The disclosures on natural environment capital as currently practised globally are too limited to provide insights into risk management, a new report by the Association of Chartered Certified Accountants, KPMG and Fauna & Flora International has shown.
The collaborative survey conducted on the preparedness of the accounting profession to respond to declining natural capital investigated the concept of materiality and how it is used to identify issues for management and disclosure.
Natural capital is the indispensable resources and benefits essential for human survival and economic activity provided by ecosystem.
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’, also explored the current response of the accountancy profession to the increasing importance of natural capital as a business issue.
It involved a survey of more than 200 accountancy professionals, interviews with Chief Financial Officers and 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.
In the survey, 60 per cent 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, and nearly half (49 per cent) 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.”
On his part, Head of Sustainability at ACCA, Ms. 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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New report faults disclosures on natural environment capital