Natural Capital Accounting How Coca-cola is putting theory into practice to advance water stewardship and replenishment

1. Natural Capital
Accounting
How Coca-Cola is putting theory into
practice to advance water stewardship
August 2016
Estimating the impact of
a business or other activity
on the quality or function
of an ecosystem.
Translating impacts (or benefits)
into monetary terms to allow their
evaluation against project costs.
The benefits that
people and
economies derive
from nature.
New opportunities to
evaluate projects and
inform business and
investment decisions.

2. Contents
Introduction 1
What is natural capital 2
The natural capital pilot project 3
Methodological approach 4
Key assumptions 5
Outcomes 6
Conclusions 7
Proposals for further actions 8
Acknowledgements
This report is a product of cooperation between partners.
We’d like to thank our partners on water replenishment
projects who provided us with invaluable local data.
> Our partners for the eight projects included in this report
were: Fondacion ECODES (Spain), Natuurpunt (Belgium),
SEO-Birdlife (Spain), University of Cordoba (Spain), WWF
Danube-Carpathian Programme, WWF France, WWF
Spain and WWF UK;
We’d also like to thank our partners who helped make this
report possible:
The Natural Capital Coalition;
denkstatt.

3. 1The Coca-Cola Company
Natural Capital Accounting
Introduction
No resource is more precious to human life and the health of our
global ecosystems and economies than water, which is under
increasing stress due to rising demand and the effects of climate
change. As the world’s largest beverage company and because
we are dependant on good-quality water, The Coca-Cola Company
(TCCC) has a responsibility to protect water resources and provide
leadership on water stewardship. This is why, in 2007, we committed
to safely return to communities and to nature the equivalent of all
the water we use in our products and processes by 2020.
In August 2016, we announced that we had achieved our goal to
be ‘water neutral’ in 2015, five years ahead of our original target.
In practice, we are returning about 192 billion litres of water to the
environment each year through over 248 local community water
projects worldwide. Each project has a specific objective, such as
providing or improving access to safe water and sanitation,
protecting watersheds, improving water quality and supporting
water conservation. For each project type, we have developed a
specific methodology to quantify the volume of water captured or
made available (i.e. replenished1
).
To further enhance our water stewardship, we are looking at new
ways to create more value for nature and society. One of these
draws on the pioneering work being done on accounting for and
managing natural capital.
Natural capital encompasses all natural resources, such as water,
as well as related ecosystem services that contribute to the well-
being of people and the environment. In the case of water, these
include flood protection, drinking water, sanitation, food production,
transport, electricity and recreation.
To know how much these services contribute to the economy, we
seek to quantify and measure the benefits of the Company’s
replenishment projects on ecosystem services. This will raise
awareness of the wider impact of investments in water projects and
improve the outcome of future projects by optimising the benefits of
replenishment on ecosystem services. Ultimately, it will help steer
business decisions towards more impactful interventions.
I am delighted to share the first insight into evaluating the natural
capital benefits of eight European replenish projects, led by The
Coca-Cola Company in Europe in collaboration with sustainability
consultancy denkstatt. This work has also been submitted to the
Natural Capital Protocol pilot project, in which The Coca-Cola
Company and denkstatt are global partners.
Ulrike Sapiro
Director Sustainability, The Coca-Cola Company
1 http://www.coca-colacompany.com/water-stewardship-replenish-report
Example of a project before and after intervention
Top: The old ditch was completely straight and
entrenched over a meter into the floodplain.
Bottom: The new stream crosses the line of the old
ditch, but is one meter higher, looks like a stream
again and has been reconnected with a functioning
floodplain.

