Natural capital accounting attributes a monetary value to environmental resources. The process gives value to what surrounds us.
Valuing our environment
STRATEGY: BIG IDEAS
How can we place a dollar value on a national park? And why would we want to?
Vardon refers to himself as “the accidental accountant”.
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Christopher Niesche is a business journalist and content writer with over two decades experience reporting on topics such as finance, trade, fintech, management, accounting, small business and human resources.
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“It's a system for keeping stock of what you have so if you don't have enough stock then you don't deplete it.”
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Sholto Macpherson is an award-winning journalist and editor of DigitalFirst.com, a blog on the latest in accounting technology for accounting firms and SMEs
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These are the sorts of questions that Michael Vardon and other proponents of natural capital accounting grapple with.
“Everyone knows what a car is and we know how much a car should cost because that’s what we pay, but it doesn’t quite work the same way with a national park,” says Vardon, associate professor of environmental accounting at the Australian National University (ANU).
“But we have a national park because the government has decided that national parks are a good thing to have.”
So how to value it?
One way is looking at its property value, what it might be worth as farmland.
Or look at the number of people who visit it and how much it costs them to get there. “It must be worth at least what people pay to travel there,” says Vardon.
Or there are the services it provides, such as water filtration.
“We all like good quality water and that relies on good quality river catchments to provide nice filtered water to us,” Vardon says.
But water is price controlled, so the price we pay isn’t necessarily the full value of water and environmental accounting tries to calculate this.
“We try to measure the value which you get from the consumption of things which aren't included within the economic system. For example, we can value the water coming out of a dam wall, but the water coming into the dam is something we don't currently value,” he says.
– Michael Vardon, Australian National University
His background is in animal population dynamics, counting bats and crocodiles. After taking a job at the Australian Bureau of Statistics, he started in its environmental division, where he began in environmental accounting and measuring the value of water. Following stints at the United Nations in New York and the World Bank in Washington, DC he joined the ANU to switch from thinking about how you could value nature to why you would and what you’d use it for.
Some people object to environmental accounting, saying it commodifies nature, which has its own intrinsic value.
Countering that argument is the idea that economics is the language of decision making.
“We know that nature is worth something so we should be able to put some sort of value on it and include the value of nature in decision making,” Vardon says.
For instance, if a government is weighing up where to put an airport, placing a value on possible sites such as a national park is a helpful exercise.
“It's a system for keeping stock of what you have so if you don't have enough stock then you don't deplete it. And if there's a choice for where to build your airport, you build it in an area where you’re not degrading or depleting your natural capital like agricultural land.”
The discipline is taking off and the System of Environmental-Economic Accounting (SEEA) is currently being investigated around the world, with the Australian Accounting Standards Board assessing options for standards for business.
“If companies are going to do it, if we're going to have supply of biodiversity offsets and carbon credits from landholders and we're going to have buyers in corporations and then financiers, we need to know what is being bought and sold and we need to have the appropriate accounting standards for that,” Vardon says.
“We try to measure the value which you get from the consumption of things which aren't included within the economic system. For example, we can value the water coming out of a dam wall, but the water coming into the dam is something we don't currently value,” he says.
Vardon refers to himself as “the accidental accountant”.
Vardon refers to himself as “the accidental accountant”.
Some people object to environmental accounting, saying it commodifies nature, which has its own intrinsic value.
“It's a system for keeping stock of what you have so if you don't have enough stock then you don't deplete it.”
Countering that argument is the idea that economics is the language of decision making.
For instance, if a government is weighing up where to put an airport, placing a value on possible sites such as a national park is a helpful exercise.
For instance, if a government is weighing up where to put an airport, placing a value on possible sites such as a national park is a helpful exercise.
The discipline is taking off and the System of Environmental-Economic Accounting (SEEA) is currently being investigated around the world, with the Australian Accounting Standards Board assessing options for standards for business.
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