By and | November 17, 2023

The term biological diversity—or biodiversity—refers to the variety of animals, plants, fungi and even microorganisms such as bacteria that can be found in the natural world. Biodiversity supports everything in nature that is needed to survive: food, clean water, medicine and shelter.

Yet current economic systems are increasing the pressure on the planet and its natural resources. Human activity is heavily interfering in the balance of ecosystems, threatening species and causing the loss of biodiversity and nature.

Thanks to new reporting standards, nature has now taken a seat in the boardroom. Regulatory disclosure requirements on sustainability have been joined by voluntary standards for nature-related financial disclosures. Launched in September 2023, the Taskforce on Nature-related Financial Disclosures (TNFD) framework aims at enabling organizations to report and act on evolving nature-related risks.

With the TNFD framework, companies can assess the impacts of nature-related topics on their operations and financial performance, as well as the impacts their activities have on ecosystems. It also supports them in developing and implementing a strategic risk management plan, including the allocation of capital.

Risks, Opportunities and Impacts of Biodiversity Loss

Biodiversity loss and ecosystem collapse is among the top five risks in the World Economic Forum’s Global Risks Report 2023. Risks related to biodiversity loss are growing more severe and are necessarily associated with risks for businesses.

Degradation and loss of biodiversity and nature can have far-reaching business consequences, including supply chain disruption that results in financial or reputational losses. Investors and stakeholders are also paying more attention to nature-related topics.

When preparing information for investors, lenders and insurers on the risks, opportunities and financial impact of climate change, companies increasingly rely on the Task Force on Climate-related Financial Disclosures (TCFD) framework. The new TNFD framework builds on the structure of the TCFD with an additional range of recommendations that cover nature-related aspects. Within the framework, the TNFD recommends a four-phase approach: locate, evaluate, assess and prepare (LEAP) for identifying and assessing risks and opportunities

Setting Science-Based Targets for Nature

Similarly, for setting targets and metrics, the TNFD recommends using the science-based targets for nature introduced by the Science Based Targets Network (SBTN) in May 2023. With this methodology, companies can set targets that are based on scientific evidence.

Science-based targets for nature equip organizations with a method for assessing environmental impacts on nature and biodiversity. Companies can establish objectives and set targets to reduce their negative impacts and increase the positive impacts of their operations on ecosystems. The SBTN defines science-based targets for nature as “measurable, actionable and time-bound objectives, based on the best available science, that allow actors to align with Earth’s limits and societal sustainability goals.”

Through its proposed action framework known as AR3T, the SBTN intends to encourage companies to take action on a subset of sustainability goals across three physical realms: land, freshwater and ocean.

Sustainability Reporting and Disclosure Requirements

Reporting on nature-related matters and biodiversity loss has long been practiced in sectors such as oil and gas, food and beverage and the apparel industry. However, it is a relatively new topic for many companies and may represent a considerable challenge.

Recent developments around sustainability reporting regulations such as the Corporate Sustainability Reporting Directive (CSRD) mean that a broader spectrum of companies in the European Union and the U.S. will have to provide comprehensive and robust information on their social and environmental impacts.

In addition, the CSRD’s reporting standard around nature-related topics (ESRS E4 – Biodiversity and Ecosystems) indicates that preserving and protecting natural resources will become more relevant as societies move toward a more nature-positive economy.

Assessing Nature-Related Impacts in the Value Chain

Recurrent aspects of sustainability reporting include carbon emissions, reduction targets and governance. Increasingly, biodiversity and nature-related topics are being included in voluntary disclosure frameworks such as the Global Reporting Initiative (GRI) standard and the CDP Climate Change Questionnaire.

Conducting a materiality assessment (a requirement for GRI) or double materiality assessment (required for CSRD reporting) will indicate the importance of ecosystem and biodiversity topics to an organization. If specific climate change and environmental topics are material to their operations, companies are advised to assess their risks and opportunities in these areas. They can then develop a consistent transition plan to adapt and mitigate such risks.

When developing a robust sustainability strategy, organizations may want to tackle environmental impacts using a holistic approach that goes beyond carbon emissions and carefully assesses their value chain. This is very likely where activities with impacts on nature and biodiversity take place.

How Sphera Can Help

With our team of sustainability and ESG consultants, Sphera is ready to support and educate our clients on the concepts and requirements around nature-related topics. Our services include performing gap assessments, as well as materiality and double materiality assessments. Such assessments enable companies to identify their material topics and comply with disclosure regulations.

We also support clients in taking effective action through the implementation of available tools such as the TNFD and SBTN frameworks.

Along with our holistic approach to sustainability and environmental strategy, Sphera has extensive and proven expertise in life cycle assessment (LCA). Using “Biodiversity Loss Risk” indicators incorporated into Sphera Managed LCA Content, we help companies consistently evaluate their biodiversity impacts throughout the life cycle of their products.

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