Natural Capital is the world’s stock of natural resources. It encompasses goods (such as food, fuel, medicine, and all living things) and services (such as climate regulation, clean water and carbon storage) that are essential to our well-being.
Unfortunately natural capital is under threat: each year we are consuming 50% more of our planet’s resources than it can replenish. This is creating huge risks for our welfare, and for business supply-chains.
In this increasingly resource-constrained world, it is in the interest of businesses to begin accounting for, as well as managing, their impacts and dependencies on natural capital…and this is where accountants can play a part.
“Pitch For Nature” – Business & the value of nature. Video courtesy of The World Business Council for Sustainable Development.
A new joint paper by Fauna & Flora International (FFI), KPMG and the Association of Chartered Certified Accountants (ACCA), entitled Natural capital and the accountancy profession: applying traditional skills to new thinking and practice, highlights the important role that accountants play in the development of natural capital accounting.
Accountants have a responsibility to safeguard business operations in the future and, in this capacity, they will have to help with decision-making when it comes to natural capital risks – particularly for businesses relying on natural resources.
Identifying risks and opportunities
With a range of tools and frameworks already available to enable the accounting of natural capital, the accountancy profession is in a prime position to support the development of common approaches and help embed their applications within businesses.
As natural capital also poses opportunities for businesses, accountants will also have to identify the value it can bring. To do that, they must gain a deeper understanding of how other business disciplines approach natural capital considerations and report their performance to their investors and wider stakeholders.
“As shown in this report, the skills, knowledge and experience needed to properly account for natural capital are certainly available within the accountancy profession, and steps are already being taken towards a new culture that incorporates natural capital as well as other sustainability issues,” explained Paul Herbertson, FFI’s Director of Environmental Markets. “All that is needed now is for these activities to be scaled up and further embedded, and FFI hopes that this report will play a part in driving this much-needed change.”
Gordon Wilson, Senior Manager, Sustainability Services, KPMG in the UK said: “I see the role of the accountant as a crucial one as natural capital accounting and reporting develops. This role is to connect the complex world of natural capital accounting and align it to how business leaders think, make decisions, operate and report their performance to their investors and wider stakeholders.”
Faye Chua, head of business insight at ACCA added, “The modern accountant has a responsibility to ensure today’s businesses are able to operate long into the future. It is important, therefore, that the finance function is wise to the potential weaknesses of financial systems in their ability to protect natural capital.”
Briefing financial leaders
Produced by a powerful collaboration between FFI, KPMG and ACCA, this report is the third in a series of short briefing papers directed at business leaders, Chief Financial Officers and accounting professionals:
- Identifying natural capital risks and materiality (PDF)
- Business and investors: providers and users of natural capital disclosure (PDF)
- Natural capital and the accountancy profession: applying traditional skills to new thinking and practice (PDF)
To keep abreast of the latest developments around natural capital, join FFI at the World Forum on Natural Capital, 23-24 November, Edinburgh – www.naturalcapitalforum.com.