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Emerging threats: natural capital depletion will leave businesses dangerously exposed, warns new report

As we become increasingly aware of our reliance on natural resources, which are dangerously thin from the demands of a growing and more prosperous global population, businesses are facing a stark choice – adapt or fail.

A new report launched by the Chartered Institute of Management Accountants (CIMA), in collaboration with EY, the International Federation of Accountants (IFAC) and the Natural Capital Coalition, calls for finance professionals to take action and lead the change to prevent their organizations failing in today's ever changing environment.

‘Accounting for Natural Capital: The Elephant in the Boardroom’ highlights how, despite its importance, natural capital is largely ignored by investors as boardrooms continue to focus on short-term management decisions and priorities. The true cost to society from the impact of business activity on natural resources is not reflected in corporate accounts, a situation made all the more urgent by the ‘fallacious assumption of infinite resources that currently underpin our economic and financial accounting’.

Organizations that respond swiftly, embracing opportunities to innovate and manage their risks, will thrive. Those that do nothing will suffer from rising input costs, risks to their supply chain and reputational damage.

Steve Lang, partner in EY's Climate Change and Sustainability Services, said: “In an increasingly resource-constrained world, it will become as important for an organization to account for its natural capital dependencies and impacts as it is for its relationship with its financial capital. Natural capital is no longer an abstract issue but one which is reflected across a range of business priorities: in revenue growth through new opportunities; in margin management through rising input costs; in organizational reputation through risk management; and in operational and supply chain stabilisation and efficiency programmes. Accounting for natural capital goes to the very heart of how companies create value; our profession has a unique role to play in enabling businesses to manage value in this broader sense”.

The report is available at www.cimaglobal.com/naturalcapital

•Date: 16th May 2014 • World •Type: Article • Topic: Operational risk management

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