Are we dependent on nature?

This is the big question businesses need to ask today. 

In a world shaped by the intricate bonds between humanity and the environment, the question of our dependence on nature takes centre stage. Unless you’ve been hiding under a rock, you probably watched the recent revelations, epitomised by Sir David Attenborough's mesmerising Planet Earth series, offer a compelling call to action. This remarkable documentary not only showcases the breathtaking beauty of our planet but also underscores the need for us to be conscientious stewards of our environment and its invaluable resources. It emphasises the urgency of preserving the biodiversity that sustains life on Earth, not only for our generation but also for those that follow. The series reminds us that individual actions can collectively wield tremendous influence.

In the pursuit of a sustainable future, businesses have rallied behind climate goals set several years ago. In the UK, the Task Force on Climate-related Financial Disclosures (TCFD) has now made climate reporting mandatory. Nevertheless, climate change is just one facet of a complex web. Other drivers, such as resource utilisation, pollution, change in land and sea use, and the spread of invasive species, remain critical. Unlike the neat categories businesses use, nature operates as an integrated whole, as one interconnected planetary system. It is imperative that we start to broaden our perspectives beyond climate change.

The available reserves of resources from nature are finite, and an increasing number of governments and businesses have come to recognise the dependencies they've long taken for granted as free resources.

While achieving net zero emissions is undoubtedly a worthy goal, governments acknowledge that being ‘nature-positive’ is a pivotal component in supporting and achieving such ambitions. Investors are demonstrating a growing interest in nature-positive initiatives, as they now recognise nature-related risks as items to include on balance sheets. The Taskforce on Nature-related Financial Disclosures (TNFD) offers recommendations to guide investors in making more informed capital allocation decisions. It is evident that stakeholders are becoming increasingly inquisitive, raising pertinent questions. To have any hope of reaching net zero emissions, we must look to incentivise companies to evaluate the risks and opportunities tied to natural capital.

In our recent articles about TNFD, we provided an overview of the framework, and explained what its recommendations involve for those eager to embark on the journey of implementing and reporting on the new framework. The TNFD framework strikes a balance between scientific rigour and practical implementation, making it a valuable tool for businesses. It aligns closely with the International Sustainability Standards Board (ISSB) standards and uses the TCFD as a reference point.

In the world of markets and businesses, we are witnessing a progressive shift away from viewing nature as an unlimited resource, to recognising its presence on balance sheets, cash flows, and investment portfolios. This shift places nature-related risks on par with other considerations, compelling companies to assess, monitor, communicate, and adapt.

Why should businesses consider reporting on nature an even more compelling endeavour than reporting on climate? Climate change is undeniably a global challenge, making it difficult for individual businesses to demonstrate their specific impact in a tangible manner, despite their best intentions. In contrast, TNFD allows businesses to pinpoint their specific dependencies within nature, which in turn localises their risks and impact. This localisation ties the stories and data directly to their businesses, making the information much more relevant.

While adopting yet another framework may seem daunting, the first step for any business is simple but essential: ask, "What are we dependent on in nature?". Equally important is to identify the positive flow of benefits that nature provides, often referred to as 'Ecosystem Services'. With approximately 25 taxonomies, businesses can identify and provide data for a meaningful assessment, creating leading metrics. These metrics might include the provision of fresh water for operational processes or the biodiversity that supplies resources such as wood for furniture and paper production.

By listing these dependencies and evaluating how your business relies on them, you can begin the assessment process using the LEAP approach (Locate, Evaluate, Assess and Prepare), including pilot programs. Surprisingly, these assessments may reveal that nature-related risks and opportunities rank higher on your risk register than climate-related ones, making them more significant for your business, both from an opportunity and risk perspective. TNFD doesn't impose a double materiality requirement; instead, it leaves it to companies to decide whether they want to communicate the risk factor, the impact factor, or both. This decision is driven by factors such as the company's purpose, vision statements, values, and investor expectations.

It is worth noting that there exists an annual US$700 billion funding gap to address nature loss. This presents a unique opportunity for governments and private institutions to make a difference.

Assigning value to nature is a crucial step and TNFD serves as a powerful tool to measure the specific aspects of a business's impact on nature. TNFD will be looking to facilitate and market its knowledge through various programs related to nature-related risks. With the baseline reporting requirements of TCFD, and recent ISSB framework launches, we will inevitably witness an increasing number of initial inquiries, pilot programs and growing interest in reporting on the risks and opportunities tied to businesses' dependencies on nature. This transformation will reshape corporate behaviour and reporting practices, ushering in a new language of sustainability.