Accountancy as an institution must evolve continuously as new questions are asked of it: the fact that a broader gamut of issues must be taken into account by businesses reveals that the existing accounting framework needs to adapt. This report – Improving Nature’s Visibility in Financial Accounting – offers the potential first steps to change the trajectory of sustainability reporting’s evolution and build an accounting system fit for purpose.
Why is this work relevant?
There is no longer any doubt that nature’s degradation threatens businesses. The case for change is there: now is time to move into action. Businesses must demonstrate leadership for positive change – and be accountable for achieving it. Disclosure and accountancy, therefore, play a crucial role to build trust in this transformation.
Advanced businesses recognize that thinking about their resources and relationships in terms of capitals can bring significant advantage. There are thousands of companies around the world conducting capitals assessments but there is not yet a standardized way to include assessment outputs in financial accounts.
Given that financial accounting is a key decision-making tool, linking natural capital data with financial accounts is an obvious route to examine.
A range of organizations are developing approaches showing how accounts could evolve to make natural capital more visible to decision makers and/or in corporate disclosures.
This report – Improving Nature’s Visibility in Financial Accounting – describes and illustrates methods to integrate natural and other capitals into financial accounting. The methods discussed are not intended to provide the panacea, rather, they offer novel improvements to current financial accounting approaches.
As with all the projects run through the Capitals Coalition, collaboration is key. The idea to develop this project came from the community of practitioners who were already looking at ways of adjusting financial accounts to make natural capital, and other capitals, more visible in disclosures.
This work has been led by Economics for the Environment Consultancy Ltd (eftec) on behalf of the Capitals Coalition, with contributions from Paolo Quattrone, University of Manchester, Alexandre Rambaud and Clément Feger, AgroParisTech and Jeremy Nichols, independent.
This work has been discussed with a wider range of experts from different backgrounds, recognizing that to change systems we need all stakeholders to be involved.
Those interested in this work can be briefed by a primer intended to open the appetite for further explanation and detail in the full report.
We launch this report in the spirit of open enquiry, of identifying issues and raising questions rather than providing complete answers. We hope that it will be of broad appeal and will act as an invitation to engage. We invite you to join this effort, support the capitals movement, and contribute to the discussion around harmonizing capital approaches, to improve all of our decision making by explicitly valuing the resources and relationships upon which we depend.
For further discussion, please keep in touch with us through: firstname.lastname@example.org