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Developing the ecological balance sheet for agricultural sustainability

Sue Ogilvy (Fenner School of Environment & Society, Australian National University, Canberra, Australia)

Sustainability Accounting, Management and Policy Journal

ISSN: 2040-8021

Article publication date: 5 May 2015

2779

Abstract

Purpose

The purpose of this paper is to suggest a practical means of incorporating ecological capital into the framework of business entities. Investors and shareholders need to be informed of the viability and sustainability of their investments. Ecological (natural) capital risks are becoming more significant. Exposure to material risk from primary industry is a significant factor for primary processing, pharmaceutical, textile and the financial industry. A means of assessing the changes to ecological capital assets and their effect on inflows and outflows of economic benefit is important information for stakeholder communication.

Design/methodology/approach

This paper synthesises a body of literature from accounting, ecological economics, ecosystem services, modelling, agriculture and ecology to propose a way to fill current gaps in the capability to account for ecological capital. It develops the idea of the ecological balance sheet (EBS) to enable application of familiar methods of managing built and financial capital to management of ecological assets (ecosystems that provide goods and services).

Findings

The EBS is possible, practical and useful. A form of double-entry bookkeeping can be developed to allow accrual accounting principles to be applied to these assets. By using an EBS, an entity can improve its capability to increase inflows and avoid future outflows of economic benefit.

Social implications

Although major efforts are under-way around the world to improve business impact on natural resources, these efforts have been unable to satisfactorily help individual businesses elucidate the practical economic and competitive advantages conferred by investment in ecological capital. This work provides a way for businesses to learn about what the impact of changes to ecological assets has on inflows and outflows of economic benefit to their enterprise and how to invest in ecological capital to reduce their enterprise’s material risk and create competitive advantage.

Originality/value

No one has synthesised knowledge and practice across these disciplines into a practical approach. This approach is the first demonstration of how ecological assets can be managed in the same way as built capital by using proven practices of accounting.

Keywords

Acknowledgements

The author gratefully acknowledges Graeme Hand, Mark Gardner, Colin Seis, Professor Steve Dovers, Professor Robert Costanza, Dr Richard Price, Dr Leo Dobes and Ms Joanna O’Brien and three anonymous reviewers for their constructive comments that have greatly improved this paper.

Citation

Ogilvy, S. (2015), "Developing the ecological balance sheet for agricultural sustainability", Sustainability Accounting, Management and Policy Journal, Vol. 6 No. 2, pp. 110-137. https://doi.org/10.1108/SAMPJ-07-2014-0040

Publisher

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Emerald Group Publishing Limited

Copyright © 2015, Emerald Group Publishing Limited

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