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201213Nov18:30

Account­ing pro­fes­sion starts to recog­nise the value of Nat­ural Capital

Infor­ma­tion
pub­lished 13 Novem­ber 2012 | mod­i­fied 05 Decem­ber 2012
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A new col­lab­o­ra­tive report explores the pre­pared­ness of the account­ing pro­fes­sion to respond to declin­ing nat­ural cap­i­tal — the stock of cap­i­tal derived from nat­ural resources such as bio­log­i­cal diver­sity, ecosys­tems and the ser­vices they provide.

Spe­cific parts of Nat­ural Cap­i­tal are increas­ingly being recog­nised as crit­i­cal and mate­r­ial busi­ness issues. This report aims to bring a new audi­ence into the debate by focus­ing atten­tion on what the accoun­tancy pro­fes­sion can do to mit­i­gate these risks
Dr Stephanie Hime of KPMG’s Cli­mate Change and Sus­tain­abil­ity prac­tice, author »

The report aimed at Chief Finan­cial Offi­cers (CFOs), accoun­tancy pro­fes­sion­als and busi­ness lead­ers — as key gate­keep­ers to cor­po­rate strat­egy, account­ing, report­ing and dis­clo­sure — inves­ti­gates the con­cept of mate­ri­al­ity and how it is used to iden­tify issues for man­age­ment and dis­clo­sure. The rec­om­men­da­tions made in this report are tar­geted to this key audience.

The key find­ings of this report are:

» Per­cep­tions of Nat­ural Cap­i­tal as a risk are vari­able within the accoun­tancy pro­fes­sion;
» Cur­rent dis­clo­sures on Nat­ural Cap­i­tal, as cur­rently prac­tised, are too lim­ited to pro­vide insights into risk man­age­ment;
» A hand­ful of com­pa­nies in high envi­ron­men­tal impact sec­tors are report­ing sub­stan­tial detail on aspects of Nat­ural Cap­i­tal, but the major­ity are report­ing lit­tle or no infor­ma­tion due to the per­ceived imma­te­ri­al­ity of the issue, and
» There are a num­ber of bar­ri­ers to cor­po­rate action such as the lack of a stan­dard­ised busi­ness case, low or unclear mar­ket val­ues for some aspects of Nat­ural Cap­i­tal and some account­ing principles.

ACCA (he Asso­ci­a­tion of Char­tered Cer­ti­fied Accoun­tants), KPMG and Fauna & Flora Inter­na­tional have inves­ti­gated the con­cept and exist­ing use of mate­ri­al­ity in light of the increas­ing sig­nif­i­cance of nat­ural cap­i­tal as a busi­ness risk. The new report enti­tled: Is nat­ural cap­i­tal a mate­r­ial issue? An eval­u­a­tion of the rel­e­vance of ecosys­tem ser­vices to account­ing pro­fes­sion­als and the pri­vate sec­tor has been offi­cially launched at a brief­ing event held in Lon­don Novem­ber 9.

Nat­ural cap­i­tal is in decline glob­ally. The loss of nat­ural cap­i­tal exposes com­pa­nies to a range of new risks and oppor­tu­ni­ties that can impact profit, asset value and cash flow. Civil soci­ety is increas­ingly con­cerned about the loss of nat­ural cap­i­tal, but are com­pa­nies iden­ti­fy­ing and mea­sur­ing these issues? When do they become mate­r­ial?

The report explores the cur­rent response of the accoun­tancy pro­fes­sion to the increas­ing impor­tance of nat­ural cap­i­tal as a busi­ness issue. It involved a sur­vey of over 200 accoun­tancy pro­fes­sion­als, inter­views with CFOs and senior man­age­ment from 8 major com­pa­nies, a dis­clo­sure sur­vey of cor­po­rate report­ing by 40 organ­i­sa­tions in spe­cific sec­tors, and desk based research into rel­e­vant lit­er­a­ture and work in the field.

Key find­ings of the sur­vey included:

  • 60 per­cent of respon­dents agreed that the nat­ural world was impor­tant to their business;
  • More than half of the respon­dents had included nat­ural cap­i­tal issues in their company’s busi­ness risk eval­u­a­tions at some point;
  • Nearly half (49 per­cent) of respon­dents iden­ti­fied nat­ural cap­i­tal as a mate­r­ial issue for their busi­ness and linked it to oper­a­tional, reg­u­la­tory, rep­u­ta­tional and finan­cial risks.
Head of Sus­tain­abil­ity at ACCA, Rachel Jack­son said: “ACCA strongly believes that con­sid­er­a­tions should be made by accoun­tancy bod­ies to make their mem­bers aware of the need to account for nat­ural cap­i­tal within the com­pany annual reports and accounts, as well as sus­tain­abil­ity reports in order to avoid fail­ures when antic­i­pat­ing future risk and their asso­ci­ated costs to busi­ness.”


(Source: Fauna & Flora Inter­na­tional media release, 09.11.2012)
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Tiger map” (CC BY 2.5) by Sander­son et al., 2006.

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