Accountants Identify Top Risks Natural Capital Poses to Operations

by CFO Innovation Asia Staff

The private sector has a responsibility to protect the natural environment is a key finding of a new paper called "Natural Capital - What do Accountants Think?" which has been published by the Association of Chartered Certified Accountants.

Accountants in the survey also identified the top five risks that natural capital poses to operations in the private sector, as being reputational risk (68%); disruption of operations (61%); scarcity and increased cost of resources (50%); supply chain risk (47%); and financing risk (46%).

"Natural capital, which is the stock of capital derived from natural resources such as biological diversity, ecosystems and the services they provide, is in decline globally," says Gordon Hewitt, sustainability advisor at ACCA and author of the report. "The loss of natural capital exposes companies to a range of new risks and opportunities that can impact profit, asset value and cashflow."

Hewitt notes that the initial report, which was produced last year, investigated the concept of materiality, how it is used to identify issues for management and disclosure and the extent to which it currently reflects the significance of natural capital as a business issue.

The accountants surveyed were aware of the links between corporate value and natural capital, and that current trends in natural capital present a variety of different risks to businesses that are likely to increase over time.

"However this awareness has not flowed into widespread corporate action as many of the accountants surveyed work for organisations that do not report on natural capital. The key barriers to greater uptake include a lack of guidance, valuation methodologies and understanding," says Hewitt.