Balancing nature’s books

Lyndall Thomas shares how accountants could help save our natural ecosystems one dataset at a time.

Natural capital accounting, also called environmental economics, is a method of measuring and reporting on nature.

Natural capital accountants look at nature as a collection of assets. They consider the extent of particular geographic areas—for example, the number of hectares in a forest, or the length and breadth of a waterway.

Then they ask:

• What condition are the assets in? For example: is the soil healthy? Is the water clean?
• What services do the assets provide? The services can be anything from water filtration to food production or carbon sequestration.
• What benefits do the assets provide the world? Humans love clean air, fresh water, healthy food and beautiful landscapes—and natural capital accountants can measure these benefits.

The intrinsic value of nature
While some people believe that money makes the world go round, others are uncomfortable with the idea of classifying nature as a series of ‘assets’. But that’s not what natural capital accountants do. Instead, they see nature’s intrinsic value.

Dr Michael Vardon, Associate Professor of Environmental Accounting at the Australian National University, says: “Intrinsic quite literally means what is within and it has value irrespective of any human use.”

He contrasts this with how we use money: “Money is for buying and selling. We don’t buy or sell the belief in the value of nature.”
Nonetheless, he explains, “[w]e still make decisions about nature, and trade-offs happen all the time, without money representing nature.”

Dr Vardon shares a case for such a trade-off, and where natural capital accountants step in:

“For example, should we allow a housing development to go ahead and lose four hectares of woodland? We estimate the monetary value of the housing development but not the intrinsic value of the woodland.

“The decision to clear the woodland or not is in the hands of the law and a judgement is made. Then, as natural capital accountants, we record the transaction. Plus four hectares of urban land, minus four hectares of woodland in the land account.

“The value of the land changes, but this is not the intrinsic value of nature on the land. We each make our own judgements about this.”

In this way, natural capital accountants don’t place a monetary value on every part of nature. Instead, they are trying to map the natural assets that we have, then use that mapping to measure and report on the outcomes from investment, development, conservation and organisational policy.

How do natural capital accountants measure nature?
Natural capital accountants use data to measure nature. In particular, geospatial data is an essential part of mapping the extent of natural capital assets. Some of the current tools in use for geospatial mapping include QGIS, ArcGIS and the FLINTpro tool (from the Mullion Group).

Tools that support the production of natural capital accounts include:

• The InVEST platform from Stanford University, which provides a tool to run a range of ecosystem services models.
• Data4Nature (D4N), developed by the Victorian Government and now operated by IDEEA Group, which measures extent and condition, consolidates data and produces accounts.
• ARIES for SEEA, developed and operated by the Basque Centre for Climate Change, which produces natural capital accounts.
• The NSW Government’s SEED platform and the Queensland Government’s GLOBE platform, which can also be used to store the observed data and create inputs to natural capital accounts.
• The global surge in uptake around natural capital accounting is being driven by technology, especially using data to analyse landscapes and inform decision-making. Factors driving this change include:
  • The availability of large public datasets, like Bushbank in Victoria and the SEED platform in NSW, to support natural capital measurement
  • The application of the United Nations System of Environmental Economic Accounting (UN SEEA)—the international standard for natural capital accounting.
  • New global initiatives towards a nature-positive future, such as the Taskforce on Nature-related Financial Disclosures (TNFD).

By the end of 2024, over 90 countries were using the UN SEEA, for example, including Australia.

Natural capital accounting in Australia
Earlier this year, the Australian Bureau of Statistics released Australia’s first full set of natural capital accounts, for 2020 to 2021. This is a huge dataset that establishes a baseline of nature in Australia for that period of time.

These accounts tell us that:

• about 49% of Australia is made up of terrestrial assets, covering 711.6 million hectares;
• another 47% of the country is made up of marine assets, covering 681.3 million hectares; and
• all our rivers and streams together add up to 4.3 million km in length.

Data like this will serve an important purpose over time because future changes to the Australian environment will be reflected in the accounts.

So, how could data help save the natural world?
Wrangling large datasets such as those collected by the ABS might not seem like the most efficient way to save nature. But the beauty of natural capital accounting is that it slots into the current global economic model. It offers organisations the opportunity to look at their dependencies and impacts on nature, and to account for them. And in the long run, it may contribute to large-scale systems change.

Dr Vardon says: “Natural capital accounting makes the environmental-economic trade-offs explicit. In the accounts we see the changes, the drivers of change and who benefits from that change or is at risk from it. The public and private sectors are aware of this and are at least looking to minimise the risks. With natural capital accounts, we can also hold decision-makers accountable. This does not guarantee better decisions, but it makes them more likely.”

This level of accountability prevents greenwashing. Organisations that report on their dependencies and impacts on nature uphold their environmental, social and governance (ESG) responsibilities, offering transparency to their stakeholders and the wider community.

Natural capital accounting isn’t mandatory for business or government—yet. But there is a growing movement toward mandatory sustainability or ESG reporting, with nine countries (including Australia, Brazil, Canada, Great Britain and Japan) now requiring these reports by law.

With a set of natural capital accounts, organisations can fulfil their reporting obligations and can even incorporate their natural capital assets on their balance sheet. In this way, we’re building on traditional accounting methods while paving the way for us all to recognise nature’s intrinsic value.

So, next time you’re catching up with your accountant, ask them if they’ve heard of natural capital accounting. Or, if you think this might apply in your work, take a look at the ways your organisation is reporting on and responding to its impacts and dependencies on nature. If you’re a shareholder in a large company—which most of us are, through our superannuation—look out for those mandatory reports.

It might not be necessary to don a cape to save the world. But a sharp pencil, reliable datasets and a willingness to recognise nature might be a big part of the solution.