Paper Example on Natural Resource Accounting: A Critical Tool for Economic Growth

Introduction

For decades now, natural resource accounting has become a critical tool in the management of environmental resources. Natural resources include forestry fisheries, water resources, agriculture, and energy, among others. Economies of different countries across the globe are dependent on natural resources. The main goal of accounting in any given economy is to provide critical and crucial data of the state's economy. Therefore, it is critical to consider natural resources as economic assets since they are essential economic contributors to long-term economic performances (Patil, 2018). The concept of "Natural resource accounting" is necessitated by the urge of the need to have a superior comprehension of the relationship between social, human, and monetary framework and the natural heritage. This relationship comprises a wide variety of essential services to the human population in the form of market resources, assimilative services, and environmental quality resources.

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In other words, the term Natural Resource accounting may be defined as the collection of data a given accounting framework of information that is related to environmental resources that are arranged as flows and stocks. According to Xiao (2019, December), natural resource accounting involves both the monetary and physical units. Natural resources accounting, therefore, provides a link between the economy and the environment. The valuation of natural resources is vital in structuring and designing measures and policies for the sustainable management of environmental resources. Economist relies on the law of demand when measuring the market value of the environmental resources. Today in the market price approach, the demand for natural resources can only be measured on the assumption that factors influencing the demand are constant in a given period.

Statement of the Problem

Natural resources are significant contributors to the human population in different ways, including renewable and non –renewable resources that add value to the economy. In the new world, natural resources are affected by the increased depletion rate, which has become a significant concern in ecological financial aspects. Most countries have continued to report losses in natural resources as a result of land degradation. These losses have hurt the growth of the economy of the said countries. Most countries do not include natural resources in the national accounts, making it difficult for policymakers and resource managers to make appropriate books of account for the natural resources in economic activities. There has also been a bigger problem in how the value of natural resources is measured. The traditional measures of economy that includes GDP and NDP generated through SNA (System of National Accounts) are viewed as inadequate in measuring the contribution and impact of the natural resources to the economy. These traditional measures of the economy do not include the natural resource depletion, expenditure on environmental degradation, and the value of the non-market amenities.

Significance of the Study

Natural resources are essential commodities in the life of a human being. Thus, this study will be relevant since it will help the researcher understand the importance of natural resource accounting and the valuation of any given country's economy.

Research Objective

The study's main objective is to analyse the theory and the method of natural resource accounting and valuation based on the macro-environmental accounting model.

Specific Objectives

• To examine the role of natural resource accounting and valuation in the growth and development of the economy
• To evaluate the techniques used in the valuation of natural resources
• To assess critical issues that affect the development of natural resource accounting and valuation.

Research Questions

• What is the significance of natural resources accounting and valuation in the development of the economy?
• What are some of the problems that affect the development and implementation of natural resource accounting?
• What are some of the techniques used in the valuation of natural resources?

Literature Review

This section provides an outline of the information that is related to the topic of the research. It includes information that is has been researched on natural resource accounting and environmental accounting.

Accounting for Natural Resources

Natural resources like woodland, water, and air are essential to the human populace are required to be explicit because they are considered in both the micro and macro levels of planning. It is critical to consider the natural environment at macroeconomic levels for effective planning. Studies have argued that it is important to include the natural environment in the national accounts since they give essential data about the utilization if the environmental resources in the monetary activities (Cenar, 2017). It also corrects the national income accounts because it provides accurate profit and loss trading account of the natural resources. Natural resource accounting also helps determine and assess the rate of degradation of natural resources, thus providing reliable information that reflects the economic performance.

The Structure of Environmental Accounts

Natural resource and environmental accounts have evolved since the early 1970s; this has been facilitated by individual countries and practitioners' efforts to develop methodologies and frameworks that represent individual priorities. Though, from the 1980s, the EU, world bank, UNSD (United Nations Statistical Division), and the OECD have made coordinated efforts to standardize the methodologies and framework used in structuring resource and environmental accounts (Rosiek, 2017). For example, South African resource and environmental accounts are based on the UN's SEEA (System of Integrated Economic and Environmental Accounting).

The SEEA is a system of satellite account in which its structure is similar to that of SNA, which involves recording flows and stocks of the environmental services and items. The satellite account offers a collection of measures that helps in monitoring the environmental, economic performance at the macroeconomic and departmental stages. It also provides detailed statistics that help in guiding resource managers in the creation of good policy decisions (Das, 2016). Natural resource and Environmental accounts are comprised of four components i.e., Natural resource asset accounts, pollutants, and material flow accounts, resource management expenditure accounts, and environmentally adjusted macroeconomic aggregates.

