The Value of Nature in Sustainable Economy: The Cost of Ignoring Nature in Economic Development

Why our economies depends on a healthy planet? The answer lies in Pakistan news headlines of summer months that echo a familiar tragic theme – floods sweeping through villages, destroying homes, uprooting millions of lives, and causing billions of damages to the national exchequer. Whereas, the story is not new. Almost, everybody is now familiar with economic consequences of climate change and how Pakistan is battling the realities of neglecting the value of nature in sustainable economy.

Pakistan is facing severe droughts, floods, and climate-driven crisis since 2022, when the unprecedented floods submerged approximately one-third of the country, killed more than 1,700 people, and left 33 million affected. The damage was staggering at about $14.8 billion in infrastructure losses, $15.2 billion in economic disruption, and nearly nine million people were pushed into poverty.

Agriculture, housing, transport, and health systems were crippled, setting economy back years. The Climate Risk Index (CRI) 2025, ranked Pakistan as the most climate-affected country in term of extreme weather events in 2022 due to record-breaking monsoon rains.

The cost of ignoring the value of nature in sustainable economy: The Unseen Foundation of Development

Fast forward to 2025, the devastating monsoon floods caused widespread destruction to homes, infrastructure, and essential services. The country suffered estimated damages of Rs822 billion (around $2.9 billion) and over 1,000 deaths. The agriculture sector reportedly suffered the greatest loss at Rs430 billion, followed by infrastructure damage estimated at Rs307 billion.

Similarly, a total of 312,000 houses were affected nationwide – including 213,000 in Punjab, 6,370 in Balochistan, 3,222 in Khyber Pakhtunkhwa, 3,677 in Azad Jammu and Kashmir and Gilgit-Baltistan, and 332 in Sindh. The floods destroyed over 2,200 livestock,and damaged major crops across the country – 3.4 million bales of cotton, one million tonnes of rice, and up to 3.3 million tonnes of sugarcane.

The figures highlighting the losses are not just statistics, but each flood is both a natural phenomenon and an economic event. It is a grim reminder of a fundamental truth – that natue and economy go hand in hand, and a healthy planet is our most valuable asset.

Whether it be in Khyber Pakhtunkhwa, Punjab, Sindh, or Baluchistan, floods serve as a painful reminder of a recurring cycle – one rooted in our continued disregard for the vital role of nature in building a sustainable economy. Ignoring the value of nature in sustainable economy carries immense costs. The loss of ecosystem services alone is estimated at $145 trillion annually.

This reflects how deeply our economies depend on the natural world. Whereas, the neglect that often stems from weak environmental policies, lack of clear vision or public and institutional awareness, poor enforcement, corruption, cause disruptions.

The result is a chain of short-sighted decisions that delay essential climate action, amplify environmental degradation, and escalate financial and human costs we face in future. Economic impacts of Climate change pose a set of challenges to economy. Macroeconomic impacts may create significant credit, market, and operational risks for financial institutions.

Fragile Balance Between Human Development and Nature’s limits

The pre-monsoon rains in Punjab submerged thousands of villages, farmlands, displaced millions of people, and devastated crops that form the backbone of the national economy. Most of the cotton, rice, maize, and vegetables were washed away, threatening not just food security but also the vital textile exports. The latest news only reflected on ignoring fragile balance between human development and nature’s limits. They exposed the reality that climate change is not a distant threat but a present-day economic crisis.

On one side, the swollen rivers and broken embankments remind us of nature’s overwhelming power. On the other hand, markets tremble, inflation rises, and livelihoods vanish, revealing how deeply the economy is entangled with the rhythms of the natural world.

How Nature increases economy-wide productivity?

When we talk about economic productivity, it’s in terms of factories, technology, and labor, but we frequently overlook the most crucial component – natural capital or valuing nature. This includes our planet’s essential resources, like clean air, fresh water, fertile soil, and biodiversity. It is an undeniable fact that natural capital matters for productivity in many ways – some obvious and others less so.

Take the example of trees in cities. How they keep the balance between nature and economy. They reduce temperatures and cut air pollution. This in turn helps human health and increases productivity by reducing the need for air conditioners and hospitals, lowering energy costs and boosting public finances. Moreover, human wellbeing is improved with access to nature and the services it delivers. When we are well and happy, we are more productive at work and take less time off.

