Dr Hilson and Dr Molinari GDP0011

Written evidence submitted by Dr Abigail Efua Hilson and Dr Matteo Molinari, Kent Business School


The University of Kent Business School is a multiple accredited research-led institution which champions sustainable innovation through high-quality research and education impacting business and society. Being at the core of our work, it is significant that the voice of the institution is represented in the UK’s effort to develop a world class set of National Accounts which will guide policy and decision-making at various levels of government and position the country competitively in the global pursuit for a sustainable world. This submission is in response to the call for evidence for Aligning the UK's Economic Goals with Environmental Sustainability. Here, Dr Abby Efua Hilson and Dr Matteo Molinari address the question To what extent is the preparation of the UK’s national accounts governed by international standards for national government accounting? In the light of the Kunming Declaration of October 2021, what prospects are there for reform of the United Nations System of National Accounts (SNA) to assign greater importance to natural capital?’ Our motivation for responding to this call is to provide insights into a strategic issue confronting the UK from a research perspective.

As a Senior Lecturer in Accounting at Kent Business School, Dr Abby Efua Hilson (nee Ackah-Baidoo) holds a PhD from Aston University UK and an MBA from the Schulich School of Business, York University Canada. She has held previous posts at Royal Holloway, University of London, CIBC Canada, Messrs. Charles Ocansey & Co, Ghana, UBS Wealth Management and Blake, Cassels & Graydon LLP, Canada. Abby’s main research interests are Corporate Social Responsibility in the Extractive industries, Geopolitical risk in conducting business in sub-Saharan Africa, Sustainability Accounting and SME financing and accounting literacy.  She provides consultancy services to multilateral organisations and the Non-Profit sector on these issues. Abby is Editor-in-Chief of World Development Sustainability, Geography Subject Editor for Social Sciences & Humanities Open and Editorial Board Member, for The Extractive Industries and Society, Elsevier Science Ltd.

Similarly, Dr Matteo Molinari is a Lecturer in Accounting at Kent Business School, University of Kent. He obtained his joint international PhD in Accounting from the University of Siena, Pisa, and Florence – Italy. He was previously a PhD research scholar at the University of Auckland - New Zealand, a long-visiting scholar at King’s College, University of Cambridge, and a summer-visiting scholar at Quinlan School of Business, Loyola University Chicago - United States. Matteo’s main research interests include Accounting History, Management Accounting, and Sustainability Accounting. His research aims at advancing accounting knowledge and extending the boundaries of accounting research by contributing to interdisciplinary literature and stimulating discussion among academics and practitioners. His research draws on intense observation of cultural, social, economic, and legislative contexts.

The discussion below draws from comparative research on existing national accounts between the UK and other OECD countries. It proceeds, first, with a discussion on what the UK discloses in its national accounts, the extent to which it complies with existing international standards and how it can position its reporting to ensure greater transparency and provide much needed data for decision-making. The second part of the contribution focusses on challenges and related reform’s prospects in the United Nations System of National Accounts (SNA) framework in the light of the Kunming Declaration of October 2021. The discussion concludes by summarising key highlights and suggesting simple ways that the UK government may consider to assign greater importance to natural capital.


To what extent is the preparation of the UK’s national accounts governed by international standards for national government accounting?


Up until 31 January 2020, the UK had been part of the European Union (EU). During the period in which it was an EU member state (1973-2021) and even before this, the UK had cooperated with the EU and other OECD countries under oversight from the United Nations to develop international standards for National Accounting.  These extend beyond the narrow definitions of economic prosperity defined by economic measures such as the Gross Domestic Product (Dasgupta, 2021).  The 2008 Systems of National Accounts provide guidance to a comprehensive set of national accounts. The UK, having been part of the EU, derives its guidance for National Accounts preparation from the European System of Accounts (ESA) and Balance of Payments Manual (BPM). This is congruent with practices in other OECD nations with Canada, Australia and New Zealand all aligning their country-specific System of National Accounts with the 2008 SNA with minor deviations. To get a holistic view on how the UK compares with global standards, we looked at the countries with the most comprehensive reports on natural capital. The top six countries (Forbes) were selected. These were Denmark, Canada, New Zealand, Sweden, Luxembourg and France. It became clear after studying these countries that those in the EU produced similar national accounts. As such, the sample was extended to include the US, Norway and Australia.  The focus of evidence gathering was to consider (i) conformity of national accounts to the 2008 SNA; (ii) the types of satellite accounts produced; (iii) the extent to which the national accounts are comparable; and (iv) the reporting frequency of national accounts. 