Techniques of Natural Resource Valuation

The economic technique suggests that in the case of a near-perfect market, then market price can be considered a true economic utility. But in the context of natural resources, market prices are not important since they are not attached to the environmental functions. Due to this, several approaches have been developed to assess and examine the economic utility of natural resources. These forms of valuations can be categorized as "constructed market valuation or price-based valuation techniques." In the case of renewable and non- renewable natural resources, the market price can only be a true index value if sustainable yields accompany the perfect market. These methods of measuring the economic value of natural resources are only aimed at estimating the economic value measured in a more prime perspective (Hein & Edens, 2016).

Research Methodologies

The study will use mixed research techniques, i.e., quantitative and qualitative research approaches. The research will also use both the primary and secondary methods of data collection. The primary data will be collected by well-structured questionnaires that will include both open and closed-ended questions. The secondary data will be obtained from the library, journals, scholarly articles, and the internet (Ghauri & Strange, 2020). The study will use both convenient sampling and simple random sampling techniques. After the data has been collected, it will be coded and stored in Microsoft Excel. The data will be analysed by statistical software, namely SPSS. Both the descriptive and inferential statistics will be analysed. Descriptive data will be analysed by the use of summary statistics, frequency tables, and histograms. Inferential statistics will be analysed using the chi-square test and ANOVA test. The result and the findings will be discussed based on the research objectives as per the research questions.

References

Baldarelli, M. G., Del Baldo, M., & Nesheva-Kiosseva, N. (2017). Environmental Accounting and Reporting. CSR, Sustainability, Ethics & Governance.

Cenar, I. (2017). THE ACCOUNTING PROFESSIONAL AND ENVIRONMENTAL MANAGEMENT ASSUMPTIONS, STAKES AND CHALLENGES. Annals of the University of Petrosani. Economics, 17, 45-54. https://www.upet.ro/annals/economics/pdf/2017/p1/Cenar_2.pdf

Das, P. K. (2016). Environmental Accounting: A Conceptual Study of Indian Context. International Journal of Mechanical and Industrial Engineering, 10(8), 2927-2933. https://publications.waset.org/10005264/environmental-accounting-a-conceptual-study-of-indian-context

Fasona, M., Adeonipekun, P. A., Agboola, O., Akintuyi, A., Bello, A., Ogundipe, O., ... & Omojola, A. (2019). Incentives for collaborative governance of natural resources: A case study of forest management in southwest Nigeria. Environmental Development, 30, 76-88.

Ghauri, P., Grønhaug, K., & Strange, R. (2020). Research methods in business studies. Cambridge University Press.

Gibassier, D., & Alcouffe, S. (2018). Environmental management accounting: the missing link to sustainability?

Ignatow, G., & Mihalcea, R. (2017). An introduction to text mining: Research design, data collection, and analysis. Sage Publications.

Johnson, R. L. (2019). Economic valuation of natural resources: issues, theory, and applications. Routledge.

Kilimani, N., van Heerden, J., & Bohlmann, H. (2016). Water resource accounting for Uganda: use and policy relevancy. Water Policy, 18(1), 161-181.

Nechita, E. (2019). Analysis of the Relationship between Accounting and Sustainable Development. The Role of Accounting and Accounting Profession on Sustainable Development. Audit Financiar, 57(155).

Obst, C., Hein, L., & Edens, B. (2016). National accounting and the valuation of ecosystem assets and their services. Environmental and Resource Economics, 64(1), 1-23.

Patil, P. J. (2018). An Ecological Analysis of Forest Accounting. International Academic Journal of Innovative Research, 5(1), 109-127. https://www.academia.edu/download/61288081/An_ecological_analysis_of_forest_accounting.20191121-116360-osof77.pdf

Rosiek, K. (2017). Environmental goods and services sector accounts: first statistics. Ekonomia i Srodowisko. http://yadda.icm.edu.pl/baztech/element/bwmeta1.element.baztech-2f4bb3bd-2a12-42b3-9a2e-d80dfb784b56

Stage, J., & Uwera, C. (2018). Prospects for establishing environmental satellite accounts in a developing country: The case of Rwanda. Journal of Cleaner Production, 200, 219-230.

Ting, N. I. (2017). Disclosure of the environmental accounting information research. DEStech Transactions on Economics, Business and Management, (eced). http://www.dpi-proceedings.com/index.php/dtem/article/view/9844

Xiao, Y. (2019, December). Research on Environmental Accounting Information Disclosure under the Background of Sustainable Development. In IOP Conference Series: Materials Science and Engineering (Vol. 677, No. 2, p. 022133). IOP Publishing.