Sustainability Meets Financial Reporting and Commercial OpportunitiesPublished by Tony Juniper on Wed, 02/01/2013 - 12:00am
Tony Juniper shares his sustainability hopes for 2013, a year in which he'd like to see business tools that better reflect the economic value of nature
Sustainability has dipped out of the headlines, but 2013 may still bring important progress with an increasing number of companies realising that their prospects depend on benefits provided by nature.
A growing number of corporations are achieving short-term growth by cannibalising the very sources of wealth that will sustain them in the long term. Research demonstrates how this comes with some big numbers attached. As a result, the business case for sustainability is changing and being elevated from one that rests on reputational enhancement to a far more strategic position that is about the longer-term protection of core business.
Many businesses are seeking new approaches that embody long-term sustainability. Some, such as the World Business Council for Sustainable Development, are articulating a quite radical agenda.
But if the activities of companies are to be aligned with the capacities of natural systems, then better information will be needed. This will require companies to collect, use and report broader information integrated with what they provide about their financial performance. The discussion on how best to do this with ecological and social data is at an early stage, although a lot of progress is likely during 2013.
The new TEEB for Business Coalition has embarked on a three-year programme to seek consensus on how to measure, value and report the dependencies and impacts that companies have in relation to natural capital, and in ways that will allow businesses to better manage these risks and opportunities. The International Integrated Reporting Council will be looking at how an organisation creates and sustains value in the short, medium and long term, and drives reporting that reflects the environmental, social and commercial context within which they operate.
The penny has dropped for many people, but chief financial officers in major companies often still seem to need convincing. They are key to changing companies' behaviour and while some of them understand the problem, for example the CFOs at Unilever and Interserve, many remain resistant. A report published by the Prince of Wales's Accounting for Sustainability project demonstrates how many CFOs remain to be persuaded as to why or how they should use information on areas like ecosystems and biodiversity in strategic and operational decisions.
The challenge of convincing more CFOs to work with new numbers notwithstanding, 2013 will see new proposals for policies that will encourage companies to align their activities with the ecosystems they rely upon more effectively.
In the UK, the findings of the Ecosystems Markets Task Force (EMTF) will propose to government how policy might assist in integrating the sustainable management and enhancement of ecosystems with commercial opportunities (for example, through adopting measures to restore bogs and floodplains to reduce flood risk, thereby reducing insurance payouts). Its recommendations will be reviewed by, among others, the Treasury's natural capital committee, which will be encouraged by EMTF to help companies find new ways to account on their reliance and use of natural capital (ideally in ways that will complement other processes, such as the TEEB programme).
The fact that campaign groups have entered this territory on natural capital accounting, an area that was in theory more the domain of accountants, is significant. Friends of the Earth's Make It Better campaign is drawing attention to the hidden ecological costs in products such as smartphones, and in calling for a more circular approach to manufacturing (whereby waste from old products becomes a resource to make new ones) is also urging the introduction of mandatory environmental and social reporting.
With 2013 looking like it will see better measurement, science-based policy, and more transparency and tools to help better reflect the economic value of nature, it will be fascinating to see the UK government's (and especially the Treasury's) reaction. If such a business-friendly and economically rational approach is still resisted then surely it will only be possible to conclude that outdated anti-environment ideology is the real barrier to progress.
Tony Juniper's new book on the economic value of nature is called What Has Nature Ever Done for Us? and is published in January 2013
This article was first published by The Guardian on January 2nd 2013