Natural capital provides the raw materials and resources that businesses need to create products and services. And for the first time in history global regulators are requiring mandatory corporate reporting of non-financial capital – with accountants at the forefront of turning natural, social and human capital into measurable value. 

But there is a huge task ahead, so how can organisations and their accountants get started on measuring and reporting reliable, relevant data on its natural capital?

Frameworks for support

Social, natural and human capital are not just ethical considerations but strategic business assets. Their integration into decision-making is vital to building sustainable and profitable businesses that are resilient in the face of global challenges, investor needs and changing societal expectations. Ignoring these dynamics will pose significant operational, reputational, and strategic risks that businesses can no longer afford. 

There are a number of critical frameworks available to help finance professionals structure their approach to gathering data and reporting on natural capital. The Natural Capital Protocol (NCP) and the Social and Human Capital Protocol (SHCP) provide comprehensive methodologies to guide finance professionals in measuring and reporting natural capital. The SHCP is a broad decision-making framework for identifying, measuring and valuing impacts and dependencies on social and human capital. 

As well as aiding sustainability approaches, frameworks are also essential for disclosure, setting targets and driving action. The Taskforce on Nature-related Financial Disclosures (TNFD) and its LEAP (Locate, Evaluate, Assess and Prepare) approach is another framework that organisations can use. It is based around four critical steps: 

• locate; 
• evaluate; 
• assess; and 
• prepare. 

The TNFD LEAP framework, which relies on established protocols – particularly the NCP – for conducting valuations, offers a structured approach for identifying, assessing and preparing for nature-related disclosures.

IT firm Accenture has applied the LEAP framework to identify critical nature-related dependencies and impacts in its UK and Ireland operations. By focusing on direct operations and upstream supply chains, the company mapped activities, prioritised key locations and assessed its natural capital risks. 

The Global Reporting Initiative (GRI), primarily a reporting framework, can indirectly support valuation by providing comprehensive metrics that organisations can use to assess and quantify their impacts on economic, environmental and social factors. Research by KPMG shows that nearly 80% of the world’s largest companies use the GRI framework.

These frameworks enable businesses to systematically identify and manage their dependencies and impacts on natural ecosystems, imperative for strategic resilience in a rapidly evolving sustainability landscape.

Each framework serves a unique purpose; however there are interconnections and overlaps among them. Both the NCP and the SHCP are rooted in specific types of non-financial capital, but they share a common methodological foundation that can be integrated into broader reporting and management strategies, such as those advocated by the GRI. 

Meanwhile the Social Return on Investment, a framework that quantifies the value of social impacts, complements the SHCP and NCP by providing a valuation method that can be aligned with the qualitative and quantitative assessments found in both protocols.

Core fundamentals

The four core principles fundamental to valuing the direct and indirect effects of businesses on non-financial capital are relevance, reliability, consistency and transparency.

Understanding these principles is essential because they ensure that any valuation of impacts and dependencies on natural, social and human capital is meaningful for strategic decision-making.

• Relevance refers to the importance of information being directly related to and significant for stakeholders’ decision-making needs. 
• Reliability centres on how dependable and consistently verifiable the information is. 
• Consistency focuses on applying the same methods in similar conditions across time, which allows for comparable and coherent results.
• Transparency ensures that all methodologies, assumptions and sources are clearly documented and disclosed.

These core principles aid integration into wider decision-making processes, ensuring that sustainability is not just a side issue but a central factor in all strategic planning. 

In practice

Identifying where and how your organisation’s operations, activities, practices, locations and value chains impact natural, human and social capital flows is the starting point.

ICAEW’s Sustainability Accelerator Programme, an e-learning course that is free for members, outlines a useful six-step process for financial practitioners to follow: 

1. assessing business context and mapping value chain; 
2. materiality assessment – incorporating double materiality;
3. stakeholder engagement;
4. prioritisation;
5. integration into business strategy; and
6. continuous monitoring and reporting. 

This process will help focus the minds of finance professionals in structuring their approach.

This approach not only helps in managing immediate environmental impacts but also builds long-term stakeholder trust and aligns with the company’s broader sustainability commitments. 

The accountants’ role is pivotal. By quantifying these dependencies and impacts, organisations and their stakeholders can uncover hidden risks, align strategies with natural capital considerations and make informed, sustainable decisions. 

Businesses that fail to act will face operational disruptions, rising costs and reputational damage. However, those that understand and manage their relationship with nature are better positioned to mitigate risks, seize opportunities and drive long-term resilience.