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How do companies account for their use of natural resources?

ACCnaturalresourcesThe University of Otago Business School is leading New Zealand research into understanding how companies are accounting for their use of natural resources.

Some global companies now undertake biodiversity accounting as part of their annual reporting cycle, recognising the importance of understanding the true costs of business, as Accountancy and Finance researchers Prof Ralph Adler, Dr Rakesh Pandey and Dr Mansi Mansi have found.

Heavy industry were amongst the first to adopt biodiversity accounting – those considered to have a larger environmental footprint, like mining or chemical corporations.

Now most of the top 150 global companies disclose some biodiversity information, and biodiversity accounting has become a new area of research.

However, the extent of biodiversity reporting is variable; the larger companies have significantly increased their disclosures on biodiversity in 2013 compared with 2010, compared to smaller companies.

The researchers' longitudinal study has monitored global companies publishing annual and sustainability reports containing information on biodiversity risk management, biodiversity conservation, biodiversity offset and threatened and extinct species.

Companies operating in high profile biodiversity areas and belonging to red zone industries are more likely to make biodiversity and threatened species disclosures.

But the researchers have concluded there is not enough information being reported for biodiversity performance to be assessed by external parties, despite many interviewees speaking about their companies being more open and transparent.

To minimise an organisation’s use of biodiversity reporting as an impression management tool, it is therefore suggested that biodiversity reporting should be more impact-based. Organisations should provide a report of their activities and their direct and tangible impacts on short-term and long-term biodiversity in and around their operating sites.

It is also suggested that this reporting should be provided on a site-by-site basis.

About the research

One study has looked at trends in biodiversity reporting by Australian mining companies both before and after the UN’s declaration of the Decade on Biodiversity in 2010 – an undertaking aimed at addressing the continuing loss of species diversity.

There is a strong need for better biodiversity reporting by Australia’s mining industry, due to the significant impact this industry has on Australia’s biodiversity.

It found Australia’s mining companies have increased their reporting on biodiversity following the UN declaration. Unfortunately, the increase in reporting has not been matched by more precise descriptions of exactly what, where, and how much the companies are doing, whether it be descriptions of their negative biodiversity impacts or their attempts at conservation.

Another study examined biodiversity and threatened species reporting of the top 150 Fortune Global companies.

The aim was to understand the extent of disclosure about their biodiversity and species conservation practices, and to explore the effects of biodiversity partners and industry on companies’ biodiversity and threatened species reporting.

This research highlighted limited reporting on biodiversity and threatened species by the top 150 Fortune Global companies, only 15 providing any substantial reporting, and a lack of consistent reporting across all index items, even among the high scoring companies.

They also found a positive association between the amount of reporting and companies’ holding of biodiversity partnerships.

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