ISO 14054 Natural Capital Accounting for Organizations
ISO 14054 is intended to provide specifications and guidance for the process of preparing natural capital accounts. Natural capital accounting is a systematic way of collating financial, socio-economic and environmental information about an organization’s impacts and dependencies on nature and presenting it in formats that are familiar to decision makers. Such accounts enable organizations to see all the information in one place, think about their impacts and dependencies in a holistic way, and prioritise ‘material impacts and dependencies’. The standard ensures the whole process is transparent by requiring the documentation of scope, data, assumptions, gaps and implications of all these on the way accounts are interpreted for decision making.
Why is it being developed?
There is a growing need for standardized approaches, metrics and analyses to assess and value natural capital, to create an inclusive process, to communicate the process and the results, and to allow an audit/assurance of them. The intention for ISO 140054 is to respond to this need.
A key challenge is that nature is complex. Understanding our impacts and dependencies on it and how these affect us is even more so: for example, how pollution of the local water source results in increased costs of water supply, as well as killing fish species, limiting our recreational opportunities, and affecting human health. Some of this complexity is inherent. Some, on the other hand, stems from environmental sciences and environmental economics being new subjects for decision makers managing organizations or data and analysis providers they tend to procure from.
A specific aim of natural capital accounting is to reduce this complexity by collating all the data in one place and presenting it in formats that are familiar and meaningful for decision makers. No format is more familiar and effective than financial accounts. This is why natural capital accounting mirrors the format of balance sheet and income statement. However, financial accountants / auditors, and even ESG data providers often don't have the necessary mix of skills and experience within their areas of expertise.
Who will be able to use the standard?
The preparation of natural capital accounts requires multidisciplinary teams including environmental and sustainability professionals, accountants, and economists, among others to help organizations embrace the complexity of nature without limiting the values of it to financial (cashflow) data.
A working group of experts was established to develop this standard. The base draft was taken from BS 8632:2021 'Natural Capital Accounting for Organizations. Specification' which will be adjusted to reflect developments since its publication and capture the increasing auditing/assurance demands.
The project leader is Stephanie Hime and the convenor of the working group is Ece Ozdemiroglu.