The threat of ever-depleting natural resources is expected to place a significant amount of pressure on the oil, gas and mining industries, which, if left unmanaged, could wipe out profits and impact on business models.

A new report by Allianz Global Corporate and Specialty (AGCS) shows that failure to manage natural capital will extend beyond environmental impacts.

For businesses, it will lead to increasing interruption and liability risks, including higher costs from resource scarcity, regulatory action and pressure from communities and the broader society.

The ‘Measuring and Managing Environmental Exposure: A Business Sector Analysis of Natural Capital Risk’ report, which analysed more than 2 500 companies, found that the oil and gas, mining, food and beverage and transport sectors rank highest in natural capital risk exposure.

“Companies around the world are increasingly confronted with the negative implications of natural capital depletion,” says AGCS environmental, social and governance business services manager Chris Bonnet.

“Sustainable use of natural resources is critical for the future success of most businesses. “Yet, while corporates’ awareness of their natural capital footprint is growing, many still need to gain a better understanding of the specific threats that can impact on their industry sector and company in particular, as well as the mitigation options available.”

The risk exposure analysis is based on five factors, namely biodiversity, greenhouse-gas (GHG) and non-GHG emissions, water and waste, all of which signal the ‘danger zone’ where the natural capital risks businesses face are greater than the mitigation options currently employed.

“Companies in the oil and gas and mining sectors have a high level of natural capital risk exposure, owing to the nature of their business. For example, in the mining sector, over 90% of global iron-ore production is derived from areas that have a high risk of water stress and biodiversity impact,” he adds.

The report notes that, while the mining sector seems technically well-equipped to mitigate natural capital risks, the exposure to social and political pressures can be considered high, which translates into equally high legal and regulatory pressures.

“To manage these formal and informal pressures and expectations, the sector needs to make further investment in technical and corporate risk management measures to handle its natural capital risk dependencies and impact – for example, ensuring the rehabilitation of landscape and biodiversity after mining operations have ceased.

“However, innovative risk solutions to reduce the stress to the environment could be more strenuously applied,” says Bonnet.

The report notes that a significant number of companies have started to address natural capital risks in their enterprise risk management and factoring natural capital costs into business decision-making can also help companies anticipate potential threats.

“With threats to the environment coming from many different areas, there will be no such thing as business as usual in the future,” says Bonnet.

“Companies need to understand, quantify and even monetise their dependence on natural capital and the impacts their operations have on it to ensure their organisations are resilient and futureproof.”