Introducing natural and social capital analysis
In collaboration with natural capital valuation experts Trucost, CottonConnect has quantified how financial investments in the REEL Cotton Programme are benefitting society and the environment and can facilitate sustainable resource management.
What is natural and social capital accounting?
Natural and social capital accounting places a monetary value on the environment and measures the impact of business operations across the entire supply chain. By calculating a cost to society and the environment in terms of returns on investment and potential consequences, natural and social metrics can help companies to better understand the risks associated with the supply chain and compare the costs and benefits of potential projects.
PUMA established the first Environmental Profit & Loss Account in 2011, and it has since become an essential tool for brands and retailers to inform decision-making and drive improvements across the value chain.
The REEL Cotton Programme is a three-year agriculture programme run by CottonConnect in partnership with leading brands and retailers that provides farmers with training on sustainable cotton farming practices. Trucost conducted a natural and social capital analysis on a group of REEL cotton farmers versus non-REEL farmers and identified the benefits of REEL Cotton in both environmental and social terms:
- On average, REEL cotton farms create $98 more natural capital value than non-REEL farms per tonne of cotton produced due to reduced water use and higher cotton yields.
- A social return on investment of between $50 and $170 is generated for every dollar invested.
- Total social return value is $2,700-$6,600 per farmer per year due to improved gender equality and economic growth.
Moreover, the REEL Cotton Programme is helping to achieve commitments towards United Nations’ Sustainable Development Goals (SDGs), such as SDG #12 – Responsible consumption and production; SDG #15 – Life on land; SDG #5 – Gender equality and SDG #8 – Economic growth.
“Quantifying the impact of our farm programmes in terms of profit and loss helps business understand more fully the return on their investments; and this supports our goal of developing initiatives in line with both the SDGs and commercial agendas.” Alison Ward, CEO, CottonConnect.
This pilot analysis of REEL Cotton proves that natural and social capital accounting can help companies put a monetary value on their services and improve sustainability across the supply chain. It demonstrates how initiatives to support cotton growers to farm more sustainably can offer environmental and social return on investment and contribute towards United Nations’ SDGs. Natural and social capital accounting can be a vital change-management tool and we invite brands and retailers across the cotton industry to join us and better understand supply chain performance through natural capital metrics.
“The apparel sector is leading the way on the use of natural and social capital accounting. This robust methodology enables companies to assess the costs and benefits of actions to improve sustainability in monetary terms to inform optimal decision making.” Dr Richard Mattison, CEO, Trucost, part of S&P Dow Jones Indices.
Read our report on Natural and Social Capital Analysis here.
Download the factsheet or read our ‘What is REEL Cotton Code?’ blog for more information about the REEL Cotton Programme. At CottonConnect we are committed to transforming the world’s cotton for good and working towards United Nations’ SDGs. For more information about how we work, visit our website or please get in touch.