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Definition

Natural Capital Protocol

The Natural Capital Protocol is a four-stage decision framework for identifying, measuring, and valuing how a business depends on natural resources and affects them.

What is the Natural Capital Protocol?

The Natural Capital Protocol is a voluntary framework for assessing how your business depends on stocks of water, soil, species, minerals, and other natural resources, and how its activities change them. It is designed to inform decisions, not as a formal reporting framework.

Why does the Natural Capital Protocol matter to you?

An investor, lender, customer, or board may ask how water scarcity, soil decline, habitat loss, or pollution could affect a sourcing or operating decision. A topic list alone misses both your reliance on nature and the consequences of your activities for other people.

How does the Natural Capital Protocol work?

The Protocol has nine steps in four stages. Frame sets the business case. Scope defines the objective, boundaries, and material issues. Measure and Value tracks pressures such as water use, reliance on nature, changes in nature, and the consequences. Apply tests the results and uses them in a decision. Use four principles throughout: relevance, rigor, replicability, and consistency.

What mistakes should you avoid?

  • Starting without naming the decision and audience the assessment must inform.
  • Measuring every environmental topic before Step 04 identifies the material impacts and dependencies.
  • Assuming valuation must use money when qualitative or non-monetary quantitative valuation fits the decision.
  • Presenting a context-specific assessment as a comparable company score.

Is the Natural Capital Protocol mandatory?

No. The Protocol does not create a filing duty. A law, lender, investor, or customer may still require nature-related information, so check the exact request before deciding which assessment outputs to provide.

What records should you keep for a Natural Capital Protocol assessment?

Keep the objective, organizational and value-chain boundaries, materiality criteria, activity data, methods, assumptions, stakeholder input, test results, and the decision made. These records let another reviewer reproduce the work and understand its limits.

Example

Hypothetical Vietnam dairy example: Suppose a dairy processor compares its current cleaning system with a water-reuse option. The current system withdraws 800 cubic metres of freshwater per day; the proposed option withdraws 640 cubic metres per day at the same production output.

Withdrawal falls by 800 - 640 = 160 cubic metres per day, or 160 / 800 x 100 = 20%. Step 05 records that change in water use. Step 06 tests what it means for the condition of the local water source. Step 07 values the consequences for the plant and other water users, using words, quantities, or money as the decision requires. Step 08 tests assumptions and limitations. Step 09 combines the result with cost and stakeholder findings before the investment decision. The 20% reduction is one input, not a complete natural capital value.

Where it comes up

Four-stage, nine-step Natural Capital Protocol FrameworkNatural Capital Protocol, Figure 0.1, pages 5-6 (checked 2026-08-20)Official sourceStep 04 material impacts and dependenciesNatural Capital Protocol, actions 4.2.1-4.2.4 and output 4.3, pages 44-52 (checked 2026-08-20)Official sourceSteps 05-07 measurement and valuationNatural Capital Protocol, Measure and Value Stage, pages 54-94 (checked 2026-08-20)Official sourceStep 09 integration into business processesNatural Capital Protocol, Step 09 and action 9.2.3, pages 104-108 (checked 2026-08-20)Official source

Related terms

Materiality

Materiality is the test a company uses to decide which sustainability topics matter enough to manage or report because they could affect its finances, reflect significant impacts on people or the environment, or both.

Integrated Reporting Framework

The Integrated Reporting Framework connects strategy, governance, performance, prospects, and the resources and relationships a company uses or affects to explain how it creates, preserves, or erodes value over time.

Sustainability

Sustainability is how a company manages its environmental and social impacts, governs those responsibilities, and shows customers, investors and regulators credible evidence of its decisions, actions and results.

TNFD recommendations

TNFD gives companies and financial institutions 14 recommended disclosures about how they rely on and affect nature, the resulting risks and opportunities, and how these issues are governed and managed.

Sources

Last verified 2026-08-20

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Natural Capital Protocol Definition | Keslio