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This standard provides specifications and guidance for the process of preparing natural capital accounts. Natural capital accounting is a systematic way of collating financial, socio-economic and environmental information about an organization’s impacts and dependencies on nature and presenting it in formats that are familiar to decision makers. Such accounts enable organizations to see all the information in one place, think about their impacts and dependencies in a holistic way, and prioritise ‘material impacts and dependencies’. The standard ensures the whole process is transparent by requiring the documentation of scope, data, assumptions, gaps and implications of all these on the way accounts are interpreted for decision making. There are two key natural capital accounting outputs prescribed – each with supporting schedules: a) a Natural Capital Balance Sheet (NCBS) shows an organization’s dependency on natural capital assets. It mimics a financial balance sheet so far as it shows the (natural capital) asset values and (natural capital maintenance) liabilities. The two key differences are that a NCBS (i) documents the asset values to the organization and the rest of the society, when financial accounts only show the former and (ii) is forward looking, i.e. projects and compares asset values and liabilities into the future, when financial accounts show past performance. The NCBS can have two scopes: Scope 1 for the natural capital assets which the organization owns or has legal or voluntary responsibility and Scope 2 for natural capital assets owned by others. Assets that are not owned by anyone, e.g. public goods, might be included in Scope 1 or Scope 2 depending on the organization and materiality of its impacts and dependencies. b) a Natural Capital Income Statement (NCIS) shows the organization’s impacts on natural capital assets. It mimics a financial income statement so far as it shows the positive impacts (the enhancements) and negative ones (degradations). Again, like its financial counterpart, NCIS looks at the past performance during the financial year to date. The NCIS can have two scopes: Scope 1 for the impacts from the organization’s own operations and Scope 2 for the impacts attributed to the organization through the operations of its value chain. Natural capital accounting is a rare offer of holistic treatment of all data with focus on natural capital assets, such as water, forests, atmosphere, etc. as opposed to tools or approaches developed on a single-issue basis. It is a structure within which the outputs from all such tools and approaches can be gathered and interpreted together. Working within a natural capital accounting structure will help organizations identify and prioritise their data needs and select the most appropriate approaches that will support their decisions. Natural capital accounting will also help organizations align with the Taskforce for Climate related Financial Disclosures (TCFD), Taskforce for Nature related Financial Disclosures (TNFD), the future requirements from International Sustainability Standards Board (ISSB), guidance from EFRAG for Corporate Sustainability Reporting Directive (CSRD), and taxonomies developed for sustainable finance. The target audience of a natural capital account is strategic and operational decision makers in organizations, in particular, accounting, finance, risk assessment and management professionals, and C-suite executives. Through its ability to bring all information together and make it relevant for the financial sustainability of an organization, natural capital accounting is capable of changing the understanding of nature for these decision makers from a regulatory burden, the cost of which needs to be minimised, to an asset to be invested in. It is this reframing that we must achieve if we want organizations to manage their impacts and dependencies for the sustainability of their finance, for nature, and society. Natural capital accounting, and hence this standard, is applicable to organizations of all types (public, third sector and listed and unlisted private) across all sectors, and of any size (such as SMEs and larger businesses) and is relevant to one or more sites in which they operate. A group of organizations dependent on the same natural capital assets, or considering collaborating to change their impacts, may produce joint natural capital accounts. This standard does not apply to national or sector-wide natural capital accounts, but its principles are aligned to those developed by the UN System of Environmental-Economic Accounting – Ecosystem Accounting (UN SEEA-EA) within the context of the System of National Accounts. The preparation of natural capital accounts requires multidisciplinary teams including environmental and sustainability professionals, accountants, and economists, among others to help organizations embrace the complexity of nature without limiting the values of it to financial (cashflow) data.

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6 Clean Water and Sanitation 7 Affordable and Clean Energy 11 Sustainable Cities and Communities 12 Responsible Consumption and Production 13 Climate Action 14 Life Below Water 15 Life on Land

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This standard contributes to the following Sustainable Development Goals 6 Clean Water and Sanitation 7 Affordable and Clean Energy 11 Sustainable Cities and Communities 12 Responsible Consumption and Production 13 Climate Action 14 Life Below Water 15 Life on Land

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