Companies Might Be Forced to Report Their Impact on Nature. A New Framework Aims to Help.
New nature-reporting recommendations aim to help companies assess their impact on and risks from the world’s natural systems. It could become mandatory one day, much as the climate framework it builds upon.
The Taskforce on Nature-Related Financial Disclosures, or TNFD, on Monday issued its final reporting framework, which aims to make it easier for companies to identify their impact on nature, and take action to mitigate it. The recommendations were developed over the last 18 months through a series of consultations with corporate stakeholders, and cover issues including deforestation, pollution, water stress and overfarming.
The task force—a market-led effort to protect biodiversity but funded by the United Nations—builds on a similar framework for climate emissions, the Task Force on Climate-Related Financial Disclosures, which was created in 2015 and eventually used in developing standards for mandatory climate reporting.
“Nature risk is financial risk,” said Elizabeth Mrema, co-chair of TNFD. Some $44 trillion of global economic value is moderately or highly dependent on nature, according to the World Economic Forum, while the World Bank has warned that the collapse of natural systems could wipe $2.7 trillion a year from the global economy by 2030.
“Businesses today are inadequately accounting for nature-related dependencies, impacts, risks and opportunities,” said David Craig, TNFD’s other co-chair. “Nature-risk is sitting in company cash flows and capital portfolios today. The costs of inaction are mounting quickly.”
Just 20% of corporations have studied the effects their operations have on biodiversity, and even fewer have assessed the impact of their entire supply chains, according to consulting firm
This is despite growing awareness of the catastrophic effects of biodiversity loss, Capgemini said in a report, based on a survey of executives of large organizations from major economies.
Some firms have begun using the TNFD even before its final version was published, said Aurélie Gillon, biodiversity lead at Capgemini Invent France. These include consumer-goods makers assessing their agricultural suppliers, and jewelers assessing their suppliers in the mining industry, according to Gillon. She said the framework is likely to be adopted by the COP15 agreement and enter into regulation.
The TNFD recommendations are currently voluntary, but come as regulation tightens around degradation of the natural world. Governments meeting at last year’s COP15 biodiversity summit in Montreal, Canada, agreed to oblige companies to report and reduce their impact on the natural world. Separately, in the EU, many companies are already facing obligations to report their impact on nature under the bloc’s Corporate Sustainability Reporting Directive. By 2024, they will also have to prove that commodities such as coffee, wood and palm oil they import into the EU weren’t produced in ways that brought about forest loss, or could face stinging fines.
Despite the challenges, some companies have already begun to include biodiversity in their impact assessments, separately from their analysis of greenhouse-gas emissions. Tobacco group
Philip Morris International
has set itself a 2033 target of ensuring it causes no ecosystem loss anywhere connected to the company’s value chain, and of having a net positive impact on nature by 2050. “We recognize that nature loss poses both risks and opportunities for business, now and in the future,” said
PMI’s chief sustainability officer.
Packaged-foods giant Nestlé welcomed the recommendations. “We are now assessing the framework in full and identifying areas of alignment with forthcoming regulation in the European Union and Switzerland,” a company spokesperson said.
another major food-products maker, declined to comment on the TNFD but said it was working to ensure a deforestation-free supply chain and to boost sustainable agriculture among suppliers.
Cost is still a major barrier to proper biodiversity assessment, especially for smaller suppliers, Gillon said. “It can be complicated to be really sure that the origin is totally controlled,” she said, noting that luxury-goods brands—with their larger profit margins and relatively local supply chains—can more quickly and easily assess their biodiversity impact. French luxury group Kering, owner of Gucci and other fashion houses, has committed to having a net-positive impact on biodiversity by 2025, including through a transition to regenerative agriculture for supplies as cotton, leather and cashmere.
But in other sectors, it can be tough for companies to know exactly the origin of every element in their products. “It’s quite a big ask of businesses…locating really where the supply chain has an impact on nature is going to require quite a step change,” said Zoe Balmforth, a co-founder of U.K.-based startup Pivotal, which helps firms assess environmental impact through comprehensive monitoring systems, including drone footage and underwater cameras.
“The easiest win for businesses are the areas where they have direct control,” Balmforth said, pointing to where companies control land or where mining companies have assets.
Write to Joshua Kirby at [email protected]
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