4. Natural capital defines the benefits that people and economies
derive from nature. The concept of natural capital has
emerged in recent years as a means to assess the net impact
of a company or project on the environment, using a defined
set of data. By enabling direct comparisons, it closes the gaps
between:
a) different ecological metrics;
b) different ecological and monetary terms.
Natural capital accounting involves two basic steps. The first is
estimating the impact of a business or other activity on the
quality or function of an ecosystem. The second is to translate
these impacts (or benefits) into monetary terms to allow their
evaluation against other commonly used criteria, e.g profit.
All ecosystems have certain functions – biological,
geochemical or physical. A project can deliver measurable or
assessable improvements in many different ecosystem
functions.
2 The Coca-Cola Company
Natural Capital Accounting
What is natural capital?
What is natural capital? The stock of renewable and non-renewable natural resources
(plants, animals, air, water, soils, minerals) that combine to yield
a flow of benefits to people.
These benefits can be: Ecosystem services: ways in which ecosystems benefit people.
These are commonly classified into four major categories:
- provisioning
- regulating
- supporting
- cultural
The quality and quantity of ecosystem services are influenced by
the underlying diversity of genes, species and ecosystems,
otherwise known as biodiversity.
Abiotic services: benefits that rely on fundamental geological
processes, such as the supply of minerals, metals, oil and gas,
geothermal heat, wind, tides and the annual seasons.
Natural capital assessment The process of measuring and valuing relevant (‘material’) natural
capital impacts and/or dependencies, using appropriate methods
(Natural Capital Protocol).
Additionally, these functions deliver benefits to people. In
economic terms, we call these ‘services’. Typical ecosystem
services include direct benefits such as: food; water; timber;
climate regulation; air and water purification; habitats for
wildlife and opportunities for recreation.
The contribution of these services can be expressed in financial
terms using metrics such as net present value and a project’s
return on investment. Using economic metrics to evaluate the
net impact of a replenishment project could allow The
Coca-Cola Company to communicate its total value creation
more easily to internal and external audiences and help
managers to evaluate and choose different projects and form
new partnerships.
In a nutshell, natural capital offers a new opportunity to
evaluate projects and inform business and investment
decisions. To put the concept into action, a global coalition
of organisations has drafted the Natural Capital Protocol2
,
a standard approach to help businesses generate timely,
trusted, credible, and actionable information and assessments
to guide their decisions.
2 http://naturalcapitalcoalition.org/protocol/

5. 3The Coca-Cola Company
Natural Capital Accounting
The Coca-Cola Company, together with denkstatt, used its
broad range of water replenishment projects to pilot the
evaluation methodology outlined in the Natural Capital Protocol
and to provide recommendations on how to maximise
ecosystem benefits from water-related interventions.
Until now, natural capital has for the most part been excluded
from decisions and, when included, has been largely
inconsistent, open to interpretation, or limited to moral
arguments. The Protocol responds by offering a standardised
framework to identify, measure, and value impacts and
dependencies on natural capital.
By evaluating eight selected European projects affecting
numerous ecosystem types in five different countries, the
primary objective of this project was to help Coca-Cola better
understand the wider ecosystem benefits of our replenishment
projects. The work employed the methodology set out in the
Natural Capital Protocol, including collection of feedback from
relevant stakeholders. A related objective of the pilot project
was to provide feedback on the draft Natural Capital Protocol.
The first phase of the project involved establishing valuation
methodologies and creating a practical valuation tool as well
as applying the tool to three wetland restoration projects in
Europe. The second phase consisted of evaluating additional
The natural capital pilot project
projects, covering a broader array of geographic regions and
types of ecosystems and interventions, refining the
methodology in phase I. Consequently, the methodology and
the tool were upgraded and phase I projects were re-
evaluated.
The impact of the pilot project on natural capital was derived
from the value of ecosystem services only. Abiotic services
were not considered in the calculations as changes due to
interventions were deemed insignificant.
Projects and their ecosystem types:
Coastal wetland
Inland wetland
River / grassland
Woodland / grassland
Water replenishment projects in the following countries were
included:
Belgium
France
Romania
Spain
UK
Case study
Strawberry farming in Spain
Spain is one of the world’s biggest exporters of strawberries.
The bulk of the strawberries are grown in south-east Spain,
in an arid region that is also an important source of water
for a large coastal wetland nearby. The Doñana National
Park is a World Heritage Site supporting millions of
migratory birds and wildlife such as the endangered Iberian
lynx.
In a typical water replenishment project that illustrates our
approach, we helped the farmers that supply strawberries
for innocent juices to use less water for irrigation. Support
from innocent drinks and Coca-Cola enabled a local
university to develop the ‘Irri-fresa’ app that calculates the
optimum time each day to irrigate. When used by local
strawberry farmers, it cut their water consumption by 40%.
The project covers 3,600 ha of agricultural land and delivers
1,732 million litres of replenished water each year.
With the additional water flowing into the wetland, its
ecosystems can function better and provide local
communities with fish, a habitat for birds and tourism
opportunities. The monetary value of these services is
evaluated in comparison to costs and the results are
compared to other projects.
Pilot projects
1 Constructed wetland to remove pollutants from
municipal wastewater
Tancat de la Pipa, Spain
2 Restoration of coastal wetlands to increase water
storage and habitats
Camargue, France
3 Reconstruction of large-scale wetland to increase water
storage and flood protection
Garla Mare, Romania
4 Reducing water withdrawal from high-value wetland
by working with farmers and reforestation
Upper Guadiana, Spain
5 Improving irrigation efficiency of strawberry farming
Doñana, Spain
6 Restoration and erosion control by working with
farmers to reduce run-off of into rare chalk streams
River Nar, United Kingdom
7 Removal of invasive vegetation from shallow wetland
to increase water storage and habitats
Stappersven, Belgium
8 Reforestation of up-river mountain sides to increase water
retention, reduce run-off and reduce risk of wildfires
Plantando Agua, Spain

