Business
MAKING NATURAL CAPITAL A MATERIAL BUSINESS CONCERN
Published by Gbaf News
Posted on December 6, 2013
8 min readLast updated: January 22, 2026
Global Banking & Finance Review®
Company
Published by Gbaf News
Posted on December 6, 2013
8 min readLast updated: January 22, 2026
A new briefing paper outlines how materiality definitions are changing to include natural capital and encourages business reporting to follow suit
A new briefing paper from KPMG, Fauna & Flora International (FFI) and ACCA (the Association of Chartered Certified Accountants) shows that:
Dr Stephanie Hime
The briefing paper, Identifying natural capital risk and materiality, is an information guide for businesses interested in understanding natural capital as a business risk and a material issue. It is the first in a series of shorter briefing papers directed at business leaders, Chief Financial Officers and accounting professionals that follow up on the 2012 report Is natural capital a material issue? An evaluation of the relevance of biodiversity and ecosystem services to accountancy and the private sector.
Natural capital – the stock of capital derived from natural resources such as biodiversity, ecosystems and services they provide – is declining globally. Business operations that have negative environmental impacts can have high, but often unrecognised costs for organisations, investors and society.
Recent analysis estimates that global primary production and processing sectors (forestry, fisheries, agriculture, mining, oil and gas exploration, utilities, cement, steel, pulp and paper and petrochemicals) have unaccounted costs of US$7.3 trillion per year – mostly from greenhouse gas emissions, water use and land use.[1]
The briefing paper outlines how changing definitions of materiality affect the boundaries of materiality assessments, enhancing interest in and justification for natural capital’s consideration in corporate materiality assessments in relation to the three key areas:
“Responsible investors are increasingly considering natural capital a material business concern and more and more want to see portfolio companies, particularly in high risk sectors, stay alert of how these -otherwise hidden- business risks might implicate their financial performance,” says Cecilia Repinski, Director of the Natural Value Initiative of Fauna & Flora International.
Incorporating natural capital issues in corporate materiality and risk assessments offers a range of benefits and value to companies: from better-informed decision making by an organisation and its stakeholders, to an enhanced and more comprehensive risk management process, to an increased ability to realise strategic opportunities.
To take advantage of these opportunities, companies are recommended to:
ACCA, FFI and KPMG work together in a unique partnership to raise awareness and improve the understanding of the accountancy profession’s role in accounting for natural capital.
Rachel Jackson, ACCA Head of Sustainability, said: “Finance professionals within business have to look at the whole picture and natural capital is a fundamental part of that. Accountants need to acknowledge that natural capital can be a material issue and that they have a pivotal role in reducing business impact and dependence on it.”
Dr Stephanie Hime, Manager and Lead Specialist – Natural Capital, KPMG UK Sustainability Services, said: “The changing focus of materiality analyses is the first step to ensuring that natural capital issues are included within corporate risk assessment and disclosures. The briefing paper seeks to provide information for businesses interested in understanding natural capital as a business risk and a material issue.”
[1] TEEB, Natural Capital at Risk: The Top 100 Externalities of Business
A new briefing paper outlines how materiality definitions are changing to include natural capital and encourages business reporting to follow suit
A new briefing paper from KPMG, Fauna & Flora International (FFI) and ACCA (the Association of Chartered Certified Accountants) shows that:
Dr Stephanie Hime
The briefing paper, Identifying natural capital risk and materiality, is an information guide for businesses interested in understanding natural capital as a business risk and a material issue. It is the first in a series of shorter briefing papers directed at business leaders, Chief Financial Officers and accounting professionals that follow up on the 2012 report Is natural capital a material issue? An evaluation of the relevance of biodiversity and ecosystem services to accountancy and the private sector.
Natural capital – the stock of capital derived from natural resources such as biodiversity, ecosystems and services they provide – is declining globally. Business operations that have negative environmental impacts can have high, but often unrecognised costs for organisations, investors and society.
Recent analysis estimates that global primary production and processing sectors (forestry, fisheries, agriculture, mining, oil and gas exploration, utilities, cement, steel, pulp and paper and petrochemicals) have unaccounted costs of US$7.3 trillion per year – mostly from greenhouse gas emissions, water use and land use.[1]
The briefing paper outlines how changing definitions of materiality affect the boundaries of materiality assessments, enhancing interest in and justification for natural capital’s consideration in corporate materiality assessments in relation to the three key areas:
“Responsible investors are increasingly considering natural capital a material business concern and more and more want to see portfolio companies, particularly in high risk sectors, stay alert of how these -otherwise hidden- business risks might implicate their financial performance,” says Cecilia Repinski, Director of the Natural Value Initiative of Fauna & Flora International.
Incorporating natural capital issues in corporate materiality and risk assessments offers a range of benefits and value to companies: from better-informed decision making by an organisation and its stakeholders, to an enhanced and more comprehensive risk management process, to an increased ability to realise strategic opportunities.
To take advantage of these opportunities, companies are recommended to:
ACCA, FFI and KPMG work together in a unique partnership to raise awareness and improve the understanding of the accountancy profession’s role in accounting for natural capital.
Rachel Jackson, ACCA Head of Sustainability, said: “Finance professionals within business have to look at the whole picture and natural capital is a fundamental part of that. Accountants need to acknowledge that natural capital can be a material issue and that they have a pivotal role in reducing business impact and dependence on it.”
Dr Stephanie Hime, Manager and Lead Specialist – Natural Capital, KPMG UK Sustainability Services, said: “The changing focus of materiality analyses is the first step to ensuring that natural capital issues are included within corporate risk assessment and disclosures. The briefing paper seeks to provide information for businesses interested in understanding natural capital as a business risk and a material issue.”
[1] TEEB, Natural Capital at Risk: The Top 100 Externalities of BusinessExplore more articles in the Business category
