Imagine if nature sent businesses an invoice. Every ton of carbon emitted, every gallon of water extracted (and river spoiled), every degraded ecosystem — what if all of this came with a bill? How much would that invoice be?​

In recent years, corporate commitments to sustainability have soared. Businesses are pledging net-zero targets, governments are tightening regulations, and investors are demanding greater transparency. Yet for all the ambitious goals and policy shifts, one fundamental flaw remains: financial statements do not tell the full story. They miss the most critical data of all — the real cost of doing business on the planet.

Companies extract natural resources, emit carbon, and degrade ecosystems, often without paying the full price. These “externalities” — costs borne by society rather than the business itself — are absent from financial statements. But environmental costs are not the only hidden expenses. Businesses also benefit from unmet social costs — low or unpaid labor in supply chains for example — effectively subsidize business operations, just as nature does when its resources are exploited without compensation. Imagine if these costs, too, came with an invoice. What would the true cost of production look like then? This prompts an urgent question: Can financial statements be considered “true and fair” if they fail to reflect the impact of business on the environment and society?

For decades, businesses have taken value from nature without compensating for the depletion of natural capital. The Dasgupta Review (2021) highlights a stark trend: between 1992 and 2014, produced capital per capita doubled and human capital rose by 30%, yet natural capital per capita declined by nearly 40%. In other words, we are creating and consuming wealth at the expense of the planet’s finite resources.

BlackRock’s Market Signal

A pivotal market shift came when BlackRock quietly acknowledged that nature is not an externality but a form of capital — one that requires a fundamental repricing. BlackRock effectively stated that underpricing nature-based assets is no longer sustainable. This is a critical signal: ignoring the real cost of using natural resources can no longer be standard practice.

Can financial statements be considered “true and fair” if they fail to reflect the impact of business on the environment and society?

A Director’s Dilemma

As a director, I confront a disquieting reflection when signing off on financial statements:

• Am I legally affirming that these accounts present a true and fair view of my company’s financial position?
• Can such statements be fair if they omit the environmental and social costs my business creates?

Under UK law, the Companies Act 2006 imposes a statutory duty on directors to ensure financial statements give a true and fair view. Section 393(1) explicitly requires that directors must not approve accounts unless they are satisfied the statements present “a true and fair view of the assets, liabilities, financial position, and profit or loss.” The Financial Reporting Council (FRC) underscores that directors cannot simply rely on compliance with accounting standards; they must exercise judgment to ensure that financial statements reflect reality.

Guidance for True and Fair

I am not an accountant or a lawyer, but colleagues at Social Value International, working with legal and accounting experts, have produced guidance on the concept of True and Fair. This project challenges businesses to align financial reporting with sustainability realities, helping company directors meet their legal obligations while integrating environmental and social considerations into financial statements. Although centered on UK company law, the approach carries global relevance.

The real question is not whether your business contributes to environmental harm, but whether you will take responsibility for your company’s negative impacts.

According to this guidance, under FRS 102 and IFRS standards, businesses must account for constructive obligations — liabilities that arise when an entity creates a valid expectation it will settle a responsibility. If a company uses resources without paying for them, it externalizes costs that arguably belong on its own books. The True and Fair guidance pushes for financial statements that reflect all costs of doing business — including those previously shunted onto society or the environment — thus enhancing accountability.

Ben Carpenter, CEO of Social Value International

“The True and Fair Project speaks to the heart of SVI’s mission to change the way society accounts for value. It will accelerate the integration of sustainability information into financial statements, trigger new discussions within boardrooms, and transform how businesses make decisions. This new guide is a game changer for anyone interested in responsible business.”

Jeremy Nicholls

“The environmental and social costs faced by business are only likely to increase. Recognizing these costs now, as part of your management and financial accounts, can help drive the ideas and decisions needed to stay resilient and competitive. This guide is designed to help.”

Two Key Approaches

1. Include Sustainability Information in Financial Statements
   • Directors can add notes to reflect carbon emissions and resource use.
   • This ensures transparency without demanding drastic changes to existing reporting frameworks.
2. Make Commitments That Create Constructive Obligations
   • Businesses can formally acknowledge responsibility for environmental costs.
   • Such commitments can be recorded as financial provisions, just like other liabilities.

Beyond improving transparency, integrating these costs into financial statements offers strategic advantages. First, making a financial commitment to environmental and social costs accelerates innovation and builds resilience — forcing businesses to focus on reducing their carbon footprint and operational inefficiencies. Over time, this drives innovation and ensures long-term competitiveness in a low-carbon economy. Second, it enhances credibility and shows leadership, demonstrating a genuine commitment to tackling climate risks, which strengthens stakeholder trust. It may also align business operations with personal and corporate values, reinforcing a company’s purpose beyond profit.

For directors, this is a pivotal moment. Many businesses claim they do not significantly contribute to environmental harm, yet the reality suggests otherwise. One study found that one-sixth of the carbon footprint of the average European diet is linked directly to deforestation in tropical countries. Unless your company operates in complete isolation, it is part of this broader system.

The real question is not whether your business contributes to environmental harm, but whether you will take responsibility for your company’s negative impacts. This is about more than compliance: it is about fundamentally reimagining the role of business so that our financial systems reflect both profits and the true costs of production. BlackRock’s repricing of natural capital aligns with the True and Fair Project’s call for recognizing hidden costs in financial reporting. Taken together, these arguments underscore the need to internalize costs that have traditionally been offloaded onto society and the environment.

So, I ask all directors: when you sign off on your financial accounts, pause and reflect — are they truly “true and fair”?

Read the True & Fair Guide, join the conversation, and ensure your financial statements accurately reflect the costs that affect the world we share. For a practical example, look at Staffordshire Chambers of Commerce and Social Value International. Their financial statements, publicly accessible via Companies House, include detailed notes on carbon emissions. These disclosures demonstrate how integrating environmental costs into official accounts can strengthen accountability and build stakeholder trust.