Bringing extinction accounting into the heart of integrated reporting

Posted
4 June, 2018

Scientists declare that we have now entered the sixth mass extinction on planet earth, that they identify is a direct result of human – and corporate – activity. From insects to mammals, trees to flowers, species are going extinct at an unprecedented rate. The corporate world and society rely entirely on the healthy functioning of the ecosystem surrounding us. Each and every species has a unique place in our ecosystem and through the interconnectedness of all life on earth, every extinction diminishes and weakens the ecosystem. The stark fact is that if the ecosystem collapses due to continued extinction after extinction, then human life will also be under threat. Species extinction presents a financial business risk for companies and investors. We only have to consider the crisis in pollinator populations to see how bee decline is a material financial risk for the food sector.

Integrated thinking, at the heart of integrated reporting, merges social, environmental and economic factors into corporate strategic value creation throughout the whole organisation. Consequently, the contribution of companies to species extinctions cannot be excluded from integrated reports. As integrated reporting brings environmental and ecological outcomes into the heart of accounting, the ways in which species are affected by a company’s activities, as well as steps companies are taking to prevent extinctions, must be included in integrated reports.

A new book, Around the World in 80 Species, which I edited, provides an extinction accounting framework for companies to disclose their impact on species and their extinction prevention efforts. The extinction accounting framework can be incorporated neatly into any integrated report and should assist organisations in demonstrating how they are treating ‘Natural Capital’ and how they are preventing extinctions where they operate. Extinction accounting represents a mechanism of ecological governance which can, and hopefully will, prevent the extinction of species worldwide, as outlined in Mervyn King’s recent book, Chief Value Officer, Accountants Can Save the Planet.

Integrated reporting provides a natural vehicle for extinction accounting. Indeed, only integrated reporting could bring this crucial form of ecological accounting into the heart of corporate reporting. All other capitals rely entirely on the healthy continuance of natural capital. It is critically important that ‘natural capital’, in other words life on earth, is preserved and protected in every way possible – and integrated reporting which incorporates an extinction accounting framework is one means to this end. The book also provides emergent examples of extinction accounting practice from organisations in Africa, East Asia, Europe, North America and Canada, and the polar regions. The extinction accounting framework will assist integrated reporting to move us towards a more sustainable future.

Around the World in 80 Species also emphasises the rising investor demand for extinction accounts from their investee companies. Investors are engaging with companies on marine and other species extinctions, as outlined in a chapter by a leading investment practitioner.