As an emerging concern in the global debate on sustainability, Natural Resource Accounting (NRA) and its potential benefits have caught the world’s attention. This process involves quantifying the value of resource depletion and environmental degradation due to economic activities. The relevance of NRA is linked to an old saying – “measurement of a resource leads to better management” – which applies aptly to this system that promotes conservational use of resources.
Historical Approach to Natural Resource Accounting
The concept of NRA traces back to the 1970 United Nations conference on Human Environment where the association between economic development and environmental degradation was broached for the first time. Further, the Brundtland Commission, established by the United Nations in 1987, highlighted the close link between these two aspects, leading to discussions on environmental accounting at the Earth Summit held in Rio de Janeiro in 1992.
In the present context, the Comptroller and Auditor General of India has revealed its plan to publish a report on NRA by November 2022, aiming to advance accounting systems that can monitor responsible resource utilization.
Global Initiatives to Promote Natural Resource Accounting
To progress in the field of NRA, the UN General Assembly passed a resolution titled ‘Transforming our world; the 2030 agenda for sustainable development,’ requiring the preparation of NRA, to which over 190 countries, including India, are signatories. The System of Economic and Environmental Accounting (SEEA), adopted by the UN in 2012, is considered the most contemporary international framework for NRA.
Today, there are around 30 nations, such as Australia, Canada, China, France, and Germany, that have achieved varying levels of success in adopting environmental accounting. Besides, the NCAVES Project, piloted by the European Union, is aimed at using an accounting framework for measuring and reporting stocks and flows of natural capital.
India, Brazil, China, South Africa, and Mexico are key participants in this project, demonstrating global collaboration on resource management.
India’s Role in Natural Resource Accounting
The Government Accounting Standards Advisory Board (GASAB) was set up by the CAG of India in 2002. The board was intended to elevate governmental accounting and financial reporting standards to bolster decision-making quality and public accountability.
In addition, in its role in the international body of Supreme Audit Institutions or WGEA, CAG India has also urged for countries to adopt NRAs.
Understanding the Significance of Natural Resource Accounting
NRA plays a critical role in illustrating the interplay between economy and environment by quantifying non-renewable damage to environmental resources. It becomes a tool that aids policy framing by giving lawmakers insights into potential impacts of their decisions. Furthermore, NRA is closely tied with Sustainable Development Goals (SDGs), as four out of the seventeen goals directly concern natural resource management and their accounting. Not only does it address climate change, but NRA also aligns with international commitments, putting India among the elite group of countries generating asset accounts.
Challenges in Natural Resource Accounting
However, NRA is not without its challenges. A significant concern relates to the lack of training and capacity building among state officers. Additionally, there are limitations in preparing the asset accounts related to the periodicity of data. Also, the involvement of multiple agencies in data collection can lead to issues like data sharing conflict. Therefore, these issues must be addressed to broaden the acceptance and implementation of NRA.