Presently, the UK publishes the following national accounts annually and quarterly:  


In addition to the three satellite accounts mentioned above, the UK has in the past published a Sport Satellite Account. The latest report was published in 2018 and it covered the periods between 2012 – 2016 (DCMS, 2018). Given that we are in a digital age and timelines of information is of utmost importance, it is instructive for the UK for review the frequency with which it publishes the Sport Satellite Account to enable users to find it relevant.   


Most high-income countries also provide a comprehensive set of national accounts which comprise the three satellite accounts mentioned above and the core accounts. The accounts are comparable and where there are differences, statistical adjustments are used to enhance comparability. Across the countries sampled, annual and quarterly reports are produced. For most EU countries, satellite accounts on the environment and agriculture are periodically published (Tebrake, 2020).  

Satellite accounts are increasingly being seen as fundamental to eliminating reliability problems in productivity analysis when it is extended to include other measures (Allin and Hand, 2017; Lynch and Thage, 2017; van de Ven, 2019) and as critical to facilitating transparency of the externalities of economic activities (Nistor and Stefanescu, 2018; SNA/M1.20/6.5). Two typologies of satellite accounts, namely thematic and extended accounts, are often put forward by countries (Tebrake, 2020; van de Ven, 2019). A recent study revealed about 20 different types of satellite accounts are published with Tourism and Environmental accounts being the most common (Tebrake, 2020).  The top five countries which publish the most satellite accounts are Canada, Colombia, Portugal, Israel, and Australia (Tebrake, 2020).   


The evidence gathered on which satellite accounts the countries in the sample publish showed a mixed picture. A number of countries publish a System of Health Accounts (e.g., Sweden, Italy, Norway and the USA) in accordance with the System of Health Accounts 2011. The UK’s Expenditure on healthcare: UK Health Accounts is published annually but falls outside of its group of National Accounts.  Norway provides a comprehensive set of accounts which includes Satellite Accounts for Education and Training and Satellite Accounts for Non -profit institutions.  Australia publishes Tourism Satellite Accounts annually, while its publications on Non-Profit Institutions Satellite Accounts and Information and Communication Technology Satellite Accounts are published infrequently. Canada publishes and disseminates annual satellite accounts which encompass the Environment, Culture, Tourism, Transportation and the Non-profit Institutions and Volunteering (StatCan, 2017) while the United States of America publishes eight different satellite accounts (US BEA, 2021).  


In light of the Kunming Declaration of October 2021, what prospects are there for reform of the SNA to assign greater importance to natural capital?


Biodiversity represents a key challenge in the context of the UN Decade of Action for Sustainable Development, the UN Decade on Ecosystem Restoration, and the UN Decade for Ocean Science for Sustainable Development (Dasgupta, 2021). The Kunming Declaration of October 2021 commits delegate countries to “ensuring the development, adoption, and implementation of an effective post-2020 global biodiversity framework, that includes the provision of the necessary means of implementation. Signatory nations, it is expected, will guarantee that the post-pandemic recovery policies, programs, and plans contribute to the conservation and sustainable use of biodiversity, promoting sustainable and inclusive development (UN 2021, p. 2). Consistently, the European Union announced the doubling of external funding for biodiversity (INCA, 2021). France, for example, is allocating 30 percent of climate funds to biodiversity projects. China, host to the event, pledged $230m toward protecting biodiversity in developing countries (Mishra, 2021).  In 2019, the UK revealed that a considerable portion of its climate funding will be directed towards biodiversity (House of Commons, 2021). Fundamental to the declaration was the need for implementing mechanisms for accounting, monitoring, reporting, and reviewing in a bid to reverse the current loss of biodiversity and ensure that it is put on a path to recovery by 2030 (Kunming Declaration, 2021).

Natural capital accounting represents the process of calculating the total stocks and flows of natural resources and services in each ecosystem or country, which can be calculated in physical and/or monetary terms. The System of Environmental-Economic Accounting (SEEA) is satellite to the 2008 SNA which is used worldwide to monitor the economic performance of most countries. Accordingly, an EU project launched in 2015 has shown that the production of a wide range of ecosystem accounts following the guidance of the SEEA is practicable, and that it is possible to produce consistent and comparable information on ecosystems. However, some challenges and criticalities arise. For instance, in the UK, natural capital estimates do not cover all resources and services. Hence, it is necessary to work to encompass as much of the economic value of the natural world as possible, which is challenging given its scale and complexity. Moreover, asset values are not an absolute "value" of the acceptable price to sell the entire natural world (UK natural capital accounts, 2021). Attention should therefore be given to proposed extended concepts in the broader framework on wellbeing and sustainability which integrate elements across the domains with traditional SNA aggregates, assigning then more importance to natural capital. One example is an expanded wealth concept that increases produced and financial capital with human and natural capital which could be part of proposed extensions to the SNA framework (INCA, 2021).


