Giving value to nature, the challenge for companies

Giving value to nature, the challenge for companies

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Published on September 08, 2021

What if the services provided by nature or the impacts of companies on the environment were integrated into company accounts? Multi-capital accounting methodologies, taking financial, environmental and human factors into account, have emerged to encourage companies to preserve nature’s resources in the same way as their financial resources. At the Giverny forum, companies are making proposals to speed up the implementation of this new accounting.

Research in accounting does not make people dream… Yet it is one of the main levers for transforming the action of companies to better respect the climate and biodiversity. For several years, experts have been working to integrate into the books of accounts elements other than just financial results, such as the impact that companies can have on the environment. Concretely, any degradation or use of nature would then be considered as a debt that must be repaid, in the same way as a bank loan.

These “multi-capital accounting” methods thus add to the balance sheet the value of nature and that of human capital, in addition to the financial aspect. “This consists of integrating the value of environmental capital into the valuation of the company“, summed up Lionel Canesi, President of the Order of Chartered Accountants, at the Giverny Forum on Corporate Social Responsibility (CSR), on September 3. Several large companies are beginning to seriously address the issue.

The members of this forum made several proposals to increase the weight of CSR in the economy, some of which aimed precisely at generalizing the valuation of the environment in company accounts. Several companies have launched initiatives on the subject, such as L’Oréal, which also funds a research chair at the Audencia Business School on the issue.

Standardize information

The cosmetics group wanted to integrate two departments that had spoken little to each other until then, the financial department and the CSR department. The group is conducting an experiment to set up multi-capital accounting. “There is a shift in mindset about what constitutes business performanceexplains Alexandra Palt, CSR director at L’Oréal. CSR must be more integrated.”

The European Commission, for its part, is working to put in place a reporting framework for companies’ environmental, social and governance (ESG) issues, based on the work carried out by its advisory group on financial information (Efrag). This standardized ESG reporting is a useful prerequisite for multi-capital accounting. A draft directive on corporate sustainability reporting (Corporate sustainability reporting directive, CSRD) was presented at the beginning of the year and must now be discussed by the European legislator.

France, which will preside over the European Union from January 2022, seems determined to move the subject forward quickly. “It is with certainty that, at the will of the President of the Republic, the CSRD will be one of the priorities of the French presidency of the European Union.“, assured Olivia Grégoire, the Secretary of State in charge of the Social, Solidarity and Responsible Economy at the Giverny Forum.

Arnaud Dumas, @ADumas5

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