A paper published last week by the Association of Chartered Certified Accountants (ACCA) asserts that companies have a responsibility to protect the environment and the loss of natural capital exposes the private sector to a range of risks and opportunities.
A paper published last week by the Association of Chartered Certified Accountants (ACCA) asserts that companies have a responsibility to protect the environment and the loss of natural capital exposes the private sector to a range of risks and opportunities.
The paper is based on the results of a survey of more than 200 accountancy professionals, which investigated the concept of materiality — how it is used to identify issues for management and disclosure and the extent to which it reflects the significance of natural capital as a business issue.
The responses show those surveyed were aware of the links between corporate value and natural capital, and that current trends in natural capital present a variety of different risks to businesses that are likely to increase over time. However, this awareness has not translated into widespread corporate action, as many of the accountants work for organizations that do not report on natural capital. The paper identifies the key barriers to greater uptake as a lack of guidance, valuation methodologies and understanding.
According to the survey — a response to a report released in November called Is Natural Capital a Material Issue? —the top perceived risks natural capital poses to private sector operations include threats to reputation, supply chains and finances as well as disruption of operations and scarcity and increased cost of resources.
“Natural capital, which is the stock of capital derived from natural resources such as biological diversity, ecosystems and the services they provide, is in decline globally,” said Gordon Hewitt, sustainability advisor at ACCA and author of the report. “The loss of natural capital exposes companies to a range of new risks and opportunities that can impact profit, asset value and cash flow.”
The financial sector has become more vocal about sustainability issues in recent weeks. Another report released last week by financial services firm Jones Lang LaSalle claims companies that implement successful sustainability initiatives solicit employee participation and recommends organizing the engagement process into three phases: raising awareness, building engagement and maintaining commitment. And in February, the Carbon Disclosure Project announced investors representing a third of the world’s invested capital have asked more than 5,000 public companies to report their carbon emissions and climate change strategies through the Project.
Published Apr 2, 2013 2am EDT / 11pm PDT / 7am BST / 8am CEST
Managing Director, Sustainability & Social Impact
Deutsche Bank
Mike Hower is a sustainability communicator and connector committed to helping purpose-driven businesses and people unlock their full potential for positive impact. As founder and principal consultant at Hower Impact, he works with companies to translate sustainability strategy into stories that inform, engage and inspire investors, customers, employees, regulators and other stakeholders in the service of social, environmental and business goals. Through his Impact Hired initiative, he works to connect and engage corporate sustainability professionals at all stages of their careers.
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