Natural Resource Accounting (NRA)

 

Natural Resource Accounting is based on the concept - ‘measurement of a resource leads to its better management’. Natural resource accounting is the compilation of data relating to natural resources within an accounting framework. NRA is an accounting system that deals with stocks and stock changes of natural assets, including biota (cultivated or wild), subsoil assets (reserves), water and land with their aquatic and terrestrial ecosystems. Natural resources accounts may involve both physical units and monetary values. Natural resource accounts differ from other data as they are organized in terms of stocks and flows.

Natural resource accounting can be used to support environmental policy, along with environmental impact assessment, economic analyses and public investment/expenditure reviews.

The resources include both those which contribute to marketable forms of production as well as non-commercial or environmental resources such as air, water and biological life. Natural resource accounts are regarded as a means of creating linkages between the environment and the economy. The terms 'NRA', 'green accounting' and 'environmental accounting' are used interchangeably.

The aim of NRA is to provide information on the state of natural resources and the changes affecting them. It is an important link in the chain of sustainable development. The term 'sustainable development' means a form of development which is capable of meeting the needs of the present generation without jeopardizing the ability of future generations to meet their own needs. 

Natural Resource Accounting (NRA) is an attempt to develop accounting systems to help monitor the responsible utilisation of natural resources, which will in turn lead to sustainability. There are various types of natural resource accounts: stock accounts, flow accounts, a combination of these two, emission accounts, waste accounts and environmental expenditure accounts.

Environmental accounting or NRA aims to provide a framework for organizing information on the status, use, and value of natural resources and environmental assets as well as expenditures on environmental protection and resource management.  NRA is also used to account for the depletion of natural resources and the fall in the environmental quality.

An environmental account must be:

• Purposeful and important for the account-user who depends on the reported information;

• Able to measure change in a defined account subject through time;

• Organised to enable comparisons and crosschecks in an internally consistent manner; and

• Comparable with other relevant accounts so it can provide the basis for more detailed or aggregated analyses

 

Aims of natural resource accounting:

Natural resource accounting is a means of demonstrating linkages between the environment and the economy. The resultant information can form the basis for the computation of environmental performance indicators. 

In short, Natural resource accounting can be used for:

• the demonstration of accountability for the management and protection of natural resources

• identifying environmental problems such as resource depletion;

• analyzing government policy;

• undertaking resource management and decision-making;

• monitoring sustainable development;

• drawing up (macro-economic) indicators for environmental performance or prosperity;

• improving benchmarks for measuring a country's national product.

 

Organisations:

There are a number of organisations which are active in this field, such as the United Nations Environment Programme (UNEP) and the United Nations Statistical Division (UNSD, formerly known as UNSTAT). These organisations include the Organisation of Economic Cooperation and Development (OECD), the World Bank, the World Resource Institute (WRI), the Statistical Office of the European Communities (EUROSTAT) and the Worldwide Fund for Nature (WWF)

The need for NRA took its first step at the United Nations (UN) conference on Human Environment in 1970 (Stockholm Conference) when the relationship between economic development and environmental degradation was discussed for the first time. 

The Brundtland Commission, set up by the UN, articulated the idea of close association between the environment and economic activities in 1987, which was followed up by environmental accounting and the Earth Summit at Rio de Janeiro in 1992.

 UN General Assembly resolution titled, "Transforming our world; the 2030 agenda for sustainable development" (25^th of September, 2016) which got the approval of more than 190 countries, requires the preparation of Natural Resource Accounts.

India is a signatory to this resolution.

The UN, in 2012, adopted the System of Economic and Environmental Accounting (SEEA). It is the latest internationally accepted framework for NRA.

Significance of Natural Resource Accounting

NRA can be effectively utilised for:

            (i)Resource management; (ii) Policy planning; (iii) Identification and accounting the natural resources within the economy; (iv) Monitoring sustainable development goals; (v) Combating climate change: and (vi) Aid to Environment Impact Assessments

What are the Challenges Related to Accounting of Natural Resources?

§  There is lack of proper training and capacity building among personnel involved.

§  Limitations in preparing the asset accounts - mapping the periodicity of data.

§  Multiple agencies are involved in data collection for resources; it may give rise to the issues of data sharing/data conflict.

 

    NRA has deep inter-linkage to sustainable development; and 10 of the 17 goals (Sustainable Development Goals or commonly known as the SDGs, 2030) are directly or indirectly related to the management of natural resources and their accounting. The government of India is a signatory to the UN General Assembly resolution on the adoption of SDGs titled, “transforming our world; the 2030 agenda for sustainable development”. Thus, it becomes an obligation for GOI to develop fine standards of resource accounting.

Accounting for natural resources will definitely aid both economical and ethical perspectives of life on earth. For example, accounting for forest wealth has a number of useful policy benefits, including the provision of a framework for analyzing and presenting detailed and diverse data in a manner which supports economically informed policy choices.