6. 4 The Coca-Cola Company
Natural Capital Accounting
Methodological approach
3 De Groot‚ et al., 2012. Global estimates of the value of ecosystems and their
services in monetary units. Ecosystem services‚ 1(1)‚ pp.50-61: http://www.
sciencedirect.com/science/article/pii/S2212041612000101
In this pilot, we applied scientific methodologies to real projects.
We went through the following steps:
Phase I
Developing the methodology and an ecosystem
services valuation (ESV) tool
Reviewed scientific literature, including the NCP, to develop
the methodology for selecting 10 main global ecosystem
types and 22 ecosystem services.
Selected values for benefit transfer from a database of 1,350
valuation factors3
. These include single-study values as well
as global minimum, maximum, mean and median.
Established five pre-defined categories for the level of
ecosystem services provided. This enables a qualitative
assessment based on a combination of scarce data and
expert opinion.
Established three key project performance indicators:
- Total ecosystem change (TEC)
- Net present value (NPV)
- Total investment multiplier (TIM)
Benefit transfer A technique that takes a value determined in one context and applies it to
another. Benefit transfer can be used with all valuation approaches and is most
commonly used to estimate the economic value of ecosystem services that are
not usually bought or sold, but which have been valued in other contexts using
cost- and time-intensive stated preference techniques.
(Natural Capital Protocol)
Key performance indicators Total ecosystem change: a single value showing how the entire ecosystem
has improved due to our replenishment intervention. It represents the difference
between the quality of ecosystem services at the site’s baseline state and
post-project. There are four categories: low, moderate, significant and high.
Net present value: This is the ‘profit and loss’ account for the project,
showing the net ecosystem profit generated by our replenishment intervention
in monetary terms ($). It represents the difference between the increase in
the value of ecosystem services (benefits to nature) and project costs
(company costs).
Total investment multiplier: shows “how well the money was spent”.
It represents the ratio of NPV divided by project costs or NPV generated per
dollar of investment (number).
Phase II
Integrating project-specific data and assessing
project performance
Selected suitable projects for natural capital accounting and
sourced specific project information (i.e. area, affected
ecosystems, replenishment volumes, other activities and
impacts, timeframe, project costs, etc.).
Established the baseline and post-intervention state based on
available data and expert assessment (ecosystem change).
Calculated the key performance indicators for the selected
projects.
Validated the results by means of a site visit to one of the
projects (sensitivity testing).
Interpreted and analysed the results.
Engaged with key stakeholders and incorporated feedback.
In summary, each project was assessed in two basic steps
in line with the requirements of the Natural Capital Protocol:
Measure the change in the state of ecosystem
services (before and after);
Evaluate the net gain in ecosystem services in
monetary terms.

