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.
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.
The focus of this methodology is to measure and value how business activities affect societies through changes in natural capital and ecosystem services, and how businesses can identify their dependencies on natural capital through ecosystem services (incorporating double materiality logic). To this end, the NCMA methodology focuses on the application of natural capital accounting in a business decision-making context, that is, in a management accounting rather than an external reporting capacity. In doing so, it also aims to improve data quality and robustness for business decision making, noting that these improved data can, in turn, be used for external reporting to stakeholders.
This methodology sets out pragmatic steps for establishing corporate natural capital management accounts, based on extensive benchmarking and testing of methodologies. For simplicity, this process of natural capital accounting is referred to as an ‘environmental profit and loss’(EP&L) as a means of designating the change in natural capital resulting from a business’s activities.
The below image is an example of how EP&L intensity can be tracked over time against a predefined target.
The table below gives a template for how the outputs might be presented.
A recording of the launch event can be watched here.
Download the NCMA in full here.
Further General Guidance can be found here.
Agri-Food Sectoral Guidance can be found here.
Apparel Sectoral Guidance can be found here.
Chemicals Sectoral Guidance can be found here.