Businesses need all kinds of resources in order to operate and provide products and services to the clients. If your business is a manufacturing facility, you need a lot of raw material to create your products. You may be in a service industry that doesn’t create any material products. If that’s the case, you are still using a lot of resources, for example, electricity. Your business creates waste that later needs to be recycled.
You may not depend on certain resources directly, but your business does depend on many of the most popular resources indirectly. For example, when the price of gas goes up, your customers spend more on gas. This means that they have less money in their pockets left to spend on products and services they need and want, including the services of your business. It also costs your employees more to get to work, which means they have less money left in their pockets and may feel stressed about that. Research shows that happy and healthy employees are much more productive than those who are stressed all the time.
While you can’t change the circumstances that impact the climate single-handedly, you can do a lot of things about how you run your business and how you use capital.
The best way to think about capital is to think about a trust fund. A trust fund can generate income and produce returns, yet immediately after you start spending the principal, the returns will start to decrease. Fewer returns mean that in the future, you will need to spend more from the principal amount, which means even smaller returns in the future.
Eventually, you may end up with a zero balance even though you started with a healthy asset that was producing returns. Nature’s capital works in a similar way. We can either be spending it wisely and have it benefit us for years to come or we can spend it all and be left with nothing.