A new collaborative report explores the preparedness of the accounting profession to respond to declining natural capital
Date
Sections
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 practiced, 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
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.
ACCA (The 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 will be
officially launched at a briefing event held in London today.
Natural capital – the stock of capital derived from natural resources such as
biological diversity, ecosystems and the services they provide – 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
Author of the report Dr Stephanie Hime of KPMG’s Climate Change and
Sustainability practice said: “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”.
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.”
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For more information, please contact:
Lali Sindi, ACCA Newsroom
+ 44 (0) 207 059 5643
+44 (0) 7921 698085
Margot Cowhig, KPMG Press Office
+44 (0)207 694 4246
+44 (0)7920 274856
Available for Comment:
- Rachel Jackson, Head of Sustainability, ACCA
- Dr Stephanie Hime, Lead Specialist – Biodiversity and Ecosystem Services, KPMG
Climate Change and Sustainability Services
- Paul Herbertson, Director Environmental Markets Programme, Fauna & Flora
International
Notes to Editors
1. Natural Capital is the stock of capital derived from natural resources such as
biological diversity and ecosystems along with geological resources such as
fossil fuels and mineral deposits. It provides the ecosystem products and
services that underpin our economy and inputs or indirect benefits to business.
This report focuses on biodiversity and ecosystems, specific constituents of
natural capital that give rise to ecosystem services. Geological resources are not considered as they are routinely included in market transactions and
accounting practices.
2. About ACCA (www.accaglobal.com): ACCA (the Association of Chartered
Certified Accountants) is the global body for professional accountants,
supporting 154,000 members and 432,000 students throughout their careers,
and providing services through a network of over 80 offices and centres. ACCA works to strengthen a global profession that is based on the application of consistent standards, which ACCA believes provide the best support for
international business and the desire of talented people to have successful,
international careers. ACCA champions the needs of small and medium‐sized
business (SMEs) and emerging economies, and promotes the value of
sustainable business.
3. About Fauna & Flora International (www.fauna‐flora.org): Fauna & Flora
International (FFI) protects threatened species and ecosystems worldwide,
choosing solutions that are sustainable, on the basis of sound science and
taking account of human needs. Operating in more than 40 countries
worldwide‐ mainly in the developing world‐ FFI saves species from extinction
and habitats from destruction, while improving the livelihoods of local people.
Founded in 1903, FFI is the world’s longest‐established international
conservation body and a registered charity. Through its global corporate
partnerships, within the Business & Biodiversity Programme, FFI aspires to
create an environment where business has a long‐term positive impact on
biodiversity conservation. FFI leads the Natural Value Initiative (NVI)
collaboration (www.fauna‐flora.org/initiatives/nvi). To date, the NVI has
released a series of valuable publications and tools that address biodiversity
and ecosystem services within the finance, extractive, pharmaceutical, and
agricultural sectors.
4. About KPMG (www.kpmg.co.uk) As sustainability and climate change issues
move to the top of corporate agendas, KPMG in the UK's Climate Change and
Sustainability Services (CC&S) practice assists organisations by providing
sustainability and climate change Assurance, Tax and Advisory services to
organisations, helping them apply sustainability as a strategic lens to their
business operations in order to better understand the complex and evolving
environment, optimising their sustainability strategy.
For more information, please visit our website:
http://www.kpmg.com/UK/en/services/Audit/Pages/ClimateChangeandSustai