Rayne van den Berg is the former CFO of Forico – Tasmania’s largest private plantation forestry manager. Her experiences have helped to inform the Global Accounting Alliance’s (GAA) new nature guidance for accountants. In a case study for the guide, which offers support for individuals based on their role, van den Berg shared how she was able to put nature on the balance sheet.

Nature risk is financial risk

Nature is increasingly seen as a strategic issue, one that affects operational costs, financial performance, enterprise value and market competitiveness. 

Accountants have a professional responsibility and the skills to help organisations assess, manage and report on their nature-related risks and opportunities. They can also play a key role in driving a wider transition towards a net-zero, nature-positive and socially just economy.

Why nature matters to accountants: a guide to building resilience and value through nature-positive action from the GAA aims to equip accountants to support their organisations and clients on this critical issue.

Alan Vallance, ICAEW Chief Executive and a member of the GAA’s Board of Directors, said: “On World Wildlife Day, we are reminded of the critical role that nature plays in supporting our economies and societies. Accountants play a key role in helping the businesses they advise and lead in getting on top of the agenda and navigating a way forward. We are proud to have developed this practical guide for accountants to use to integrate nature across their work.”

The document offers support to accountants on understanding the financial impact of nature-related issues and embedding these considerations into their day-to-day work. The GAA has created guidance tailored for different roles, including board members, senior manager, analysts, report preparers, as well as external auditors and assurance practitioners. The guide also contains a series of case studies to illustrate how companies have incorporated nature-related risks and opportunities into their business strategy. 

Toby Roxburgh, Nature and Biodiversity Manager at ICAEW and co-lead author, said: “Climate change is one part of a wider nature crisis threatening businesses and our economies – one that also involves biodiversity loss, land use change, water and resource scarcity, and pollution. Accountants can build on progress on climate – bringing in these wider dimensions of nature as an integral element of business strategy. It is a learning curve, the key thing is to get started.” 

Forico: championing nature-related reporting

In 2021, Forico released Australia’s first natural capital report. It was the first time the value of nature appeared as a financial statement, the numbers were assured so they had credibility. Forico has repeated these reports annually in sync with its financial reporting cycle.

For van den Berg, this was a journey about accountants and ecologists finding a common language of value. It was about “putting nature on the balance sheet” to transform corporate reporting, and strategic decision-making, by considering the costs of externalities and the value that natural assets contribute to the business and wider society.

The Forico estate comprises some 90,000 hectares of sustainable plantation forestry and 80,000 hectares of forestry that is actively managed for conservation and biodiversity at a cost of over $600k per annum. In its traditional balance sheet the “non-productive” asset had no material value assigned to it. 

The natural capital report started as a project to reveal the “invisible” value of this forest so that the company and its stakeholders could see what its transactions with nature might look like. “We found that the value of the company’s natural capital balance sheet was conservatively four to five times more than the traditional financial balance sheet,” says van den Berg. 

This exercise demonstrated that the company was, in effect, a land custodian and that the land had value beyond just the productive value of the timber – such as carbon storage, control of water flows and sediments, and supporting biodiversity. By highlighting the wider value generated to society, the work has helped to enhance engagement from environmental advocacy groups and other stakeholders.

“Balance is very important,” says van den Berg. “Logging, trucking, shipping and water use can have negative impacts on the environment, but accountants can show how sustainable practices can consider, improve and balance often contradictory values – whether that be financial, societal or environmental values.”

These early forays into natural capital reporting had a halo effect. For example, mining companies are starting to prepare natural capital balance sheets, and having conversations about nature-related impacts, dependencies, risks and opportunities. But, she suggests, accountants must be involved. “The numbers need to mean something and be credible to financial markets,” she says.

Nature and the role of CFOs

“A CFO’s core role is to create and protect value. But we need to modify the traditional financial definition of value to also include natural, human and social capital,” says van den Berg.

“There has to be more transparency for accountability,” she continues, “and there must be more conversations between finance teams and sustainability teams. They need to find better ways to speak and work with each other.”

What resonates with financial professionals is using language associated with managing risk and showing how these risks impact the business’s value over short- and long-term horizons.

“Boards need to think about climate and nature in the same way they think about cyber and geo-political risks,” she says. “Those risks either need to be mitigated or the opportunities they provide need to be harnessed. Ultimately, it’s about having a cohesive strategy across the entire C-suite.”

Understanding nature risks cannot wait until we finish addressing climate risks, she warns. It requires strategic planning to address the whole suite of risks.

What’s at stake

Van den Berg is quite clear that a company wins when it mitigates risks better than its competitors. Out of risk comes opportunity – but it will take CFOs and the rest of the C-suite, as well as company directors, working together to identify and respond to these issues.

Her message to boards is, given that compliance with regulation is coming, to get resources and talent in place. After all, a company’s impacts on nature can be found in all sorts of places – be it datacentre related or water-use related or any other driver for nature loss – and there is an education piece to be done around a business’s influence on its associated value chain.

“Everyone has to transition,” she says. “Every part of society needs to evolve. Some of us have a larger responsibility than others, but there will need to be change.”