Sustainable accounting and the six capitals
It is becoming increasingly apparent that standard financial accounting practices are failing to fully quantify impacts and risks, particularly those associated with natural and social resources. Sustainable accounting approaches attempt to incorporate these considerations into an organisation’s monitoring and reporting processes, by quantifying impacts on natural, social and human ‘capital’, in addition to the standard reporting of financial capital.
We are working to embed sustainable accounting across our business: quantifying the natural, social and human impacts of projects and decisions alongside financial assessments. We are working with organisations including the Cambridge Institute for Sustainability Leadership (CISL), Accounting for Sustainability (A4S) and the Natural Capital Coalition to inform internationally developing techniques to better quantify natural and social impacts and improve our risk management and decision making.
Our business model and the capitals
We are embedding the concept of the Capitals into our long-term business planning, to help us ensure the affordability and resilience of our essential public services for current and future generations. The Capitals are the valuable assets which are critical to the success of any organisation, and effective management of the Capitals helps ensure the resilience of our business.
Our Decision Making Framework
We have instigated a range of projects to examine our impacts and dependencies across the Capitals, assessing a range of economic, environmental and social attributes associated with our activities and considering both our negative and positive impacts to society.
We’ve embedded our Six Capitals concept into our new Decision Making Framework (DMF). The DMF is a cross-business process which integrates with many of our management systems and uses live data and cutting-edge analytical tools to improve how we manage our assets and investments, helping increase our customer service, efficiency and resilience. We've used the Six Capitals framework to quantify risk and value, to optimise investment and management decisions about our assets and operations and to help us provide the greatest net benefit to our customers and wider society.
Our Contribution to Yorkshire: Total Impact and Value Assessment
Total Impact and Valuation Assessment - TIVA - enhances our understanding of our impact on customers and the environment, both positive and negative. We have used a mix of accounting, economic and sustainability techniques to quantify our impact throughout our value chain, and where sensible, to put a monetary value on the impact across the six capitals: financial, manufactured, natural, human, intellectual and social. This innovative approach is providing a broader view of the risks to our services, and the value we create for society. It is also highlighting opportunities to enhance our impact and value, and the trade-offs that need to be considered when making decisions. We are using this fresh insight to shape our current approach and future strategy to ensure our services are resilient and we are maximising our potential contribution to society, the economy and the environment.
Little Don multi-capitals assessment
The Little Don area includes the Langsett, Midhope and Underbank reservoirs, and is a popular site for both local visitors and tourists. Yorkshire Water’s Little Don Recreation Plan aims to promote health, fitness, and wellbeing by creating opportunities for outdoor recreation that is inclusive and open to all. We worked with consultants at AECOM to create a framework and model for comparing options for the area: going beyond financial considerations to value impacts on people’s health and wellbeing, job creation, the local economy, and the natural environment. Having created this model for Little Don, we are now using it in other areas of the business, including options for some of our operational sites.
Rivelin wastewater treatment works
We were one of around 50 organisations globally to pilot test the draft Natural Capital Protocol, to help inform the first publication of the Protocol and to shape our own approach to natural capital assessment. We worked with expert consultants at AECOM to economically value the positive and negative natural capital impacts of different solutions for our £24m scheme to enhance Rivelin water treatment works in Sheffield. Our assessment showed that our chosen option significantly reduced negative environmental impacts and introduced positive environmental enhancements, enabling environmental value of around £3.8 million over the do-nothing scenario. Economic valuation of these impacts provided evidence for the chosen option, and helped to shape our thinking and decision-making for future asset management projects.
Burnby Lane landfill site
We worked with environmental consultants at Arup to conduct a natural and social capital assessment at Burnby Lane: a site reaching the end of its life as a landfill. We used sustainable accounting techniques to assess the environmental and social value of options for the site, including conversion to a solar farm and evaluation of an innovative mineral recovery technique. This assessment has helped inform considerations about the optimal future use of the site.
View Burnby Lane case study
Natural Capital Principles
Yorkshire Water supports the publication of natural capital approach principles on which to base future investment decisions
The Water Industry Forum, working with Water UK’s Environment Policy Advisory Group members, through Welsh Water and supported by Atkins, has produced a set of principles to guide the water sector on the use and application of Natural Capital type approaches in investment decision making.
The principles include:
Natural Capital approaches should aim to:
- facilitate balanced decisions that will meet the needs of the present without compromising the ability of future generations to meet their own needs
- create benefits across a broad range of outcomes beyond individual targets, for environment and society
- offer best value options for environment, and stakeholders.
Yorkshire Water’s Head of Sustainability, Gordon Rogers said “Natural Capital is core business to the water industry, which fundamentally relies and impacts on the environment. I’m passionate about fully reflecting the value of these dependencies and impacts throughout our decision-making process to continue the work to make us more sustainable. This supports the case for catchment and behavioural approaches that are essential to the affordability and resilience of customer services, while also delivering multiple other benefits.”