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STRENGTHENING INDICATORS AND ACCOUNTING SYSTEMS FOR NATURAL CAPITAL
• misleading market price signals that did not cover
all costs and risks;
• neglect of public goods such as the built and natural
infrastructure, security, cooperation, equity, nature,
clean air and water.
Yet early signals could have been recognised in
advance of these crises: financial transactions accounting
for more than 90% of the world’s total transactions;
two digit profit rates raised as an accounting standard
for companies; pension liabilities putting pressure on
public budgets/debts (which will increase markedly in
coming decades of aging population); the average very
low progress towards the Millennium Development
Goals (MDGs) and even increases in malnutrition in
many countries; the melting of ice caps and glaciers;
and a rate of ecosystem degradation and species
extinction unprecedented in the Earth’s history.
These crises highlight the need for governance that
maintains capital, meets the needs of today’s and
future generations and enhances citizen participation.
Fair, transparent and robust accounts are an important
support for any such governance model. Robustness
relates to the completeness of recording and the
elimination of double counting – such properties are
essential when calculating the true results of economic
activity (profit of companies, taxable revenue of
households or Nation’s product, income and savings).
Fairness relates to distributional equity considerations
between rich and poor within countries, between
rich and poor parts of the world and between present
and future generations. Transparency concerns full
disclosure of the use of different types of capital, the
positive and negative impacts (externalities) on them
from such uses and how their costs/benefits vary
between today’s needs and those of future generations.
3.4.2 LIMITATIONS OF CONVENTIONAL
ACCOUNTING SYSTEMS
The UN System of National Accounts (UN SNA), is the
globally recognised accounting framework that brings
coherence to hundreds of mainly economic (but also
some social and environmental) statistics sources
available in countries. SNA is the framework from
which variables such as GDP, production, investment
and consumption are produced annually, quarterly
and sometimes even monthly.
Historically the impetus for such accounts has always
come from the need to mobilise resources in times
of crisis. From the first sets of accounts developed in
the 17th and 18th century in England 8 and France 9 ,
the material balance of the USSR economy of 1925 10 ,
to the first official national income statistics produced
for the USA 11 in 1934, the UK 12 in 1941 and several
European countries after 1945, the common purpose
was either to mobilise resources to fight wars and/
or to pay for peacetime reconstruction. After the
Second World War, the Marshall Plan for post-war
construction in Europe spawned the development of
a first Standardised System of National Accounts
published in 1952 13 . The following year the United
Nations published a revised version for global use
known as the 1953 SNA.
This backdrop of reconstruction and re-industrialisation
strongly influenced the SNA’s almost exclusive focus
on the economic factors of production and consumption.
Its creators were well aware of the SNA’s
limitations. In his Nobel Memorial lecture in 1984,
the ‘father’ of the SNA, Richard Stone, stated that
accounts for society ought to rest on three pillars:
economic, socio-demographic and environmental.
He highlighted that issues such as pollution, land use
and non-renewable resources offered plenty of scope
for accounting and that GDP should in effect be
complemented by other variables when considering
overall societal welfare. Since then, there has been only
limited progress with including natural capital in SNA
revisions: the 2008 revision still does not record subsoil
assets depletion in the same way as fixed capital
consumption (United Nations et al. 2008).
The intrinsic limitations of SNA when analysing the social
functions of the economy led to the introduction of
‘satellite’ accounts in the 1993 SNA revision, one of
which was developed as the System of Economic Environmental
Accounting (SEEA) (United Nations et al.
2003: see Figure 3.3 below). However, the SEEA of
1993 failed because it did not recognise the need for
asset accounts in physical units or acknowledge the
concept of ecosystem.
TEEB FOR NATIONAL AND INTERNATIONAL POLICY MAKERS - CHAPTER 3: PAGE 28