Abstract
Purpose– The purpose of this paper is to suggest a practical means of incorporating ecological capital into the framework of business entities. Investors and shareholders need to be informed of the viability and sustainability of their investments. Ecological (natural) capital risks are becoming more significant. Exposure to material risk from primary industry is a significant factor for primary processing, pharmaceutical, textile and the financial industry. A means of assessing the changes to ecological capital assets and their effect on inflows and outflows of economic benefit is important information for stakeholder communication.Design/methodology/approach– This paper synthesises a body of literature from accounting, ecological economics, ecosystem services, modelling, agriculture and ecology to propose a way to fill current gaps in the capability to account for ecological capital. It develops the idea of the ecological balance sheet (EBS) to enable application of familiar methods of managing built and financial capital to management of ecological assets (ecosystems that provide goods and services).Findings– The EBS is possible, practical and useful. A form of double-entry bookkeeping can be developed to allow accrual accounting principles to be applied to these assets. By using an EBS, an entity can improve its capability to increase inflows and avoid future outflows of economic benefit.Social implications– Although major efforts are under-way around the world to improve business impact on natural resources, these efforts have been unable to satisfactorily help individual businesses elucidate the practical economic and competitive advantages conferred by investment in ecological capital. This work provides a way for businesses to learn about what the impact of changes to ecological assets has on inflows and outflows of economic benefit to their enterprise and how to invest in ecological capital to reduce their enterprise’s material risk and create competitive advantage.Originality/value– No one has synthesised knowledge and practice across these disciplines into a practical approach. This approach is the first demonstration of how ecological assets can be managed in the same way as built capital by using proven practices of accounting.
Published Version
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callMore From: Sustainability Accounting, Management and Policy Journal
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
