Application of double-entry accounting to biodiversity

Internal and external stakeholders in businesses are becoming more and more conscious of the importance of “natural capital” in the creation of value.  During the last two decades, businesses have published an ever-increasing number of reports on their recognition of natural capital , particularly in relation to climate change (carbon footprint), water and waste.

However, the quantified data divulged are, at present, essentially limited to the annual flows, such as the use of resources or greenhouse gas emissions.  Biodiversity is often referred to only in narrative form (few figures and little traceability) and without taking account of the net impact, in the business’s balance-sheet, on the “stock” of natural capital.

In a recent article, we proposed the adoption of new accounting policies for  biodiversity, based on the double-entry accounting system which is commonly used by businesses.

In effect, this is a question of the accounting system base principle used by all businesses and organisations:  the accounting entries are made in two accounts (at least) – a debited account and a credited account. The entry history thus reflects a photograph of the business’s financial position on each date, with its gains, the state of its cash flow, its risk assessment, its debts and its receivables.  The equivalence between debits and credits indeed enables checks of the accuracy of the accounts from several angles.

To apply the balance-sheet principle to biodiversity, the hectares used by the activities of a business (or a site, or a project) are counted and their state of conservation is described in relation to a benchmark state (good state) using field data and observations (Biotope’s staff are specialists in this type of assessment). The number of hectares, multiplied by the indicator of the state of conservation,  gives us a figure which can thus constitute a unit of account in the business’s balance-sheet. The surface areas and their state of conservation then constitute a measurement of the “biodiversity capital” that the business possesses and for which it is responsible towards its stakeholders and the rest of society.  

This method thus makes it possible to quantitatively value the natural capital of a business and to monitor and aggregate the impacts, both positive and  negative, on the ecosystems over time and on different sites.  Those data can also help the stakeholders better to understand whether the management activities put in place are effective for reaching their biodiversity objectives, and are intended to enable enlightened decisions to be taken.

To illustrate the application of this approach, the cases of the station at Manduel (Gard) and the offset natural site at Cossure (Bouches-du-Rhône) have been studied.

The full article is available in the review Ecosystem Services: https://www.sciencedirect.com/science/article/pii/S2212041620300462.