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The Transparent Project Launches The Natural Capital Management Accounting Methodology

June 09, 2023 |

The accelerating deterioration of natural ecosystems, the loss of biodiversity, and a rapidly changing climate are fundamentally changing the traditional context for business decision-making. Once a fringe discussion, the role that natural systems play is now accepted in the mainstream as essential to the functioning of our economic and financial systems.

Governments, business leaders, and investors across the world are increasingly recognizing their dependence on the health of natural capital, and the ways in which their impacts on nature may undermine their continued success. The urgent need for action is reflected in significant momentum globally towards better understanding, measuring, and managing the role of non-financials in enterprise value. The realms of academia, finance, business, and policy are all contributing to the further development and harmonization of approaches.

The Transparent Project (led by the Value Balancing Alliance (VBA), the Capitals Coalition, the World Business Council for Sustainable Development (WBCSD) and the European Commission’s DG Environment) has been funded by the EU Life Programme to develop a standardized Natural Capital Management Accounting (NCMA) methodology for business in line with the ambition of the European Green Deal.

This publication is the world’s first standardised methodology providing practical application guidance for corporate accountants in charge of establishing a natural capital accounting system. The methodology empowers private sector decision-makers with the information necessary to generate long-term value and improve business resilience, enabling a shift towards a more sustainable financial and economic system.

It will enable the integration of environmental information and financial accounts and support companies in managing their environmental risks and opportunities.

The NCMA methodology has been developed in an iterative process and close engagement with corporate practitioners, experts, academia and the general public. Each phase of the methodology development was accompanied by stakeholder reviews, piloting and public consultations to facilitate widespread adoption by companies worldwide.

Anna Karamat, European Commission, commented: “Tackling our environmental challenges will require significantly stepping up actions to support the transition to a green and biodiversity-friendly economy. The EU Green Deal and the EU 2030 Biodiversity Strategy stress the need to better integrate environmental considerations into public and business decision-making and announce that the Commission will support the development of standardised natural capital accounting practices.”

Read the NCMA in full here.

As the last outputs of the Transparent Project, three sectoral guidance documents will be published for the agri-food, apparel, and chemicals sectors. These guidance documents delve into unique issues faced by each sector. The sector-specific guidance documents will further support users in their decision-making processes and build upon the NCMA.

The Transparent Project marks a major contribution to the European Commission’s commitment “to support businesses and other stakeholders in developing standardized natural capital accounting practices within the Union and internationally, with the aim of ensuring appropriate transaction costs”.

Together with its sister project, Align, which will provide integrated guidance focused on the challenging natural capital aspect of biodiversity, we believe that the guidance provided through the Transparent methodology will support a more sustainable financial and economic system that delivers value for nature and people alongside business and the economy.

The Transparent project included a Call for Methods on NCMA which resulted in over 30 new tools and guidances being uploaded to the Natural Capital Toolkit.

For more information on the Transparent project please head here.

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