ACCA, Fauna & Flora International and KPMG, January 2014. This paper is an information guide for businesses interested in understanding natural capital as a business risk and a material issue. It outlines how materiality definitions are changing to include natural capital and encourages business reporting to follow suit.
This paper shows that:
Natural capital – the stock of capital derived from natural resources such as biodiversity, ecosystems and services they provide – is declining globally. Business operations that have negative environmental impacts can have high, but often unrecognised costs for organisations, investors and society. Recent analysis estimates that global primary production and processing sectors (forestry, fisheries, agriculture, mining, oil and gas exploration, utilities, cement, steel, pulp and paper and petrochemicals) have unaccounted costs of US$7.3 trillion per year – mostly from greenhouse gas emissions, water use and land use.
The paper outlines how changing definitions of materiality affect the boundaries of materiality assessments, enhancing interest in and justification for natural capital’s consideration in corporate materiality assessments in relation to the three key areas:
Incorporating natural capital issues in corporate materiality and risk assessments offers a range of benefits and value to companies: from better-informed decision making by an organisation and its stakeholders, to an enhanced and more comprehensive risk management process, to an increased ability to realise strategic opportunities.