Natural capital is largely ignored by investors as boardrooms continue to focus on short-term management decisions and priorities.
This is the key finding of a new report launched by the Chartered Institute of Management Accountants (CIMA), in collaboration with EY, the International Federation of Accountants and the Natural Capital Coalition.
The report, entitled Accounting for Natural Capital: The Elephant in the Boardroom calls for finance professionals to take the lead in helping their organisations to navigate their way through the challenges and opportunities that the depletion of our natural resources will create.
According to the report, the true cost to society from the impact of business activity on natural resources is not reflected in corporate accounts, a situation made all the more urgent by the fallacious assumption of infinite resources that currently underpin our economic and financial accounting.
The report outlines the key steps finance professionals should help their companies to take in order to integrate natural capital considerations into decision making, resource allocation and reporting, and to adapt to growing competition for ever more scarce natural resources.
Organisations that respond swiftly, embracing opportunities to innovate and manage their risks, will thrive, the report said. Organisations that do nothing will suffer from rising input costs, risks to their supply chain and reputational damage.
Sandra Rapacioli, head of sustainability research and policy, CIMA, said: “Accounting for natural capital issues isn't easy. But just because it's hard doesn't mean it shouldn't be done. We are calling on finance professionals to take action now and incorporate natural capital considerations into strategic planning and business decisions, before the regulatory axe falls. They have the skills and oversight to show the connections between natural capital, commercial opportunity and business risk and, ultimately, financial performance.”
Sally Percy is editor of The Treasurer