The United Nations recently presented a new alternative to GDP for measuring national economies, “Inclusive Wealth.”  It combines a country’s manufactured, human, and natural capital into a single comprehensive measure of wealth. This is roughly analogous to looking at an individual’s net worth instead of only her annual income. The analysis is enabled by advances in the still emerging field of quantifying natural capital and environmental services. As these methods are advanced and refined, this kind of accounting will inevitably spread to the private sector, and early adopters will reap the benefits of better understanding and managing all resources, natural or otherwise.

The Inclusive Wealth Report, created by Partha Dasgupta, of Cambridge University, and others, does not break ground in terms of valuation methods as much as it leverages a number of existing analyses to create a uniquely holistic and internally consistent measurement. The results contain much that is intuitive—Russia’s inclusive wealth is decreasing because it is not growing its human and manufactured capital enough to offset the consumption of its natural capital—and much that might be more surprising—Canada’s natural capital, the largest among the 20 countries studied, drives its 3rd place ranking in inclusive wealth per capita.

The value of such a metric will only increase as valuation methods become more precise and data, gathered over multiple years, allows for analysis of how a country’s condition is changing. For example, natural assets such as clean air and water are not yet included because of difficulties in measurement.

Similar analyses of companies’ wealth will be part of the logical evolution of corporate sustainability. Manufactured capital is already tracked closely, and discussions of a company or industry’s human and natural capital are common among analysts. We know the American electricity sector’s workforce is rapidly aging, for example, and that companies reliant on rare earths face a seller’s market. But there isn’t yet a methodology for determining how the strength of a particular utility’s younger-than-average workforce compares to the weakness of aging infrastructure, or the degree to which exposure to a constrained rare earths market is offset by a stable of highly-educated engineers tasked with finding alternatives. 

The methodology presented is not yet fully equipped to answer these and similar questions, and would need to be adapted significantly to fit the private sector. Natural capital, in particular, will require careful thinking. Some companies own natural resources, but more are at least one step removed. Access to, as well as ownership of, natural resources would have to be accounted for.

Nevertheless, as the connections between natural resources and corporate performance continue to gain prominence and become better understood, investors will expect a comprehensive methodology for measuring a company’s assets and use the information to make investment decisions. Moreover, the sooner companies realign their thinking in this way, regardless of investor pressure, the sooner they will be able to account for all the ways in which they can accumulate or lose wealth and reap the long-term benefits of a holistic approach to asset management.