Toolkit: why think about biodiversity in the corporate context?

What does biodiversity have to do with business? The nexus between the two might seem obvious for certain industries (eg, agribusiness and extractive industries), less so for others (eg, technology). Yet, there's mounting evidence that corporates in every sector are exposed to biodiversity-related risks from the rapidly evolving regulatory, market and litigation landscapes. These are risks that ultimately stem from existential threats to biodiversity and ecosystems.

A new path was paved for corporates and other economic players with the signing of the Kunming-Montreal Global Biodiversity Framework (GBF) in December 2022 at the 15th Conference of the Parties of the UN Convention on Biological Diversity (COP15). In the same way that the Paris Agreement set in train global efforts to curb the release of greenhouse gas emissions, the GBF – hailed as the "Paris Agreement for nature" – is likely to herald a new era focusing on the conservation, restoration and sustainable use of nature to halt and reverse its loss.  

We're already seeing a steep rise in biodiversity-related laws and policies globally, with corresponding levels of engagement from stakeholders (whether through regulatory enforcement, shareholder resolutions or grassroots litigation). There are also increasing expectations around nature and biodiversity-related disclosures. This is especially so with the publication of the final disclosure framework from the Taskforce on Nature-related Financial Disclosures (TNFD), effectively the nature equivalent of the disclosure framework developed by the Taskforce on Climate-related Financial Disclosures (TCFD), with the former likely to follow a similar voluntary-to-mandatory trajectory as the latter.

To mark these significant developments, we're publishing a series of articles over the coming weeks which provide corporates with a toolkit to better understand their relationship with biodiversity and to take steps to address biodiversity-related risks as well as opportunities. In this first chapter, we place biodiversity in the corporate context and provide an overview of the chapters to come.

Nature and biodiversity's business with corporates

Nature and biodiversity are distinct but interrelated concepts. Nature refers to everything that forms part of the natural world, including biodiversity.¹ Biodiversity, an aspect of nature, is the diversity of all living organisms, in all its forms.² Its interaction with the natural physical environment (such as soil, air and water) makes up ecosystems from which we all derive benefits, that is, the goods and services we obtain from functioning ecosystems. Biodiversity of the elements that comprise ecosystems enables these ecosystems to generate the services on which people and global economies depend.³

The World Economic Forum (WEF) estimates that US $44 trillion of economic value generation (ie, more than half of global GDP) is highly or moderately dependent on ecosystem services.⁴ Such a dependency may be clearcut for corporates operating in primary industries like the extractives industry, but those operating in secondary and tertiary industries commonly have significant concealed dependencies through their supply chains. For example, the infrastructure, renewable energy and pharmaceutical industries rely heavily on natural commodities and the provision of ecosystem services from forests, soil and water. 

In addition to dependencies on nature and biodiversity, there are often impacts of business activities on nature and biodiversity, and these impacts are attracting increased attention from governments and the scientific, economic and international communities. The rate of land degradation and habitat loss, the over-exploitation of natural resources, climate change, and pollution to air, water and land - to name but a few drivers of biodiversity loss - far exceed the speed at which biodiversity can replenish and regenerate. This has led to the WEF identifying biodiversity loss and ecosystem collapse as one of the top five global risks over the coming decade.⁵

Studies tell us that no corporate actor is immune to the risks associated with these dependencies and impacts.⁶ The loss of biodiversity, failing to understand related dependences and impacts, and trailing behind the regulatory and market changes already taking place pose significant risks to business, including:

• Operational risks: These include risks to business operations and supply chains from resource deficiency and depletion and physical security of assets and inputs.
• Financial risks: These include rising capital costs, loss of investor confidence or investment opportunities, more onerous lending requirements, and increased costs of insurance premiums and claims.
• Reputational risks: For example, risks to consumer and market trust with evolving stakeholder preferences and expectations, with the potential to undermine climate commitments where nature loss and climate change are inherently interconnected.
• Liability risks: With compliance and enforcement activities on the rise, such risks include those in relation to greenwashing, breaches of directors' duties, failure to engage with stakeholders, and nature and environmental damage generally.
• Transition risks: These include risks associated with responding to and complying with policy and regulation and shifts in market focus.

By the same token, there are biodiversity-related opportunities. Corporates are already starting to capitalise on these opportunities, whether by accessing environmental markets, using natural capital accounting processes or redefining and improving brand value.⁷ With worldwide attention increasingly focused on the conservation, restoration, and sustainable use of biodiversity, corporates that seek to get ahead of the curve are likely to find themselves better placed to adapt and succeed in an evolving market.

A toolkit for every corporate actor

Looking ahead in our biodiversity toolkit series, chapter two is a questionnaire for businesses across all sectors to benchmark their progress against key biodiversity-related considerations from a governance and due process perspective. It also serves as a useful tool for boards seeking to understand how their business is managing biodiversity-related risks and positioning themselves to take advantage of the opportunities.

Chapter three sets out practical steps businesses should consider taking to improve their biodiversity credentials. The structure follows that of our questionnaire from chapter two. Proactivity in these areas will help businesses prepare for upcoming regulatory, policy and market changes and shifting public and governmental attitudes to the role of business in biodiversity conservation, restoration and sustainable use.

Chapter four provides a snapshot of the regulatory landscape, with an emphasis on the key developments likely to impact businesses, their governance and their global activities.

Chapter five discusses how businesses are responding to this fast-moving regulatory landscape to manage the risks – operational, financial, reputational and legal – and how some businesses are leveraging their activities to achieve competitive advantage.

Chapters six and seven explore case-study scenarios to bring the preceding chapters to life.

[1] Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES), The Global Assessment Report on Biodiversity and Ecosystem Services (2019).

[2] Convention on Biological Diversity (1992), Article 2.

[3] Commonwealth Climate and Law Initiative (CCLI), Biodiversity Risk: Legal Implications for Companies and their Directors (December 2022).

[4] World Economic Forum (WEF), Nature Risk Rising: Why the Crisis Engulfing Nature Matters for Business and the Economy (January 2020).

[5] WEF.

[6] IPBES and WEF. See also OECD, Biodiversity: Finance and the Economic and Business Case for Action (2019) and Partha Dasgupta, The Economics of Biodiversity: The Dasgupta Review (2021).

[7] CCLI.