Higher standardisation in the use of measures to assign greater importance to natural accounts is also needed (Nistor et al., 2018) and subsequently incorporating sustainability accounting principles and standards adopted by private companies within the methodology underlying the UK Natural capital accounts should be beneficial. Particularly, UK national accounts need tighter and explicit integration with the cluster of main principles developed by GRI, IIRC, SASB, IASB, UNGP framework, TCFD, SDGs, and EU guidelines, that go beyond relevance, replicability, and consistency, including stakeholder engagement, materiality, completeness, strategic focus and future orientation, timeliness, conciseness, and connectivity (EFRAG, 2021).

Another key challenge in refining, integrating and further developing SNA framework for wellbeing and sustainability relies on setting the best balance between ideal concepts and measures and the feasibility of implementation across a broad range of national economies with diverse resources and institutional contexts. Multiple efforts are already being made to guarantee stronger cohesion and coordination with national accounts of other countries, such as the ongoing consultation with and experimentation by National Statistics Offices, along with more in-depth discussions with the policy and research communities worldwide.

Stronger engagement with broader audience, such as UK citizens, immigrants and society as whole is required. Arguably, the Kunming Declaration of October 2021 states explicitly countries’ commitments.  Among others, the UK needs to enable the full and effective participation of “local communities, women, youth, civil society, local governments and authorities, academia, the business and financial sectors, and other relevant stakeholders, and encourage them to make voluntary commitments” (Kunming Declaration, 2021, p.5). These commitments could be met by allowing higher accessibility of information disclosed which, in turn, could be guaranteed by making natural capital information disclosed easier to read and understand. For instance, synthesis of key-information on natural capital and appropriate graphical representations could allow local communities and civil society to know what’s going on and consequently acquire higher understandings and awareness of natural capital relevance. This call for evidence represents a good example of how to involve academia in such discussions. But it is only a starting point. Stronger collaborations between academics and scholars specialised in these topics and the UK government is needed, maybe through the implementation of research projects and dedicated funds. These efforts should extend beyond academia by including broader community stakeholders who could support the reform of SNA in assigning greater importance to natural capital. For instance, interested students, citizens, civil society, and private organisations should be involved as they are poised to provide fresh ideas and meaningful contributions. Accordingly, Natural Capital accounting awards and prizes, internships, and in-field work-projects are simple mechanisms which could promote beneficial involvement. Furthermore, collecting data on how tax income has been used to enhance biodiversity and amounts of individual investment in natural capital projects and initiatives will be novel ways to enhance engagement.


Concluding reflections


This contribution assessed the current preparation of the UK’s national accounts for conformity with international standards for national government accounting and identified key challenges – and related reform’s prospects - in the SNA framework in the light of the Kunming Declaration of October 2021. Key reflections drawn from the analysis could be summarised as follows:  


  1. To a large extent, the UK National Accounts are governed by international standards. However, issues of measurement, integration and unestablished accounting principles persist (Obst, 2015). Effectively, higher standardisation in the use of measures to assign greater importance to natural accounts is also needed.
  2. When it comes to satellite accounts, most countries seem to focus on their core competencies and are selective with what is published, although emphasis on environmental accounts is growing.  
  3. There is increasing pressure from users of national accounts for a digital economy satellite account (Mitchell, 2018; Tatarinov, 2019; Strassner, 2019). Most extant country specific satellite accounts on technology and the digital economy are dated although countries publish data on the value of their digital economy via appropriate public sector institutions (BEA, 2020). 
  4. Natural capital estimates do not cover all resources and services. It is necessary to work to encompass as much of the economic value of the natural world as possible, which is challenging given its scale and complexity (UK natural capital accounts, 2021).
  5. Stronger engagement with broader audience, such as UK citizens, immigrants and society as whole is required as suggested by the Kunming Declaration of October 2021.


On the back of these highlights, some suggestions have been provided to deal with the challenges outlined. However, this is not a prescriptive document as it aims to provide some preliminary reflections which could help the ongoing work to reform the 2008 SNA to assign greater importance to natural capital.





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January 2022