Accountants ‘Ignoring Natural Capital Risks’

Nearly half of accountants identify natural capital – the stock of capital derived from natural resources such as biological diversity, ecosystems and the services they provide – as a material issue for their businesses, but the majority are reporting little or no information on the issue, according to research by the Association of Chartered Certified Accountants.

According to Is Natural Capital a Material Issue?, some 49 percent of survey respondents identified natural capital as a material issue for their business and linked it to operational, regulatory, reputational and financial risks. However, the report found that only a handful of companies in sectors with high environmental impact are reporting substantial detail on biodiversity and ecosystem services (BES), and the majority are reporting little or no information owing to the perceived immateriality of the issue.

However, in some cases, an item or issue relating to biodiversity and ecosystem services is measurable in financial terms and, therefore, included in the quantitative elements of the accounts, the report says. CFOs need to use their board position to educate other board members on the importance of BES within key management and strategic decisions, ACCA says.

The report was co-authored by the ACCA, KPMG and Fauna & Flora International and 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.

In 2009, the ACCA joined forces with a host of other global accounting institutions including the American Institute of Certified Public Accountants to call for universal accounting standards on financial information related to climate change. In association with The Prince of Wales Accounting for Sustainability Project, the groups sent an open letter to political leaders worldwide calling for such standards.

AICPA President and CEO Barry Melancon said that universal corporate accounting standards would reduce complexity and allow businesses and investors to make better decisions about reporting their climate change data.