Farm‐scale Natural Capital Accounting: Unlocking the potential of natural capital to support sustainable agriculture

Abstract The demand for information about property‐scale natural capital is growing rapidly as producers and supply chains respond to opportunities and pressures to report environmental performance information. Natural Capital Accounting offers promise but agreed methods for farm‐scale accounts are currently lacking. Here, we propose a framework, methods and models to quantify on‐farm natural capital and ecosystem services that support agricultural production. The accounts are outcomes‐based, data‐driven, transparent and repeatable. We demonstrate that our accounts are conceptually consistent with the UN System of Environmental‐Economic Accounting Ecosystem Accounting, although they do differ in two main ways: (i) we combine information on Ecosystem Type and Ecosystem Condition into a single indicator of Ecosystem State; and (ii) we use ecological models to derive indicators of the ability of Ecosystem Assets to generate a range of ecosystem services. Our approach integrates farm operational and production data, remote sensed imagery and data, ecological modelling and state and transition models to generate accounts that contain verifiable information about the extent and condition of natural capital assets, indicators of the ability of these assets to generate a range of intermediate and final ecosystem services (e.g. habitat maintenance for biodiversity, forage for livestock, carbon sequestration, pollination, soil regulation, shade and shelter) and environmental performance at the farm scale. The accounts are underpinned by ecological models, built from empirical (field‐tested) data, of the relationship between natural capital and measures of biodiversity and ecosystem services. We have demonstrated the practicality of our approach by producing farm‐scale accounts for 50 farms in south‐eastern Australia. Our accounts provide farmers with detailed information that could be used for sustainability reporting and the promotion of sustainable farm practices. Simultaneously, our accounts provide the agricultural supply chain with transparent information on the environmental performance of farming entities, helping to overcome false or exaggerated claims of sustainability by companies and retailers.