Natural Capital Protocol Launched in Chartered Accountants Hall to Great Fanfare
Stathis Gould | July 18, 2016 |
Organizations spanning business, finance, civil society, the non-profit sector, and academia as well as the accountancy profession participated in the launch of the Natural Capital Protocol in London on July 13 at an extremely well attended event with approximately 200 participants.
Another 1.25 million people were involved or reached in the virtual world through the Natural Capital Coalition’s Twitter campaign and the use of the amplification platform Thunderclap. In the UK, the Protocol trended on Twitter, just behind David Cameron’s final Prime Minister Question Time before leaving office hours later. Online, organizations as diverse as Unilever, Dow Chemical, the UN, Virgin, and IFAC—among thousands of others—voiced their support for the Protocol and hailed its release and the move toward the greater visibility of nature in business.
The excitement and anticipation for the Protocol is shared by a diverse group of stakeholders. Like the International Integrated Reporting Council, the Coalition draws its strength from is multi-stakeholder governance platform. No one group drives or controls the agenda. Disparate experts and business folks have come together to address a common vision: natural capital is precious and needs to be better managed by societies and organizations.
The Natural Capital Protocol is a framework designed to help generate trusted, credible, and actionable information for business managers to inform decisions and disclosures about natural capital impacts and dependencies. It begins to unify various methodologies and approaches in this space.
The accountancy profession has been significantly involved in the Coalition and the development of the Protocol. The Institute of Chartered Accountants in England and Wales (ICAEW) hosts and facilitates governance and direction. Through various consortia, a number of accounting firms developed different elements of the Protocol and sector guides, including Deloitte, EY, and PwC. IFAC has also been active with the Coalition in an advisory capacity and through the Coalition’s Operations and Communications Groups.
The involvement of the accountancy profession, and the 2.8 million professional accountants represented by IFAC’s member organizations, in natural capital accounting is partly about building a relevant profession for the future. The profession has much to offer global efforts to develop the evaluation, measurement, and management of a broader range of capitals—those beyond financial and manufactured capital. Natural capital is a good place to start. As Michael Izza, Chief Executive of the ICAEW, reflects: “How we preserve the capital stock of nature is the most important question we face today; without nature there is nothing. The accountancy profession has a huge role to play in this endeavour.”
Accounting for natural capital needs the input and capacity of the profession to develop and promote methods and practices. Accountants in business, particularly CFOs and FDs, have a hugely influential role.
The 2014 report from the Chartered Institute of Management Accountants, EY, IFAC, and the Coalition, Accounting for Natural Capital: The Elephant in the Boardroom, included five key recommendations for how senior finance leaders and management accountants can support the adoption of natural capital accounting. The report encouraged the leadership and involvement of CFOs in proactively managing natural capital.
A number of CFOs are now incorporating the “sustainability” agenda within their remit. This is partly down to ensuring this agenda is treated as a core business activity and not an activity orchestrated in a corner office and, ultimately, running parallel to business decisions.
These CFOs are stepping up and taking a wider view of their stewardship role, in which going concern and business viability is considered over a longer horizon. CFOs, such as Tim Hayward of Interserve plc and John Lelliot of The Crown Estate, openly talk about dealing with sustainability as part of their portfolio to ensure they are embedding relevant considerations around natural (and other capitals) into the strategies, planning, and activities of their organizations.
At the Prince of Wales’s Accounting for Sustainability Project’s Measure What Matters event prior to the launch of the Protocol, John Lelliot spoke about the stewardship role of the CFO, management accountants, and finance function extending beyond strictly financial information. As one ICAEW member put it at the Protocol launch event, the duty of care of chartered accountants requires application of their professional skills to this field to help ensure businesses understand and respond to natural capital impacts and dependencies. The sustainability of organizations, economies, and societies depends on it.
By bringing standardization and a practical approach, the Protocol begins to provide accountants the opportunity to boost their relevance as business partners, as well as the resilience of their organizations.
For more information on the Natural Capital Protocol, please visit the Coalition’s website.