Improving nature’s visibility in financial accounting (report from Natural Capital Coalition, April 2020)

Excerpts from the Natural Capital report:

“As a growing number of organizations identify and assess their impacts and dependencies on natural capital, they also seek ways to use and report the results. Given that financial accounting is a key decision-making tool, linking natural capital data with financial accounts is an obvious route to examine.

This report presents methods to address the questions of how can financial accounts be adjusted to make natural capital more visible to decision makers and/or in disclosures?

This report provides an overview of four innovative approaches and identifies potential future routes and collaborations to mainstream solutions. The four methods explored all show how parts of financial accounts, such as an income or balance sheet, can be altered to include figures that reflect natural capital impacts and/or dependencies. The methods presented are neither comprehensive nor complete, but they are all illustrated through real-world examples, showing that action can be taken. They help companies to understand and visualize how they can integrate natural capital within their income statement and/or balance sheet, and what impact this could have.

The specific methods differ in their approaches, providing different routes to make natural capital visible within different aspects of financial accounts:

– Method 1 – Integrating Natural Capital Accounting practices into Financial Accounting of Intangible Assets: Treating some investments to enhance natural and human capital as an “intangible asset” under existing accounting standards (International Accounting Standard 38).

– Method 2 –Value Added Statement for Nature: Reshaping the income statement to show how much of the value generated by companies is “given back” to nature.

– Method 3 – Comprehensive Accounting with Respect to Ecology (CARE) Model: Including new types of liabilities and assets that reflect debts to (as a result of inputs from) natural and social capital.

– Method 4 – Integrating Natural Capital into Financial Accounting: Illustrating integration of financial and natural capital into a single income statement and balance sheet”

Read the entire report here.

Or visit Natural Capital here.

Sources: All texts, content, quotes and graphics by Natural Capital Coalition. All credits and rights to Natural Capital Coalition.

Posted in CSR, bæredygtighed og samfundsansvar, CSR-risikostyring, CSR-strategi.