What is natural capital accounting? (Business Green)

Will Nichols / Business Green / December 2012

This article gives an overview of the process of including natural capital in national and company accounts.

This approach was the main focus of the Rio+20 conference and is being worked on by the UN Environment Programme Financial Initiative, World Bank and other international bodies.

Governments and business are being encouraged to take the natural capital approach seriously. The idea is that countries and companies will be better able to calculate their true environmental impact to assess whether they are operating sustainably or at a loss.

There are also risks (for example to supply chains as a result of climate change) and potential business opportunities related to how companies manage existing stocks of natural capital (dependence on natural inputs).

There are several initiatives already underway in the United Kingdom that could provide a key reference point internationally. These include the Ecosystem Markets Task Force that is assessing how companies’ goods, services and investment can contribute to environmental protection. And a Natural Capital Committee that is working with accountancy firms to research how natural capital can be included in corporate accounts.