The Role of Natural Resources Accounting in Sustainable Development

The depletion of natural resources at an alarming rate is a great concern in the current environmental and developmental culture. A question of whether the natural resources are utilised in a sustainable way arises along with the current developmental strategies. Understanding the deterioration of natural resources for the growth and development process has led to explicitly incorporating the value of natural resources.

Natural Resource Accounting (NRA) has become a predominant tool for environmental and natural resources management. It provides information on stocks and stock exchanges of a resource that are available at a particular time, as well as the activities that the resource is being used for.

The degradation, pollution or depletion cost of natural resources are not generally taken into account by the traditional system of National Income Accounts. Since the costs are not taken into account when assessing the country’s economic performance or development progress, this encourages unsustainable use of natural resources.

Need for Natural Resources Accounting

Natural Resources Accounting (NRA) is a different technique that emphasises on the material and non-material benefits provided by natural resources such as air, water, land, and biota. A beneficial aspect of the National Revenue Accounts is that they can be reevaluated after adjusting for changes in the economic values of natural resources used in the previous fiscal year.

With the effect of technology in accounting, NRA estimates the economic values as well as costs connected with the usage of natural resources, thus it plays a significant role in the planning and development of natural resources available. This estimate is vital to the country.

As a result, the NRA permits the amalgamation of environmental changes into economic planning. Thus NRA is an endeavour to incorporate environmental issues into the traditional national accounts.

It is obvious that the national income accounting procedures must be modified. Current method of accounting fails to fully value the environmental services and natural resources as inputs or assets and encourages environmental exploitation without even considering it as Country’s real revenue.

To know which method of modifying the accounts will be most right and effective in bringing about necessary policy changes is obviously difficult.

Aim of Natural Resource Accounting

Natural resource accounting attempts to provide information on the income and expenditure related with the maintenance or restoration of natural resources. It is one of the tools that can be used to support policies like environmental impact assessments at the project level, integrated environmental and economic analyses for policy work at the sectoral and macroeconomic levels, and public investment/expenditure reviews. Natural resource accounting is a method of demonstrating the linkage between the economy and the environment.

Natural Resource Accounting Uses:

• It demonstrates accountability for the natural resources management and protection.

• Identifies environmental issues such as depletion of resources, combating climate change

• Investigating government policy

• Managing and decision making of resources

• Sustainable development monitoring

• Developing indicators for environmental performance or prosperity

• Improving benchmarks for measuring a country's national product

The various improvements outlined above suggest broadening the scope of income accounting. In so doing, special attention must be given to all relevant definitions and assumptions for consistency within the broader accounting framework, as well as within the context of economic theory.

Simplifying assumptions and abstractions are required to partially integrate the environment. As a result, it's possible that these partial changes will result in measurements that are at least as distorted as the current ones.

The concept and practice of natural resource accounting has now widespread international support. The activities performed in various countries shows that accepting certain standards of natural resource accounting countries is gradually growing.