My International Sustainability Unit has begun looking at examples from around the world, in sectors such as global fisheries and agriculture, to discover why, for instance, the market price of fish does not reflect the true cost of its production.

It really is a particular pleasure to see so many leaders here today from the business and financial community, as well as representatives from government and civil society, and I am immensely grateful to all of you for taking the time out of what I know are incredibly busy schedules to be here this afternoon, I do appreciate it enormously. I am rather hoping you might be able to apply your ingenuity and imagination to a crucial question in today’s world – in other words how we might develop effective accounting and reporting systems that better meet the immense environmental and economic challenges we now face. Because, without a better approach, we will not be able to forge a sustainable economic model.

I am very grateful indeed to Jeremy Grantham and Jochen Zeitz who, in a moment, will, I hope inspire – or terrify! – you by sharing insights from investor and business perspectives.

And I am also immensely grateful to David McCandless for his wonderful designs that bring this information to life – not least because they demonstrate the problem which was actually my original inspiration for Accounting for Sustainability. It forms the theme of this year's event – the “economic invisibility of Nature.”

You do not need me, I am sure, to point out how grim the economic climate is. At a time like this, “sustainability” can all too easily seem a bit of a distraction, or even a frustrating hindrance to economic development – a “cost centre” for business that’s a “nice-to-have,” but has no place at the table in the current circumstances. Even in better economic times, “accounting for Nature, if it comes into calculations at all, is usually an afterthought to the real business of 'doing economics'”, as the leading economist, Sir Partha Dasgupta – who I am delighted to have with us today – has pointed out.

The trouble is that in our high tech age we have totally lost sight of the fact that the ultimate source of all our economic capital is Natural Capital. So, if we continue to draw down on this capital without replenishing it, then I am afraid we will visit upon ourselves economic, social and environmental crises that will have fundamental implications for how we live our lives and for the prosperity of everyone born and yet unborn on the planet. It has all the makings of a “perfect storm…”, accompanied by a mass stampede of headless chickens.

For one thing, an ever-increasing global population is slowly but surely putting the sort of demands on natural systems that may soon begin to outstrip the Earth’s capacity to sustain us. Already, nearly one billion people – one in seven globally – lack access to adequate food and nutrition. But by 2050 the global population is likely to be more than nine billion, and the demand for agricultural products is expected to double. How is this actually “sustainable,” I wonder, given the intense pressures on what is left of Nature’s services?

Then there is the problem of depleting resources. In that same period the world’s agricultural systems will be increasingly challenged by water scarcity, by the accumulating effects of climate change, by rocketing oil and gas prices and all the volatility that flows from that – all of this increasing the risk of production shortfalls. The U.N. estimates that nearly two-thirds of the globe’s ecosystems are now degraded, and yet we continue to deplete these valuable resources even further.

The “bottom line” of all this is, surely, plainly obvious. We are, to a large extent, consuming our children and grandchildren’s inheritance. And to compound the felony, we are also expecting them to cover the costs too – to repay the debts we are incurring for them. It would not be so bad if we could not see the error of our ways, as once was the case, but we have absolutely no excuse today. We know exactly what we are doing.

At the moment, we tend to measure the scale of this global environmental crisis in purely non-financial terms, whether tonnes of carbon emitted, number of species near extinction or areas with absolute water scarcity. In other words, the terms used fail to connect the scale of the environmental crisis we face with its implications for future economic growth and human welfare.

I hate to say this but this is where all of you come in, ladies and gentlemen. If we are to tackle the challenges of over-consumption of natural resources and the impact of climate change, it is vital we have better information about the risks and opportunities that the transition to a sustainable global economy will entail. And that information needs translation into economic terms that mean something in the world of finance and accounting.

If I could turn for a moment to another eminent economist here today – and, by the way, I did warn you last year, those of you who were here, that having meddled with accountants, I was now going to meddle with economists! – Professor Robert Costanza has suggested that the value of services delivered by the Earth to the global economy – at no cost – is fifty trillion U.S. dollars per year. Fifty trillion dollars! Nearly as large as global G.D.P. – last year, sixty-three trillion dollars. Even if the figure were half as large, it is at least an economic value that we can all understand!

That was my initial impulse when I established my Accounting for Sustainability Project in 2004 – to work with the accounting and financial sectors to address what I felt was a failure to incorporate the value of Natural and Social Capital into accounting and reporting; to expand the narrow and retrospective emphasis of most accounting information and to lengthen the disproportionate focus by business and investors on the short-term.

On all those counts I am delighted to say we seem to be making real progress, aided over the past year by our wonderful secondees from PwC, Ernst and Young, Deloitte and Grant Thornton.

For one thing, the Project has transformed the direction of corporate reporting through the establishment of the International Integrated Reporting Council and the development of Integrated Reporting. The Project is also working with its International Network, made up of accounting bodies, companies and investors, to develop tools and practical guidance that will help embed sustainability into accounting and decision-making processes.

This year, A4S commissioned the founder of MORI, Sir Robert Worcester, and Futerra to identify what information would be most useful to accountants and other senior decision-makers in business and the public sector if they are better to “future-proof” their organizations in the decisions that they take. This research will be published early next year and I know that many of you are kindly supporting this work – but I am sure there is room for one or two more to join!

