Natural Capital: What Do Accountants Think?
Published on: Mar 3, 2016
Transcripts - Natural Capital: What Do Accountants Think?
Natural Capital – what do accountants think?
IntroductionDuring 2012 ACCA, in partnership with KPMG and Fauna and Flora For further informationInternational (FFI), published the report Is natural capital a material issue?The report investigates the concept of materiality, how it is used to Gordon Hewittidentify issues for management and disclosure and the extent to which Sustainability Adviser, ACCAit currently reflects the significance of natural capital as a business issue. firstname.lastname@example.orgIn order to gather the views and opinions of accountants on naturalcapital, ACCA conducted a survey of its membership. The key findingsof this survey are presented in this paper.This paper is the first in a series of articles that expand upon the researchconducted for the ACCA/KPMG/FFI project. Is natural capital a material issue? An evaluation of the relevance of biodiversity and ecosystem services to accountancy professionals and the private sector A report from ACCA, Fauna & Flora International and KPMGACCA_Natural Capital_ExecSumm.indd 1 5/11/12 15:05:12 NATURAL CAPITAL – WHAT DO ACCOUNTANTS THINK? 2
The information presented in this paper represents: 218 completed surveys 50 countries, including the UK (15%), Malaysia (10%), Ireland (8%), Mauritius (6%) and Pakistan (4%). 17 sectors, including the construction, oil & gas, public sector, consulting, transport and manufacturing industries. 13% who were either CFOs or Finance Directors, with a further 5% being CEOs or other executive board directors. 8% of respondents were financial controllers and 19% held a management position. NATURAL CAPITAL – WHAT DO ACCOUNTANTS THINK? 3
Natural capital and corporate success 1 The long term success of many organisations The long term success of my organisation is dependent on the natural world is dependent on the natural world Strongly agree 44% Agree 19% Neither agree nor disagree 25% Disagree 7% Strongly disagree 5%63%of accountants agreed or strongly agreed that the 81%long term success of their organisations is dependent of accountants agreed or strongly agreed that the privateon the natural world. sector has a responsibility to protect the natural environment. NATURAL CAPITAL – WHAT DO ACCOUNTANTS THINK? 4
> Continued 2 Trends in natural capital pose a range The top 5 risks highlighted by accountants have been identified of different risks to the private sector as follows: 1. Reputational risk (68%) 2. isruption of operations (61%) D 3. carcity and increased cost SAccountants surveyed identified a number of resources (50%)of different risks to their operations that areassociated with natural capital. 4. Supply chain risk (47%)These included physical risks that disrupt 5. Financing risk (46%)an organisation’s activities and increase input costs;regulatory risks, such as new pricing andcompensation regimes; and market risks,such as changing consumer preferences. NATURAL CAPITAL – WHAT DO ACCOUNTANTS THINK? 5
Continued 3 The risks posed by natural capital The top five issues are provided below: are expected to increase in the future Issue Important Important or Change Trend or very very important important now in 5 years’ time Loss of market share and 49% 58% 9% customer loyalty due to negative impacts on natural capital resulting in impacts on tourism etc Reputational, operational 46% 54% 8% or market risks associated with the loss of biodiversityThe accountants surveyed were asked toidentify whether a range of issues were important Climate regulation 55% 59% 4%or very important now, and how that would change Access to clean air 57% 58% 1%over the next 5 years. In all but one case, the Securing continued 54% 52% -2%importance of the issues increased over time. access to fresh water NATURAL CAPITAL – WHAT DO ACCOUNTANTS THINK? 6
Corporate approaches to managing natural capital 4 Organisations are taking steps to manage My organisation takes steps to manage natural capital issues their impacts on natural capital, but could do more Strongly agree 24% Agree 27% Neither agree nor disagree 27% Disagree 16% Strongly disagree 6%51% 43% of accountants agreed or strongly agreed that they consider naturalof accountants agree or strongly agree that their capital when making decisions at work. This is a lower proportion thanorganisations are taking steps to manage natural those that felt there are strong links between natural capital and thecapital issues. success of their organisations. NATURAL CAPITAL – WHAT DO ACCOUNTANTS THINK? 7
Continued 5 Few companies are Does your organisation report What are the key barriers to reporting on natural capital on natural capital reporting on natural capital 51% 49% 48% 45% 34% 11% 4%62% of accountants surveyed e g es re l w er ia nc in no su th gi er nd da O lo s k at rework for organisations that do ta ’t do i tm gu rp on rs ho de no D de renot report on natural capital, with et su un ol is m lo eh ue of n sconly 3% of respondents working ak io iss k di c at st La e of lu o Th va N ckfor organisations that extensively La of kreport of natural capital. c La Yes – extensively 3%Respondents highlighted a Yes – briefly 24%number of barriers to reporting on No 62%natural capital, the most significant Don’t know 11%being a lack of disclosure guidance(51%), a lack of understanding(49%) and a lack of valuationmethodologies (48%). NATURAL CAPITAL – WHAT DO ACCOUNTANTS THINK? 8
The need for greater guidance on natural capital 6 Guidance as a means to increase I need guidance and training on natural capital issues to help me better manage the risks and opportunities presented by them understanding and better manage risks and opportunities Strongly agree 44% Agree 31% Neither agree nor disagree 14% Disagree 7% Strongly disagree 4%75%of accountants surveyed felt that guidance andtraining on natural capital issues would helpthem better manage the risks and opportunitiespresented by them. NATURAL CAPITAL – WHAT DO ACCOUNTANTS THINK? 9
SummaryThe accountants surveyed were aware of the links between corporate value and natural capital, and that current trends in naturalcapital present a variety of different risks to businesses that are likely to increase over time.This awareness however, has not flowed into widespread corporate action. This was best demonstrated by the fact that the majority of accountantssurveyed, work for organisations that do not report on natural capital. The key barriers to greater uptake of reporting include a lack of guidance, valuationmethodologies and understanding. This last point has also been reflected in the survey, as three quarters of respondents felt that they need training andguidance to better manage the risks and opportunities associated with natural capital.In order to address this demand, ACCA is continuing its research into the topic of natural capital and will be producing a number of reports andpapers over the coming months. ACCA will also be collaborating with expert groups, such as the Natural Capital Declaration, and will be contributingto wider initiatives that are seeking to produce guidance on how to account for natural capital. natural valuation accurate material ensure decisions including guiding assessments operations resources biological communities concern importance Earth standarised biodiversity report integrated organisations disclosure financial materiality flora developing lack professionals stock reporting accounting floods demonstrates threats tools biodiversity systems services strategicecosystems depend corporate society international Awareness quality develop issues fauna importance capital members risk opportunities exposures account companies dependencies considering information BES impacts among benefits incorporated accounts stakeholders consider assessment finance ecosystem standards protection investors business engage diversity barrier capacity CFOs revenues development accountancy impact water recreational defined assurance NATURAL CAPITAL – WHAT DO ACCOUNTANTS THINK? 10