7. 5The Coca-Cola Company
Natural Capital Accounting
The developed methodology relies on several critical
assumptions, which are largely driven by the pioneering nature
of this work and the lack of readily available data. As
businesses and stakeholders firm up their understanding of
natural capital, the collaborative way of evaluating and testing
these assumptions and their influence on potential outcomes
will be critical:
The quality of ecosystem services is determined on the basis
of five categories used to evaluate the baseline state and
post-intervention state of a particular service: These
categories are:
- Non-existent
- Very degraded / undeveloped
- Moderately degraded / developed
- Sub-optimal
- Optimal
The evaluation is provided by expert opinion. The
assignment of each of the five levels reflects a conservative
representation.
Valuation factors based on secondary data are used to
assess projects.
Key assumptions
Sensitivity testing
Visiting the River Nar project
The River Nar in Norfolk is one of England’s
unique chalk streams and a natural habitat
for wildlife such as otters, water voles, trout
and kingfishers. It flows through an area
from where Coca-Cola sources 80% of the
British sugar beet we use in our drinks.
The project to restore the river to its natural
state involved improving groundwater
recharge by changing the way the land is
managed, constructing silt traps and small
wetlands and re-meandering and
re-wilding the river shores along a total
area of 400 ha.
The project was chosen to check if the
results of a desk-based natural capital
assessment will be impacted significantly
from inputs obtained during a physical site
visit (sensitivity testing).
The values of the final assessment did not
change significantly (see graph in chapter
6 Outcomes). The field trip revealed that
replenishment volumes alone do not
capture many of the benefits to nature and
shows we do not know enough yet about
the value of the ecosystem services of
rivers. The data available doesn’t reflect the
full value of river ecosystems in comparison
to wetlands and presents a major
limitation to our methodology.
Based on the fact that different valuation factors are
available from scientific studies, the valuation factors are
best and most conservatively represented by median
values; under certain conditions, mean values might be
applicable.
In the absence of aerial information, water depth is used to
approximate the equivalent aerial footprint.
Each project is analysed over a similar time-frame: from
start-year 2013-2015 until 2020.
Project costs can be allocated during the first three years of
the project; if there are further costs, these are also
allocated in the first three years.
Each project may have an impact on up to three different
biomes or ecosystems, which are ultimately summed up
using a single output value for NPV and TIM.
The discount rate is 5% for all projects and the inflation rate
is set at 1.5%.
The River Nar is restored to its natural state.
Photography©CharlesRangley-Wilson

8. Using our methodology, we assessed all eight European
water replenishment projects by:
Measuring the change in the state of ecosystem
services (before and after);
Evaluating the net gain in ecosystem services.
Outcomes
ECOSYSTEM SERVICE CHANGE
Ecosystem service category Baseline state Post-intervention state Net change
Provisioning services Sub-optimal ● Optimal ● Moderate ●
Regulating services Sub-optimal ● Optimal ● Moderate ●
Supporting services Sub-optimal ● Sub-optimal ● None / low ●
Cultural services Sub-optimal ● Optimal ● Moderate ●
Total ecosystem change Moderate ●
CALCULATING THE ECOSYSTEM SERVICE BENEFITS OF PROJECT 5 ($)
Ecosystem service benefits Note 2014 2015 2016 2017 2018 2019 2020
Total provisioning services 1 12,933 57,854 58,722 59,603 60,497 61,405 62,326
Total regulating services 2 107,137 479,250 486,439 493,735 501,142 508,659 516,289
Total supporting services 3 0 0 0 0 0 0 0
Total cultural services 4 30,368 135,841 137,878 139,946 142,045 144,176 146,338
Total ecosystem benefits 150,438 672,945 683,039 693,284 703,684 714,240 724,953
Economic costs
Project financial costs 100,000 99,211 0 0 0 0 0
Total costs 100,000 99,211 0 0 0 0 0
Net economic flows 50,438 573,734 683,039 693,284 703,684 714,239 724,953
1. Provisioning services: for project 5 these relate to food, water, raw materials, genetic and medicinal resources
2. Regulating services: for project 5 these relate to climate regulation, disturbance regulation, erosion prevention, nutrient cycling, waste regulation
3. Supporting services: none for this project
4. Cultural services: recreation
The graph below provides an example of the methodology
being applied to project 5.
BENCHMARKING INDICATORS
Project level indicators
Total ecosystem change Moderate
Project NPV $ 3,328,372
Total investment multiplier: 16.71
The final outcome of the pilot project is presented in the
next graph, which shows the results (TEC and TIM) of all
eight replenishment projects. Clearly, projects 1 and 3 are
outstanding from an environmental change and return
on investment perspective, as both ecosystem change
and investment multiplier are high. Most projects led to
high ecosystem change but generated a lower return on
investment for the environment (lower right quadrant).
TOTAL ECOSYSTEM CHANGE TOTAL INVESTMENT MULTIPLIER
Totalinvestmentmultiplier
Total ecosystem change
20
15
10
5
0
low moderate significant high
5
3
8 2
4
7
6 post-visit6 pre-visit
6 The Coca-Cola Company
Natural Capital Accounting
1

