Is Natural Capital a Material Issue?

Jay Owen Reforming Global Finance

Report from ACCA, Fauna & Flora International and KPMG, November 2012

an evaluation of the relevance of biodiversity and ecosystem services to accountancy professionals and the private sector

From the Report:

“Is Natural Capital a Material Issue?” investigates the concept of materiality and how it is used to identify issues for management and disclosure. It is aimed at accountancy professionals and business leaders. It explores the extent to which materiality definitions currently reflect the increasing significance of natural capital as a business issue.  A survey of over 200 accountancy professionals, interviews with CFOs/senior management from eight 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 were all undertaken as part of this work. The report focuses on biodiversity and ecosystems, which are specific constituents of natural capital that give rise to ecosystem services.

The Association of Chartered Certified Accountants (ACCA), KPMG and Fauna & Flora International’s Natural Value Initiative (NVI) have come together to investigate the concept and existing use of materiality and its conflicts in light of the increasing significance of natural capital as a business risk. This report focuses specifically on issues of biodiversity and ecosystem services (BES). It asks the question, are current approaches and guidance on BES enough to enable corporate management of risk and opportunity?

Many businesses could find that their impacts on nature directly affect their credit worthiness, balance sheets and company values within the next five to ten years, as moves to place an economic value on ‘natural capital’ accelerate. With that in mind, urgent work should be done to find practical ways to assess and report on the natural capital impacts of business and to use those assessments in formulating future strategy. CFOs and accounting professionals must be at the centre of this work.

Read the full report.