My International Sustainability Unit has begun looking at examples from around the world, in sectors such as global fisheries and agriculture, to discover why, for instance, the market price of fish does not reflect the true cost of its production. If you take subsidies into account and add the social costs and the damage the industry does to marine and terrestrial ecosystems, the estimate is that, at a global level, fisheries alone incur an economic loss of eight billion dollars every year.

However, because these sorts of figures are not part of valuation, accounting and risk assessment systems, the business case for change and reform, in fisheries and other areas, is hidden, and that is why I would urge you to see this forum as a vitally important springboard for change. In fact, I feel it is time to go beyond that earlier definition I gave you of “Accounting for Sustainability” and consider it more in terms of “Accounting for Enlightened Change.” We have to find many more innovative ways of creating effective examples of markets for eco-system services that will both protect and enhance all kinds of natural resources, as well as, if we are clever, enabling many of the poorest communities in the world to benefit from maintaining and managing those services. There are some interesting examples of this approach. At Iwokrama in Guyana, for instance, or in Sabah in Malaysia, but these programmes have been developed by brave souls to demonstrate that there is nothing technically difficult in designing projects that could support an ecosystem market. What we lack is the will to design the policies that would create the demand.

I am only too aware that if this approach is to succeed it has to be scaled up. Action needs to be taken on a global basis. Which is why I am delighted that A4S’s Accounting Bodies Network continues to grow, with new representatives here today from A4S in the Middle East, Zambia and India. The network now represents twenty-five organizations that influence nearly two million accountants from around the world.

Ladies and Gentlemen, I don't want to go on for too much longer – otherwise I shall have to be accounting for verbosity! – but I must highlight what is, without doubt, A4S’s greatest success so far! This is the establishment of the International Integrated Reporting Council. It was only two years ago that we held a roundtable here at St. James’s Palace that brought together the global leaders from the financial reporting, sustainability, investment, business and securities sectors. The aim was to agree that a transformation in corporate reporting was essential to understand and communicate the value of companies in the 21st Century.

Since then the I.I.R.C. has been run by my Accounting for Sustainability Project, in partnership with the Global Reporting Initiative and the International Federation of Accountants. Under the leadership of Sir Michael Peat and Jessica Fries, and with the support of so many of you around the room, it is already changing how companies and other organizations report on their performance. Indeed, it has been so successful that with the publication of its first Discussion Paper and the launch of a pilot programme involving over fifty companies from around the world, I am proud to say the project has now outgrown the walls of Clarence House. It has now grown up and it is time for it to move out of the family home. I know that it is in safe hands under the leadership of Professor Mervyn King and Paul Druckman, both of whom have been instrumental in its development and success to date. I have no doubt it will go on to do bigger and better things, safe in the knowledge that it can rely upon the continued support of my Accounting for Sustainability Project. Although, like any parent, I rather hope the requests are for guidance and assistance, and not necessarily for too much money!

So, Ladies and Gentlemen, I'm afraid all this success means I am rather keen to make even more progress, which could be bad news for you as you are going to have to work for your cup of tea and mince pies this afternoon! I have, in fact, three requests to make of you, which I hope you will be able to help us with over the coming year.

Firstly, to contribute with concrete examples. A4S’s work depends upon the development of case studies and working groups that will increase the understanding of how best to incorporate Natural and Social Capital into accounting and decision-making. Over the next year, A4S will work with the T.E.E.B. for Business Coalition and my Cambridge Programme to develop common methodologies and practical approaches to account for Natural Capital and to integrate them into business processes, as well as building the international consensus and agreement between government and business on such systems. Your participation will be critical to ensure that solutions developed are relevant to business. We are also planning to establish a working group to develop new approaches that enable environmental and social considerations to be systematically incorporated into decision-making about capital expenditure. And with that in mind, I am sure that the I.I.R.C. would also be delighted to welcome additional companies to participate in their pilot programme.

Secondly, I would be immensely grateful if each of you could demonstrate leadership and be willing to speak up, to put your poor old head above the parapet to inspire others – both inside and outside your organizations – in the search for innovative answers to these challenges. And if you get it shot off, when you put your head above the parapet, you might have some consolation in knowing that I know what it is like. I know how important it is to receive recognition for effort like this and, as Justin King mentioned last year, how competitive you all are, so I can only hope you will find it impossible to resist entering the “Finance for the Future Award” that A4S has established in partnership with I.C.A.E.W. and NatWest. It will reward leadership and innovation shown by finance functions within business, the public sector and charities, as well as highlight how you and your peers have set about tackling some of these challenges.

And thirdly, I wonder if you could also make sure your voices are heard loud and clear at the upcoming Rio+20 and G20 meetings to help governments create an economic framework with Natural and Social Capital at its heart, so as to provide us all with a much more resilient and durable future. Because, make no mistake, the decisions that investors and businesses take in the next few years will have a cumulative impact on humanity’s ability to survive in the long-term, in a way and to an extent never seen before. If we do not have the right information and the right systems to make the right decisions, not only will we drive Nature’s bank to the verge of collapse, and thus her own economy on which actually we all depend, but we will effectively lock our children and grandchildren into a very grim future indeed.

I think it was the late Jawaharlal Nehru who pointed out that “crises and deadlocks, when they occur, have at least this advantage – they force us to think.” Well all I can say is that we must now take action for sustainability, having so bravely begun to account for it.