Key points

  • Including the value, extent and condition of natural assets on balance sheets can help combat climate change and biodiversity loss.
  • This style of ‘natural capital accounting’ represents a new measure of sustainability expressed in financial terms.
  • Using these practices, business and agriculture can readily partner to meet emissions targets and regenerate Australia’s ecosystems.

Australia’s history of riding on the sheep’s back and exporting mountains of golden grain has come at the cost of our natural biodiversity. Since European settlement, the continent has lost an estimated 40%1 of its forest cover, and much of the native vegetation that remains occurs in fragmented patches. 

This loss of habitat has a significant role in the climate crisis, as these native ecosystems helped absorb greenhouse gases. Reversing biodiversity loss by regenerating vegetation could be just as important in combatting climate change as moving away from fossil fuels. 

That is now the challenge – and opportunity – for Australia’s agricultural sector.

Working with nature

Agriculture accounts for 55%2 of Australia’s land use, and its environmental impact has been “orders of magnitude” larger than mining, said Terry McCosker OAM, founding director of regenerative agriculture consultancy RCS.

Speaking at CommBank’s second sustainability conference, Momentum, McCosker said that for hundreds of years farmers were taught to think of their farms only as agricultural land and not part of the broader ecosystem.

“There wasn’t a connection in their training between farming and ecology,” he said.

“The biggest breakthrough for me probably happened 35 years ago, when I understood that what we are actually farming is an ecosystem.”

The CSIRO’s Living Landscapes research director, Libby Pinkard, adds that agriculture relies on healthy environments to function. To maintain this, farmers need to think of biodiversity on their land as an asset. 

One of the challenges limiting farmers’ conservation activities is realising a return on their investment. And that’s partly because as modern consumers we aren’t paying the price we should for our food, said McCosker.

To make a living, farmers have had to focus on maximising production rather than stewardship of the land. And that’s been devastating for the environment. 

Recent research suggests some agricultural land in the US and the UK has only between 60 and 100 harvests left3 before it becomes totally degraded and infertile, McCosker said. 

Securing our food supply will mean helping the agricultural sector to preserve and improve the quality of the land it occupies.

Putting natural capital on the balance sheet

Some farmers now measure the health of the environment in financial terms using ‘natural capital accounting’. 

Pinkard explains this is a way to value the role nature plays in a business’s ongoing success and profitability. Effectively, it’s a form of sustainability reporting expressed in financial terms.

For Julian von Bibra, a seventh-generation farmer from Tasmania, this sort of accounting can fill the gap between farmers’ love of land and the impact their work has on it.

“We all have this mantra that we will hand [the land] over to the next generation in a better state [than we received it],” he said. 

“Luckily, when you start that mantra the next generation probably hasn't been born, and at no point did anyone actually take a snapshot of what your 30 years of farming looked like to hold you accountable – because most of us fail.

“Ensuring that we somehow have capital accounts that acknowledge the environment, that's a space we are working at. We need to put that on the balance sheet.”

Carbon credits and an opportunity for businesses

Solutions like natural capital accounting help create new opportunities for farmers and businesses to collaboratively tackle the climate crisis. 

Von Bibra pointed to a wool supply agreement he has with a customer in London which factors in the environmental impact of his work.

“We are working on the understanding of planetary boundaries that will see no negative impact from agriculture or processing in the production of those garments,” he said. 

“The full cost will be paid by the consumer. Yet, I will be paid fair value. And, beyond that, money will go towards the environment.”

McCosker adds many farms where he consults are now sequestering more carbon than they produce, with one notable example sealing away 47 kilograms of carbon for each “kilogram of steak and sausages” produced.

By using natural capital accounting to track the health of a farm and the volume of carbon sequestered, the agricultural sector could now sell carbon credits to businesses.

This would shift food production costs not included in supermarket prices off the farm’s books while helping businesses meet their own emissions targets. 

“By getting those credits and that income back to farmers, we will fund them to regenerate things like our water cycle, put carbon away into soils, and increase our biodiversity,” McCosker said.

“That is where some of the potential is in agriculture.”

Our regeneration and biodiversity experts

Dr Terry McCosker OAM Founding Director, RCS Australia
Terry is an internationally acclaimed teacher and has worked in research and property management in government and the private sector for almost 55 years. He has published over 40 papers and made several world-first discoveries in the 1980s in the fields of bull fertility, ruminant nutrition and pasture ecology. One of his greatest lifetime achievements is effectively bridging the gap between traditional agriculture and regenerative agriculture.
Terry co-founded RCS in 1985. The organisation has set the benchmark for capacity building in rural and regional Australia, and was independently rated by a Commonwealth Government survey as the most trusted source of farming knowledge in Australia. 

Libby Pinkard Research Director – Living Landscapes, CSIRO Environment Business Unit
Dr Libby Pinkard applies her background in tree physiology to quantify the risks and impacts of environmental stress and pests on forest function and condition. She leads projects applying novel tools such as genomics to issues of climate change adaptation in natural and managed forest systems.
Libby led the first integrated assessment of climate change risks and impacts for the Australian plantation forest industry. Her recent work focuses on the application of natural capital accounting to primary enterprises to improve environmental outcomes from private land. As a Research Director in the CSIRO’s Environment Business Unit, Libby oversees a broad portfolio of research that aims to inform land use change and sustainable management.

Julian von Bibra Farmer and Land Conservationist, W and C von Bibra.
Julian is a seventh-generation family farmer based in the Midlands of Tasmania, a traditional wool-growing area. The family has transformed the farm through water development, irrigation, and the opportunity to expand by purchasing neighbouring properties. Today the farm still produces Merino wool, but also prime lambs, beef, cereal crops and carbon. The property also has significant areas of native vegetation and biodiversity. 
In his business, Julian values relationships, partnerships and focusing on customers. The family has a strong sense of community and manages the land with a future vision.

To watch this session on-demand or explore other content from CommBank Momentum 2022, visit Momentum.