Rethinking Productivity: Why Natural Capital Is The Key To Our Future

Our economy is not separate from nature. Therefore, the idea of limitless economic growth that we are pursuing at the expense of environment is a dangerous and outdated notion from 20th century. It’s an age of environmental consequences, and a time to rethink how we measure progress, as climate change is affecting every aspect of life including the delicate ecological balance of our planet.

Just as a business needs financial capital to operate, our economy also relies on natural capital. Farming is not possible without soil and water, manufacturing requires raw materials, and even service industries depend on a stable food supply. But, this natural foundation and balance between nature and economy is being degraded at an alarming rate, which results in the harsh realities of nature.

Pakistan’s Floods and the Unseen Economic Crisis: It’s Time for Natural Capital Accounting

Looking at the current scenario of floods in Pakistan, we see that we’ve always treated natural resources as limitless, draining our water supplies, overfishing our oceans, and allowing pollinators to die out. In broad scenario, the reason that contribute to the deluge of climate disasters is the environmental consequences of our wrong perception to neglect the economics of nature for development.

This shortsighted approach is a missed opportunity and a massive risk for our survival. Nature has limits, perhaps harder than other limits we take into account. While we have robust systems for tracking financial and labor markets, the health of our natural systems is largely unmonitored and absent from the mainstream economic discussions. Though climate and the economy enables each other, the value of nature in sustainable economy, or simply the natural capital underpins everything.

The Problem with Business as Usual

In our current economic model or set up, environmental damage is often neglected, as it is mostly treated as an externality – or a side effect that isn’t factored into the core balance sheet. This is the main reason as to why we can see things like critically endangered ecosystems, such as box-gum grassy woodlands, disappearing to make way for development. Although economic productivity is worthwhile, but not at the cost of environment.

Without natural capital accounting there is no guarantee it will work, as we see in the harsh realities of neglecting the economics of nature today. Our current environmental approval processes allow developers to “withdraw” from natural capital without a full understanding of what’s left in the bank. This reactive approach of assessing environmental impact after a project is proposed, is inefficient and very dangerous. What we need is a proactive shift in our thinking about nature economy.

Natural Capital Accounting: A Plausible Solution in the Economics of Nature

We are past the 20th century. We have limit for everything. If we rely on material things and only thinking of productivity, we would be the losers in the end. Faster approvals may boost productivity, but damage nature. The answer lies in natural capital accounting – the economics of nature.

It is a system for tracking the health of natural resources and the benefits they provide to our economy. Imagine having a detailed report on the state of forests and waterways, or soil, just as we have data on GDP, inflation, and employment. This can allow our policymakers and businesses to make informed decisions and truly integrate environment into economic planning.

Beyond GDP: How Valuing Nature Can Save Our Economy

Several countries, like the United Kingdom and Australia, have already recognized this approach. While accepting the cost of ignoring the value of nature in sustainable economy, they adopt systems like the System of Environmental-Economic Accounting. They start to quantify the value of nature, which isn’t just an abstract exercise; but it has real-world benefits:

1. Improved Productivity: Healthy ecosystems, such as urban trees that cool cities and filter air, can directly boost human health and productivity and reduce the need for expensive healthcare and energy.

2. Smarter Development: With a clear picture of our natural capital, developers can identify areas for sustainable new projects, avoiding environmentally sensitive zones and saving time and money in the process.

3. Long-Term Sustainability: We can set clear standards for how much natural capital can be “spent” and this way we protect our resources from being depleted to a point of no return.

A Call for 21st-Century Thinking: The Age of Environmental Consequences

This is a century largely defined by environmental consequences. The floods in Pakistan are, for example, a stark reminder that if we continue to draw down on our natural capital without knowing what we have, we are risking “intergenerational bastardry” by worsening the lives of future generations. In order to build a truly resilient and sustainable economy, we need to move beyond 20th-century thinking.

We must accept the economics of nature. We must embrace new tools and make long-term reforms, which recognize the fundamental connection between a healthy planet and a thriving economy. Integrating the environment into economic thinking is crucial. It lets us to think about the limited resources and ecological systems alongside other factors, such as factories, roads, financial labor and knowledge. The challenge is immense, but the future of our productivity and well-being depends on it.