Natural Capital Accounting
Natural Capital Accounting
Natural capital accounting is a systematic way of collating financial, socio-economic and environmental information about an organization’s impacts and dependencies on nature and presenting it in formats that are familiar to decision makers.
A Natural Capital Account is made up of a Natural Capital Income statement which focuses on the impacts and dependencies of an organisation and their effect on natural capital in the past year and/or a Natural Capital Balance Sheet. The Natural Capital Balance Sheet is a future looking assessment of impacts and dependencies taking account of the benefits nature provides and costs the organisation incurs to maintain nature. Both outputs include values to the business and values to society and are underpinned by a series of supporting schedules. The values to business and to society are displayed side by side.
ISO14054 (under development) Natural Capital Accounting for Organizations
ISO14054 (under development) has been released for public consultation from the end of November 2024 to the 10th of February 2025 (note different country mirror committees may have slightly different timings).
ISO14054 is intended to provide specifications for the process of preparing natural capital accounts to respond to the need for standardised approaches, metrics and analyses to assess and value natural capital, as well as communicate, audit and assure the outcomes and processes.
Natural Capital Accounting video series
Little Blue Research's Dr Stephanie Hime, in collaboration with Ece Ozdemiroglu, have launched a video series discussing some frequently asked questions on Natural Capital Accounting and the development of ISO14054 (under development) Natural Capital Accounting for Organizations.
How are business costs included in a natural capital account?
Eftec's Ece Ozdemiroglu explains how supporting schedules of natural capital accounts show the financial costs and benefits to businesses and how accounts can be used to answer the question of whether the organisation is investing enough in nature to be sustainable.
Natural capital accounting case studies
Frequently Asked Questions
What is natural capital accounting used for?
Natural capital accounting can be used for:
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Understanding impacts and dependencies on nature
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Understanding nature related risks and opportunities
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Scenario analysis of different strategic and operational decisions, external factors and investment
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Monitoring and reporting changes over time
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Developing a strategy for green finance
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Identifying what assets to invest in
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Understanding what market & non-market returns to expect
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Understanding whether natural capital risks are appropriately priced
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Understanding whether financial provisions are sufficient to maintain natural capital
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Corporate reporting
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Internal communication - across the organisation
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External communication - customers, regulators, investors and other interested parties.
How do natural capital accounts support other frameworks and standards?
Natural capital accounts:
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Help to support monitoring of relevant targets and monetary indicators for TNFD and CSRD
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Help with scenario analysis as balance sheets can be used to collate forecasted values into the future under different scenarios. This enables the production of several future looking natural capital balance sheets that can help to test the potential risks and opportunities associated with different scenario based assumptions supporting a number of external standards and frameworks.
Official standards like those created by national institutions or ISO show what good process, practice and outputs look like. ISO14054 (under development) presents principles, requirements, and guidelines for preparing natural capital accounts (NCA). It is not a how to guidance – as such wealth of information lives with the prepares of the standard and the accounts is available from different expert groups and preparers of NCAs.