursuing Science Based Targets for Nature — the Protocol provides baseline measurement methodology

Key Principles

1. Relevance — include natural capital impacts and dependencies that are relevant to the decision context
2. Rigor — use technically robust methods, data, and assumptions
3. Replicability — document methods and data so assessments can be replicated
4. Consistency — use consistent methods across the organization and over time

How to Implement

Frame (1-2 months): Define the objective of the assessment. Identify the target audience. Determine the scope of the assessment (which business activities, natural capital impacts, and dependencies to include).

Scope (1-3 months): Map the value chain to identify interfaces with nature. Prioritize impacts and dependencies based on significance. Determine appropriate measurement and valuation approaches.

Measure and Value (2-6 months): Collect data on natural capital impacts and dependencies. Quantify impacts using appropriate metrics (hectares of habitat affected, tonnes of pollutants, volume of water withdrawn). If appropriate, apply monetary valuation using recognized techniques (replacement cost, avoided damage cost, contingent valuation).

Apply (1-2 months): Integrate results into business decision-making. Communicate findings to relevant stakeholders. Identify actions to reduce negative impacts and protect dependencies.

Relationship to Other Frameworks

TNFD: The Protocol provides measurement methodology for TNFD's LEAP assessment approach. TNFD recommends the Protocol as a resource for the "Evaluate" stage.

SBTN: Science Based Targets for Nature uses natural capital assessment approaches aligned with the Protocol for baseline measurement.

ESRS E4: CSRD's biodiversity standard requires assessment of impacts and dependencies that the Protocol provides methodology for.

TEEBAgriFood: The Economics of Ecosystems and Biodiversity for Agriculture and Food applies similar principles to the food and agriculture sector.

Why It Matters

The Natural Capital Protocol matters because it provides the methodological bridge between recognizing that nature has economic value and actually measuring that value in ways that inform business decisions. As TNFD, CSRD, and other frameworks require companies to assess and disclose nature-related impacts and dependencies, the Protocol provides the "how" — the measurement and valuation methodology needed to produce credible, decision-useful natural capital assessments.