The report, Business and investors: providers and users of natural capital disclosure reviewed published information from companies with an intensive use of five key commodities with a high impact on natural capital: beef, cotton, palm oil, soya and sugar. The use of these commodities is a critical sustainability challenge and the report discusses many examples of the approaches taken to disclosure by significant users of these commodities. Standard practices revealed by these companies include: supplier certification, supplier audits, membership to industry wide sustainability initiatives and monitoring and traceability activities.
The report demonstrates a clear link between an organisation’s strategy for managing its use of these commodities and the extent to which it impacts on the natural world. The unsustainable use of natural capital can create or exacerbate corporate risk and is becoming increasingly important to investors.
Outside a small leading group the majority of companies are not reporting on natural capital impacts and dependencies. This leaves investors struggling to assess natural capital risks and opportunities
Rachel Jackson, ACCA’s head of sustainability, said: 'Businesses are beginning to measure their impacts on natural capital, and accountants need to understand the pivotal role they should have in accounting and reporting for it accordingly. This, in turn, will not only help reverse the unsustainable use of natural capital caused by companies, but also provide more complete information required by the investors.'
Zoe Balmforth, FFI’s Senior Technical Specialist, Business & Biodiversity, said: 'If we continue to draw down on natural capital, we risk irreversible degradation of the ecosystems that provide goods and services on which we – both society and business - rely on. By managing natural capital sustainably, companies can help to ensure these goods and services are available to them, and to all of society, for the long term. They can also mitigate their own business risks – for example from disruptions to supply chains and operations, future changes to legislation and the impacts of reputation.'
Vincent Neate, head of sustainability services at KPMG said: 'Transparency on value at risk between managers and investors is critical grist in the mill of capital markets. Leading companies are making their own lives easier by demonstrating the security of their commodity sourcing to investors. I hope this report encourages others to follow suit.'
- To read the Business and investors: providers and users of natural capital disclosure paper, visit the 'Related links' section, left of this article.
- For a full copy of the briefing paper Identifying natural capital risk and materiality, released in 2013, visit the 'Related links' section, left of this article.
- For a full copy of the 2012 report Is natural capital a material issue? An evaluation of the relevance of biodiversity and ecosystem services to accountancy and the private sector, visit the 'Related links' section, left of this article.
- Natural Capital is the stock of capital derived from natural resources such as biological diversity and ecosystems along with geological resources such as fossil fuels and mineral deposits. It provides the ecosystem products and services that underpin our economy and inputs or indirect benefits to business. This report focuses on biodiversity and ecosystems, specific constituents of natural capital that give rise to ecosystem services. Geological resources are not considered as they are routinely included in market transactions and accounting practices.
- Materiality is a concept that recognises that information, if omitted or misstated, can influence the assessments of the users of corporate reports. It defines the point at which information becomes relevant to report users. For example, the Global Reporting Initiative G4 Reporting Guidelines state: “Relevant topics are those that may reasonably be considered important for reflecting the organisation’s economic, environmental and social impacts, or influencing the decisions of stakeholders, and, therefore, potentially merit inclusion [in reporting].”