Report calls for robust reporting on management of key commodities

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"If we continue to draw down on natural capital, we risk irreversible degradation of the ecosystems that provide goods and services on which both society and business rely on," says Zoe Balmforth, a senior technical specialist for business and biodiversity at FFI.

The report, 'Business and investors: providers and users of natural capital disclosure' reviewed, published information from companies with an intensive use of five key commodities with a high impact on natural capital, namely beef, cotton, palm oil, soya and sugar.

Examples of approaches

The use of these commodities is a critical sustainability challenge and the report discusses many examples of the approaches taken to disclosure by significant users of these commodities. Standard practices revealed by these companies include supplier certification, supplier audits, membership to industry wide sustainability initiatives and monitoring and traceability activities.

Although the report focuses on a global trend, locally the report demonstrates a clear link between how an organisation's strategy and the extent to which it impacts on the natural world are vital in risk assessments. The unsustainable use of natural capital can create or exacerbate corporate risk and is becoming increasingly important to investors.

Outside a small leading group the majority of companies globally are not reporting on natural capital impacts and dependencies. This leaves investors struggling to assess natural capital risks and opportunities. The same can be said for South African business. A large portion of South Africa's economy is dependent on natural capital.

Pivotal role of accountants

"Businesses are beginning to measure their impacts on natural capital, and accountants need to understand the pivotal role they should have in accounting and reporting for it accordingly," Rachel Jackson, ACCA's head of sustainability, said. "This, in turn, will not only help reverse the unsustainable use of natural capital caused by companies, but also provide more complete information required by the investors."

Karen Smal, acting head of ACCA, said opportunities and benefits can arise from including natural capital in strategy and governance structures within the South African market. "By integrating natural capital into core business strategy and comprising it to other areas of business an organisation can begin to secure itself to diminish risks and realise opportunities."

"Transparency on value at risk between managers and investors is critical grist in the mill of capital markets. Leading companies are making their own lives easier by demonstrating the security of their commodity sourcing to investors. I hope this report encourages others to follow suit," Vincent Neate, head of sustainability services at KPMG, said.