9. 7The Coca-Cola Company
Natural Capital Accounting
The Coca-Cola replenishment programme aims to address locally relevant environmental and social
issues by improving access, availability and quality of water resources. By designing these projects, we
always work with local stakeholders and communities and include aspects that help achieve wider
environmental improvements. The natural capital approach, however, provides a new opportunity to
quantify the wider ecosystem benefits of replenish work and to provide a clearer understanding on the
value and investment needs to secure these services for the future.
At this point, the conclusions from this work have to be preliminary. What we can see, however, is that
except for large-scale wetland restoration projects, replenishment volumes – our main key performance
indicator – do not fully reflect the total ecosystem change, total investment multiplier, or net present value.
This is to be expected, as water quantity is not the only contributor to ecosystem health, and many
projects include conservation measures (such as returning the river into natural meanders, lowering
siltation, restoring vegetation and natural habitats, etc.) that are not reflected by water volumes, but have
significant positive impacts on the environment. These additional measures need to be systematically
monitored and their benefit quantified to ensure a proper evaluation and, ultimately, investment behind
them.
For the moment, our practical insight is that an attractive project (higher value of the total ecosystem
change, total investment multiplier or the net present value) typically has the following features:
Increased scale (larger aerial footprint and larger water replenishment volume)
Occurs in a site with high conservation value (e.g. national park or World Heritage Site)
Involves large-scale wetlands (due to a lack of data on grasslands, woodlands and rivers)
Leads to a significant positive impact on the state of ecosystem services (improvement in at least two
categories)
Occurs in lower-income countries or incurs lower overall costs.
Conclusions
Stakeholder perspective Stakeholder engagement is not currently evaluated but must be part of the
bigger picture. Certain projects, particularly those with lower net present value or
total investment multipliers, may be extremely valuable for stakeholders and
ultimately generate added value for the company. Such projects may be
undervalued by natural capital accounting. Additional aspects such as local
water risks and the scalability of replenishment projects also need to be
considered when making investment decisions.

10. As discussed, the presented methodology has certain
limitations. These limitations affect two major dimensions:
a) high uncertainty in the final outcome; and
b) lack of comparability among projects affecting
different ecosystem types.
Given the high potential of natural capital thinking, we are
proposing to address these limitations through a set of further
actions, both by ourselves and by other interested parties,
including conservationists, academia and technology partners.
Proposals for further actions
ADDRESSING LIMITATIONS
No. Current limitation Potential solution
1
Insufficient project data, as implementation partners were not
required to monitor changes in ecosystem services but
concentrated on water replenishment volumes.
Produce a guide on how to design, implement and monitor our
future projects to maximise the available ecosystem service data.
However, ecosystem monitoring and reporting need to be built
into all conservation projects.
2
Assessment of total ecosystem change made by experts on a
qualitative basis.
See proposed solution no. 1
3
Using only secondary data for valuation factors. The use of primary data for numerous projects is only possible
with enormous time efforts. A potential well-balanced approach
is the use of secondary data from valuation studies in the region
in cases where such are available.
4
Dependence on the availability of benefit transfer factors. See potential solution no. 3
5
Time-bound, discrete logic that does not calculate ecosystem
service quality in a continuous manner.
Additional scientific research is needed.
6
Very limited availability of valuation factors for ecosystem
services of rivers, woodlands and grasslands.
Additional scientific research to develop valuation factors for
different ecosystems is needed.
7
Use of minimum, median, mean and maximum values for
valuation factors is based on a set of soft rules and strongly
depends on expert opinion.
More stringent rules for the assessment can be applied.
8
The importance to stakeholders or the company (supply chain) is
not considered.
Additional weighting for such variables can be applied.
This document proposes an approach for assessing natural
capital in terms of our water replenishment projects and helps
TCCC to define its responses. It is far from being the final
answer, serving more as a starting point for a wider discussion.
8 The Coca-Cola Company
Natural Capital Accounting

11. 9The Coca-Cola Company
Natural Capital Accounting
The Coca-Cola Company is committed to continuing its work on natural
capital both globally and locally in collaboration with partners and other
stakeholders with an interest in advancing the dialogue.
Specifically, we will undertake the following steps in the near future:
Draft a natural capital guide
Set out how to design and implement water replenishment projects
so that ecosystem service benefits can be better planned, measured
and valued.
Share best practice
There seem to be further opportunities to increase cooperation and
share experience on natural capital. There is a clear willingness among
stakeholders to share knowledge to achieve a more balanced and
truthful evaluation.
We are at the beginning of a journey on natural capital. Every business
wants to create greater value, be more efficient and make better decisions.
As more organisations start to take natural capital into consideration in their
business decisions, the agenda will be driven by many different contributors.
There is opportunity to collaborate on improvements to the methodology
and the application of the Natural Capital Protocol.

12. Further information, please contact:
Ulrike Sapiro
Director Sustainability
S.A. Coca-Cola Services N.V.
Chaussee de Mons 1424 Steenweg op Bergen
1070 Brussels
Belgium
Email: usapiro@coca-cola.com