Natural capital accounting standard launched by BSI
The British Standards Institution (BSI) has issued its first standard aimed at helping businesses and public sector bodies measure the extent and value of their impacts on nature.
Launched as organisations await the full recommendations of the newly launched Task Force on Nature-related Financial Disclosures (TNFD), due by 2023, the BSI’s new BS 8632 standard is designed to help organisations integrate their financial accounts with their impacts on nature. It outlines how users can place a value on nature and translate this into ‘balance sheets’ and ‘income statements’. This is known as a natural capital approach.
Natural resources covered by the standard include forests, fisheries, rivers, oceans, soils, minerals, the atmosphere and the biodiversity supported by all of these habitats. Crucially, it enables the accounting of both positive and detrimental impacts to nature and can be applied to operations in any geography.
It is hoped that businesses and other organisations will be able to use the ‘balance sheets’ to inform decision-making (i.e. a financial value can be assigned to nature and risks relating to nature degradation measured) and to ensure that they are contributing to national nature goals and the international UN Sustainable Development Goals (SDGs).
‘Balance sheets’, the BSI has stated, should be regularly updated to help users of the standard track changes over time and communicate the information and its implications internally and externally. In developing the standard, it noted common challenges in terms of assessing data quality and dealing with data gaps.
Aside from businesses, the standard could be used by public sector bodies, charities, investors, auditors and those responsible for assurance, certification and regulation.
According to the World Economic Forum (WEF), $44trn – more than half of global GDP – is exposed to risks from nature loss. Similar research from WWF found that nature loss will cost the global economy at least £8trn by 2050 without transformational action from the public and private sectors, alongside governments.
Businesses and nations are under increasing pressure to measure and reduce their negative impacts on nature, ahead of the 15th biodiversity COP and 26th climate COP. The recent Dasgupta Review on the Economics of Biodiversity, commissioned by the UK Government, argues that a natural capital approach must be embedded into economic decision-making globally to give humanity the best possible chance of avoiding large-scale risk in the future.
The convenor of the BSI’s assessing and valuing natural capital expert group Ece Ozdemiroglu said: “There is increasing awareness that maintaining natural capital is a business sustainability issue, yet many investors still believe that nature is too complex to invest in. By setting out a framework and documentation requirements for natural capital accounting, the new standard will make such investments much easier."
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