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Half of Accountants Recognize Materiality of Natural Capital, But Barriers Remain
November 13, 2012
Roughly half of professionals in the accounting industry identify natural capital as a material issue for business and link it to operational, regulatory, reputational and financial risks, according to a new study by the Association of Chartered Certified Accountants (ACCA). However, only a handful of companies in high environmental impact sectors are reporting substantial detail on aspects of natural capital.
A survey of professionals found that 49 percent of respondents recognize the loss of natural capital — the stock of capital derived from natural resources, such as biological diversity, ecosystems and the services they provide — exposes companies to a range of new risks and opportunities that can impact profit, asset value and cashflow.
The study, titled Is Natural Capital a Material Issue?, also identified a number of barriers to corporate action, such as the lack of a standardized business case, low or unclear market values for some aspects of natural capital and some accounting principles. Other key findings include:
- Perceptions of natural capital as a risk are variable within the accountancy profession
- Current disclosures on natural capital, as currently practiced, are too limited to provide insights into risk management
- 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
“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,” Rachel Jackson, Head of Sustainability at ACCA, said.
The report was produced by ACCA, KPMG and Fauna & Flora International. It involved a survey of more than 200 accountancy professionals, interviews with CFOs and senior management from eight major companies, a disclosure survey of corporate reporting by 40 organizations in specific sectors, and desk-based research into relevant literature and work in the field.
Earlier this month a new global nonprofit — The Economics of Ecosystems and Biodiversity (TEEB) for Business Coalition — launched in Singapore with the aim of shifting corporate behavior to preserve and enhance, rather than deplete, the earth’s natural capital.
@Bart_King is a freelance writer and communications consultant.