How to become a biodiversity leader: reconsidering the business-nature relationship
“The only way to have a friend is to be one.”
~ Ralph Waldo Emerson
Any healthy relationship is built on a foundation of mutual respect and support. A give and take. We rely on our friends and family and they, in turn, rely on us.
A stable, resilient and responsible business depends on the same reciprocity. Over the past year, we have begun to realise just how much. Climate change, COVID-19 and biodiversity loss are linked to an unhealthy – even toxic – relationship between humans and nature.
But it doesn’t have to stay this way. In this article, we explain the latest thinking on how business interacts with nature, why it matters to your business, and what you can do about it.
Understanding the current business-nature relationship
Economic activity – from burning fossil fuels to spraying fertilisers – can destabilise the natural systems on which we all depend. This increases the risk of abrupt, non-linear, and potentially irreversible changes to the habitability of our planet.
As you may know, the demands humans place on nature today are equivalent to the sustainable output of 1.6 earths. And as a result, biodiversity and ecosystem health are declining across the globe at rates unprecedented in human history.
At the corporate level, nature-related risks and opportunities are best understood through the lens of impacts and dependencies. These concepts are defined by the OECD as follows:
- Dependencies: how nature positively or negatively impacts an organisation’s immediate financial performance from the ‘outside-in.’ For example, extreme heat, zoonotic disease (-); mineral deposits, fertile soil (+).
- Impacts: how an organisation’s activities positively or negatively impact nature from the ‘inside-out.’ For example, chemical pollution (-); reforestation and afforestation (+).
Why does this matter for your business?
According to the World Economic Forum (WEF), over half of the world’s economic output – US $44 trillion in value – is moderately or highly dependent on nature. Unsurprisingly then, the 2021 Global Risks Report ranks biodiversity loss as the third most likely of the adverse risks facing the planet.
The decline in ecosystem services (e.g., climate regulation, soil fertility) and natural capital stocks pose a significant financial risk to banks, insurers, and institutional investors. Recent investigations found that more than one-third of all investments held by French and Dutch financial institutions are ‘highly’ or ‘very highly’ dependent on nature.
In response, providers of financial capital are expanding their focus from climate risk to broader, nature-related risks. Global institutions are also pushing companies to measure and report on their nature-related risks and opportunities in a consistent way.
Climate change has recently become a predominant focus for the corporate sector. At BWD, we are convinced biodiversity will be next. The Taskforce on Nature-related Financial Disclosures (TNFD), for example, has set a deadline of 2023 for the creation of a new reporting framework to address risks connected to the natural world.
If you are still grappling with the multiple challenges posed by climate change, there’s some good news. Actions that address biodiversity loss and climate change are often complementary. For example, reducing value chain emissions tends to create positive value for nature along the way (e.g., afforestation accelerates carbon sequestration).
What can you do about biodiversity? Here are four simple tips.
- Complete a readiness review
Screen your organisation for biodiversity risks at the corporate level. Consider operations, investments, value chains and communities. From there, prioritise your material (i.e. most important) nature-related impacts and dependencies, and set strategic objectives
- Familiarise yourself with key frameworks and tools
Engage with the initial guidance from the TNFD and the Science-based Targets for Nature (SBTN). This Business Benefits document is a useful resource for raising awareness with internal stakeholders. It will help you lay a foundation for nature-related reporting now, rather than being caught out later. You can also begin gathering and/or supplementing existing data to estimate your value chain-wide impacts and dependencies on nature, with guidance from the Natural Capital Protocol (NCP) and other leading tools (e.g., ENCORE, Swiss Re’s BEC Index, and STAR metric). From here, build a list of potential issue areas and locations for target setting.
- Incorporate nature-related risks and opportunities into existing strategy, reporting and financial planning
Once complete, your readiness review will tell you which nature-related issues matter most to your business. While being familiar with the emerging tools and data sets will help you know what’s possible to measure and manage at this early stage. If you commit to steps one and two above, you can begin introducing nature-related risks and opportunities into your existing strategy, reporting and financial planning.
- Signal your intent to become a biodiversity leader
Act now and you’ll be an early-mover in what will become a critical business issue. To signal your leadership to investors, employees, governments, local communities and others, consider publishing your first ‘biodiversity strategy‘, which should outline your priority areas, your existing work, and long-term ambitions.