Biodiversity accounting: an important and limitedly discussed topic

Michael John Jones, Emeritus Professor in the School of Accounting and Finance explores the importance of biodiversity and what organisations can do to better account for it.

Biodiversity is an extremely important international issue. There has recently been much more concern with biodiversity. For example, there has been an increasing global realisation of biodiversity’s importance and an appreciation of the extreme problem of biodiversity loss, often due to much more human interference. As outlined in my book, Accounting for Biodiversity, biodiversity consists of flora and fauna and the ecosystems in which they inhabit. It is now widely understood that biodiversity is essential for the wellbeing of both humans and the planet. For instance, it is vital in providing us with medicine, food, recreational and aesthetic services, and is understood by many as having an intrinsic and significant value. Its global importance has been demonstrated by the fact that 2010 marked the ‘Year of Biodiversity’, and that at the 2015 Paris world climate talks biodiversity was a key point of discussion. Increasingly, Biodiversity is joining sustainability as a major area of interest and concern.

However, as the Dasguta Review (2021) which examined the Economics of Biodiversity recently acknowledged, discussion concerning nature and biodiversity has been largely absent from the fields of economics and accounting. Indeed, despite the obvious importance of biodiversity, and the key role of accountants in publishing company details, there has been a surprisingly limited volume of literature on accounting for biodiversity. What does exist began with my article ‘Accounting for Biodiversity: A Pilot Study’ (1996), followed by my book, ‘Accounting for Biodiversity’ in 2014. Here, I will evaluate both the nature and importance of biodiversity and outline how companies can publish biodiversity information according to the approach outlined in my 1996 article.

Despite the fact that awareness around the importance of biodiversity is increasing, the exact nature and extent of biodiversity at local, regional and national levels remains difficult to evaluate for several reasons. Overall, there is very little detailed recording of biodiversity, and this varies globally and also within countries. Across different countries and different regions there are both different species and different amounts of biodiversity records. Indeed, overall there are very few species or regions which have a complete and detailed picture of their biodiversity. The most detailed information that exists concerns species that humans enjoy the most such as birds or mammals. There is also often information on rare and endangered species, but very limited information on population numbers or species which humans are less interested in such as insects or on flora or fauna that is not endangered.

I believe that the importance of recording and reporting biodiversity data is crucial so that biodiversity can be protected and enhanced. Organisations such as companies are accountable to various stakeholders such as the electorate, the general public or shareholders, and given that the issue of biodiversity affects each of these groups, it follows that organisations have a responsibility to account for it. Transparent information enables stakeholders to understand the state of an organisation’s natural resources. They can then, if necessary, pressure organisations into improving their biodiversity stewardship. If the information is published annually, they can also evaluate which biodiversity in the company’s area is declining. However, it is only recently that accounting practitioners, accountants and academics have started to recognise biodiversity’s importance.

In order to record and report data successfully a workable model is necessary. So far there have been two main, radically different approaches to biodiversity recording: a bottom-up natural inventory approach and a top-down ecosystem approach. The ecosystem approach focuses firstly on the whole ecological approach and then on individual biodiversity. By contrast the natural inventory model (NIM), which I have developed, is biodiversity orientated. It evaluates all the individual elements of flora and fauna to arrive at the biodiversity total, and is more precise, clearer, and more specific than the ecosystem approach.

The model has three stages: survey reporting, valuation, and reporting. In the survey stage, the organisation’s acreage and habitats are recorded and one of six levels of natural inventory can be undertaken:

  • Level 1 categorises habitat type and natural capital status providing an overview of the main ecosystems.
  • Level 2 focuses on critical species. It records an inventory of listed and protected flora and fauna by species and total population.
  • Level 3 sets up an inventory of critical habitats’ flora and fauna by species.
  • Level 4 extends level 3 by an inventory of critical habitats flora and fauna by total population.
  • Levels 5 and 6 then provide a general inventory of flora and fauna by species and then by total population.

This builds up to a survey of the flora and fauna by species number and type. They can also be given a market value and an ecological value. Finally, the information needs to be reported, for example, by companies. The idea with this approach is that this data should be recorded annually to allow longitudinal changes in biodiversity to be evaluated. Shareholders and stakeholders of a company can then identify whether the company’s biodiversity is increasing or decreasing and respond accordingly.

To date, the natural inventory model has been applied in a number of contexts, for example:

  • In an evaluation of Cosmeston Country park, a 220-acre mixed habitat site in South Wales (Jones, 1996).At Elan Valley nature reserve, a site that acts as a fresh water source for the city of Birmingham (Jones and Matthews, 2000 :Jones 2003)
  • In the Sundabarans in Bangladesh (Siddiqui, 2013), the world’s largest mangrove forest.
  • In a recent study by Horner and Davidson (2020) who used the natural inventory model to investigate the biodiversity in Tasmania.

In each of these articles, the natural inventory model was shown to give important details of the habitats in which the flora and fauna existed. It also demonstrated that critical flora and fauna species could be examined in the habitats, that the numbers of the flora and fauna species and also sometimes the population numbers can be recorded, and that valuations could be made. Indeed, as Horner and Davidson (2020 p.18) assessed, ‘with minor amendments the NIM can be useful for NGO’s in assessing the value of their biodiversity conservation and restoration activities’.

The valuation of natural assets is quite contentious. Some believe that valuing habitats and flora and fauna signals that biodiversity can be sold at that price. Others believe if a realistic valuation can be determined then wildlife assets should be valued. The Jones model prefers not to value critical flora and fauna as a monetary price valuation could conflict with their critical status.

To conclude, biodiversity is a very important global issue and concern on it has been expanding since 2010. I believe that it is important for companies and other organisations to annually record their flora and fauna in the land which they own or control. They will need to collect and record and publish the data and one way of doing this is the Jones (1996) natural inventory model. If this is done then hopefully it will improve our global knowledge of biodiversity data and help to stop the rapid decline in biodiversity loss. This will benefit human beings across the world.

About the author
Professor Michael J Jones is an Emeritus Professor and former Head of Department in Accounting and Finance at the University of Bristol. His research interests have included accounting history, annual report content, financial communication, financial graphs, impression management, fraud and creative accounting, measuring research quality, bibliometrics, sustainability, and social and environmental reporting and assurance, particularly accounting for biodiversity. Michael Jones runs a Financial Reporting and Business Communication Conference since 1996 and The Financial Reporting and Special Interest Group since January 2006. He was also an Editor of the British Accounting Review.

Dasgupta,P. (2021) The Economics of Society: The Dasgupta Review, The Royal Society, February.

Horner,C. and Davidson,N. (2020) “Accounting for biodiverse wildlife corridor plantations”, Meditari Accountancy Research@ Emerald Publishing Limited. Available on Emerald Insight ;

Jones, M.J. (1996), “Accounting for biodiversity: a pilot study”, British Accounting Review, Vol. 28, pp. 281-303.

Jones, M.J. (2003), “Accounting for biodiversity: operationalising environmental accounting”, Accounting, Auditing and Accountability Journal, Vol. 16, No. 5, pp. 762-789.

Jones, M.J. and R. Matthews (2000), Accounting for biodiversity – a natural inventory of the Elan Valley Nature Reserve, ACCA Occasional Research Paper No. 29, ACCA, London, UK.

Jones, M.J. (2014), Accounting for Biodiversity, Routledge.

Siddiqui, J. (2013) “Mainstreaming Biodiversity Accounting: Potential Implications for a Developing Economy”, Accounting, Auditing and Accountability Journal Vol.26, No5, pp.779-805

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