Apart from a small leading group, the majority of companies globally are not reporting on natural capital impacts and dependencies.
This leaves investors struggling to assess natural capital risks and opportunities.
The same can be said for South African business as a large portion of the country’s economy is dependent on natural capital.
A new report launched by the Association of Chartered Certified Accountants (Acca), Fauna & Flora International (FFI) and KPMG calls for robust reporting on the management and use of key commodities, including commitments to reduce impacts on natural capital.
According to Zoe Balmforth, FFI’s Senior Technical Specialist and Business & Biodiversity, if the world continues to draw down on natural capital, it risks irreversible degradation of the ecosystems, which provide goods and services on which both society and business rely.
The report reviewed published information from companies with an intensive use of five key commodities with a high impact on natural capital.
These are beef, cotton, palm oil, soya and sugar. The use of these commodities is a critical sustainability challenge.
“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," said Rachel Jackson, Acca’s head of sustainability.
"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.”
According to Vincent Neate, head of sustainability services at KPMG 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,” he said.