How can business account for its responsibility to nature and society? A key driver for sustainability is understanding how decisions are made, with whom and for what purpose. The capitals approach is the integration of organisations’ impact and dependencies on nature and society into mainstream decision-making.

What is Natural Capital Accounting?

Natural capital describes the world’s stocks of renewable and non-renewable assets. Underpinned by biodiversity, these stocks combine to produce a flow of benefits to individuals and society.

The most tangible of these benefits include provisioning services such as food, shelter and raw materials. In addition, regulating services influence the climate, provide natural flood defences and facilitate carbon storage.

Natural capital supports and is influenced by other recognised forms of capital, including financial, manufactured, societal, intellectual and human. As a result, business both impacts and depends on natural capital.

At present, numerous facets of natural capital are not valued within our current economic system. Many of our business activities produce harm to our environment, where the full cost of damage is not borne by the actor. This results in the over exploitation of our natural capital stocks. Continued poor management of natural capital will be hugely detrimental to both the environment and society. It is therefore vital to account for this natural capital within our business practices.

Accountants can apply their expertise in measuring and reporting information to help develop and embed natural capital accounting.

The Capitals Coalition

In January 2020, the Capitals Coalition united the Natural Capital Coalition and the Social & Human Capital Coalition 'to accelerate momentum, leverage success, connect powerful and engaged communities, and identify the areas, projects and partnerships where we can collectively deliver benefits for nature, people and the economy'.

The coalition is a collaboration of over 350 organisations from business, accountancy, science and academia, membership organisations, standard setting, finance, policy and civil society. They have united in a pre-competitive space because they believe that the coalition is a vehicle that can drive the global conversation and deliver desperately needed systemic change by bringing nature and people into the heart of decision-making.

Find out more: Accounting for capital: natural, social and human