Natural Capital: Why rural businesses need to take stock
Many farmers and landowners have heard the phrase ‘natural capital’, used to describe the world’s stock of natural resources such as air, soils and water plus the benefits they provide such as fisheries, healthy soil and outdoor recreation.
Historically, these natural assets have been undervalued, not finding their way to balance sheets and thus not being incorporated into the decision making process.
This issue was recently considered by Emily Norton, Head of Rural Research at Savills, in an editorial in Farmers Guardian;
“It is a debate dominated at times by highly academic answers. But we need to think beyond theory and onto things that mean something to farmer. We need real farm examples and how to take the value of soils or water in business decisions”.
Mike Bracegirdle, who heads the Butcher & Barlow Agriculture department, looks at why natural capital principles are growing in importance.
- The UK Government has stated that it plans to replace the Basic Payment Scheme with a new scheme which rewards those farmers and land owners who improve natural capital.
- An online guide to help businesses, including farmers and landowners, better understand the value of their natural capital assets, and thus protect and boost natural capital has been launched by Defra.
- Defra secretary Michael Gove included the enhancement of natural capital alongside food production as a core task for farmers.
- Post Brexit, farmers were to be rewarded for ‘public goods’;
“The government’s proposals will see … a new system of paying farmers “public money for public goods” – principally their work to enhance the environment and invest in sustainable food production”.
This would include not only soil and water quality but improving public access and paths for the benefit of public leisure and recreation.
- Farmers are to be regarded as ’Stewards’ of natural capital and therefore financially rewarded for both the preservation of ancient woodland and bringing woodland under active management, and the restoration of peat bogs.
- Adding to carbon storage ,boosting both air and water quality are targets for Public Goods.
- Triple bottom line reporting is becoming more widely recognised as a way for public and private organisation to demonstrate what they have achieved socially, environmentally and financially.
As the details of these schemes have yet to be formalised, let along announced, many farmers have, especially given the pandemic, stepped back from considering natural capital and adopted a wait and see approach. However more diversification must be an important part of the commercially minded farmer and landowners business and succession plan.
Thinking ’out of the box’ has already been seen in Wessex. In 2015 farmers were paid by Wessex Water Authority to grow cover crops to prevent nitrate run-off into the water environment. This assisted the water authority who saved the costs of an additional treatment plant. This was so successful that the water authority set up En Trade as a trading platform (with auctions for farmers to bid for funding to grow the cover crops).
New opportunities are likely to arise and it is important that both farmers and landowners have got both the business structures and funding in place to benefit from such diversification. This is particularly the case for those farmers whose incomes are made up currently from a high percentage of subsidies in the form of the basic payment.
Butcher & Barlow can assist help rural business realise their commercial potential through diversification – considering new income sources or using existing resources more effectively. The Agriculture team at Butcher & Barlow can provide advice and guidance in relation to business structures, property, renewables, succession planning, and more. Whatever the size or turnover of your farming or landowning enterprise our Agriculture and Commercial Specialists can assist.
Contact the specialist team at our dedicated commercial and agriculture office on 01606 334 309 or email email@example.com.