What is the true cost of business?

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When you run a business, you know how much it costs; your eyes water when your staffing bill comes out, that fancy office isn’t cheap and let’s not talk about how much advertising costs you. 

All business data gets compiled to help create the UK Gross Domestic Product (GDP). We then get to hear whether this is good or bad. Usually, if an election is coming up or there’s some showboating to be had, we get to hear about it a lot. It’s a badge of honour and a benchmark of success around the globe. 

But what good is GDP when people no longer exist to hear it?  

Does that sound extreme? Well, it is a very real reality. Through the documentary series, The Perfect Planet, Sir David Attenborough has been trying to show us all the damage we have already done to our natural world and what may happen if we don’t stop.    

The show captures some of the awesome power nature has, we also get a sense of what may happen if we don’t start respecting it. You only need to look back on the year 2020 to see how true that is and how easily we could be crushed by nature. It flexed its muscles with swarms of locusts, floods, forest fires that wiped out huge pieces of land and the unleashing of a deadly virus. Although, is this a warning to us or is it more like nature’s last hurrah before the sinking ship goes down? 

But, it’s not all doom and gloom. There is still space for lots of optimism. We still have time to enact real change and one of the biggest opportunities is in business.  

In 2019 the UK Treasury commissioned The Dasgupta Review. An 18 month study on the Economics of Biodiversity, by Professor Partha Dasgupta. This report has called for transformational change in our economic approach to nature.    

The review states the importance of recognising nature as an asset. Using sustainable economic growth models to measure the true success of business, not GDP. Prof. Dasgupta suggests; 

Standard economic measures such as GDP can mislead. If the goal is to protect and promote well-being across the generations (i.e. social well-being), governments should measure inclusive wealth (a measure of societal means). Inclusive wealth is the sum of the accounting values of produced capital, human capital, and natural capital. The measure corresponds directly to well-being across the generations. Social well-being and inclusive wealth are not the same object, but they move in tandem". 

"A shift to sustainable patterns of consumption and production will require us to embed environmental considerations along entire supply chains. Transparency and the sharing of information across supply chains is needed, and such information should be verifiable and support the enforcement of standards."

"Truly sustainable economic growth and development means recognising that our long-term prosperity relies on rebalancing our demand of nature's goods and services with its capacity to supply them. It also means accounting fully for the impact of our interactions with nature across all levels of society."  

We have always agreed with this approach, GDP is not a sustainable model and it is great to see some progress on this.  

We recently were B Corp Certified because we want to be held accountable for our impact. Sadly, this is something we can choose to do at this stage, not something we must do. We believe all businesses can operate in this way. After all, how can you know your true cost of business without understanding the damage you may be doing.  

And we are not alone in celebrating this report. The BBC reported Jennifer Morris, of conservation non-profit The Nature Conservancy, describing it as a "clarion call" to world leaders. 

Critics have questioned the approach because of the difficulty in capturing it. But, what if we think about it in a different way?  

At the beginning we talked about knowing the cost of advertising to a business. Imagine that is TV advertising. So, you know what you have paid an agency to make the ads and what the channel is costing you, but what you can’t fully track is how many sales that has brought you. I am talking about when you haven’t used a discount code to capture it, just a straight brand awareness exercise. Even with this uncertainty, you continue to advertise because you know really there is a link. The more you advertise the more sales you get.  

So, why isn’t it the same principle with this? If we make our impact a cost of business, one you may or may not be able to track with traditional models or with a one size fits all approach, but from that you start to see an improvement in nature it’s a winner isn’t it? We need to start somewhere don’t we? There is always an opportunity to adapt when we find a better way. After all, Tesla added $1.5 billion of Bitcoin to their books to capture the investments and that (in the simplest terms) is a made up digital currency that came from nowhere. If we can find a place for that on a business' P&L, we should be able to incorporate nature. 

Prof. Dasgupta’s report features recommendations on how to include nature within economic measurements and key decision making, and we should be taking note.  

As it is the first time the government’s finance department has authorised this kind of review, we can only hope real change is on the horizon. Fingers crossed. 

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