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Setting the scene: Kunming-Montreal Global Biodiversity Framework

The resounding message from global leaders at the 15th Conference of the Parties to the United Nations Convention on Biological Diversity (COP15) is that there is a pressing need to take steps to protect biodiversity and restore ecosystems.

Held in Montreal, Canada in December 2022, COP15 gave rise to the ambitious Kunming-Montreal Global Biodiversity Framework (GBF), which outlines internationally agreed goals and targets to address biodiversity loss and promote the fair and equitable sharing of nature-derived benefits.

Although non-binding, GBF has substantially influenced the framing and development of national and regional laws and policies, several of which will require businesses to take a close look at their relationship with biodiversity and put in place measures consistent with the shifting paradigm.

Regulatory changes are hitting hard and fast, and those that are likely to have the most bearing on businesses relate to due diligence and disclosure obligations. This suggests efforts are underway to achieve GBF targets, among them targets 14 and 15.

"Ensure the full integration of biodiversity and its multiple values into policies, regulations, planning and development processes, poverty eradication strategies, strategic environmental impact assessments, environmental impact assessments and, as appropriate, national accounting, within and across all levels of government and across all sectors … progressively aligning all relevant public and private activities, fiscal and financial flows with the goals and targets of this framework."

- Target 14

"Take legal, administrative or policy measures to encourage and enable business, and in particular to ensure that large and transnational companies and financial institutions: (a) regularly monitor, assess and transparently disclose their risks, dependencies and impacts on biodiversity including with requirements for all large as well as transnational companies and financial institutions along their operations, supply and value chains and portfolios …"

- Target 15

Telling the story: due diligence and reporting obligations

Value chain due diligence

The local nature of biodiversity loss and damage calls for legal systems that hold multinational corporations to account across their entire value chains. Because of this, there has been a great deal of stakeholder anticipation for the EU's Corporate Sustainability Due Diligence Directive, which, once adopted, would impose sweeping obligations on large EU companies and non-EU companies with significant EU activity. Broadly, these companies would need to integrate due diligence into their policies and risk-management processes to identity, assess, prevent, mitigate, bring to an end, and remedy actual and potential adverse environmental and human rights impacts that stem from their own operations, those of their upstream business partners and those from specified downstream activities.

The EU-wide directive follows in the footsteps of several EU member states (eg, France, Germany and the Netherlands), which have already established due diligence laws at the national level. Other non-EU jurisdictions (eg, Australia, South Korea and the UK) are also contemplating or developing their own due diligence regimes.   

To date, deforestation due diligence in particular has attracted significant attention from a legislative point of view. Tackling deforestation yields far-reaching benefits such as mitigating biodiversity loss and climate change, and protecting indigenous peoples and local communities.   The EU's Deforestation-free Products Regulation, which came into force in June 2023, seeks to curtail global deforestation and forest degradation by introducing extensive mandatory due diligence and reporting requirements for operators and traders before they import or place specified commodities[1] (or their derived products[2]) onto the EU market or export them from the EU. The UK has plans for similar requirements as part of its Forest Risk Commodities Scheme, which will be introduced as secondary legislation under the Environment Act 2021, though timing around this is still unclear.

Other issue-specific due diligence legislation cannot be far off, what with global commitments to protect 30% of the planet's land and sea by 2030 under the GBF ("30 by 30").

Sustainability disclosures

Corporates everywhere must also take heed of the proliferation of sustainability disclosure obligations. The EU's Corporate Sustainability Reporting Directive (CSRD) and accompanying European Sustainability Reporting Standards (ESRS), now both in force, require companies in scope to make disclosures on their risks, opportunities and impacts in relation to material sustainability matters, including material biodiversity and ecosystem-related matters. Through its efforts to enhance and standardise corporate sustainability reporting and make consistent and comparable data available to investors and stakeholders to inform decision-making, the EU has been at the forefront of advancing sustainability disclosures.

Following closely behind, the UK has signalled that it will soon incorporate into the domestic corporate reporting framework the global sustainability standards issued by the International Sustainability Standards Board's (ISSB) and the disclosure recommendations of the Taskforce on Nature-related Financial Disclosures (TNFD). Other jurisdictions (eg, Australia, Canada, US and Japan) have echoed similar plans. Notably, the TNFD recommendations seek to operationalise Target 15 of the GBF, encouraging and enabling businesses to assess, report and act on their nature-related dependencies, impacts, risks and opportunities.

Going forward: biodiversity-related risks and opportunities

Time is of the essence for businesses to get ahead of the curve in this fast-evolving legal and political landscape and to avoid the pitfalls of not getting things right. Biodiversity and nature-related litigation in the context of due diligence is already on the rise, as is regulatory enforcement in relation to misleading and unsubstantiated green claims.

For steps businesses could be taking now to understand links with biodiversity and to benchmark progress against key considerations from a governance and due process perspective, see our earlier chapters one, two and three. For more on biodiversity-related risks as well as opportunities, look out for the next chapter of our biodiversity toolkit series.

[1] Palm oil, soya, wood, cocoa, coffee, cattle and rubber.
[2] Examples include chocolate, beef, leather, furniture and printed paper.

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London ESG, Sustainability and Responsible Business Biodiversity ESG Heidi Asten Dr Marius Boewe Melanie Debenham Rachel Foo Silke Goldberg Kathryn Pacey Natalie Shippen