Securing the future: Why biodiversity is a business imperative

April 11, 2024

Biodiversity is gaining momentum in the corporate landscape, as evidenced by the emergence of global frameworks, such as the TNFD and SBTN, and the growing recognition of nature-related risks. However, quantitative assessments of business impacts and associated biodiversity action plans remain largely absent.

This article dives into the concept of biodiversity, its pressing risks to business, and the evolving frameworks and regulations. We hope to equip companies with key insights to start their biodiversity journey and develop a competitive advantage.

Download our whitepaper for a comprehensive review of key concepts, global frameworks, and a step-by-step guide detailing TNFD and SBTN requirements and resources.

Corporate biodiversity: What companies need to know and how to get started

What is biodiversity?

According to IPBES, Biodiversity is the “variability among living organisms from all sources, including terrestrial, marine and other aquatic ecosystems and the ecological complexes of which they are a part.” It exists at three levels:

  • Ecosystem biodiversity: The variety of ecosystems within a region, encompassing different habitats, biological communities, and ecological processes, such as nutrient cycles.
  • Species biodiversity: The range of species in an ecosystem, including plants, animals, fungi, and microorganisms. It measures both the number of different species and their population distribution.
  • Genetic biodiversity: The variation of genes within species that ensures health, adaptability, and resilience to changes in the environment and external risks such as pests.

Biodiversity is crucial for human survival, well-being, and the economy by providing essential ecosystem services. These include provisioning services that supply physical materials (e.g., food, fresh water, and wood), regulating services that maintain ecosystem processes and balance (e.g., carbon sequestration, water filtration, and air purification), and cultural services that provide spiritual enrichment, recreation, and aesthetic experiences.

Biodiversity and its three levels

Why is biodiversity important for business?

More than half of the world’s total GDP, $44 trillion in economic value, is moderately or highly dependent on nature and its services. Businesses interconnect with biodiversity and nature through their dependencies, impacts, risks, and opportunities.

Dependencies and impacts

Businesses rely extensively on natural capital and ecosystem services to operate. For example, agriculture companies depend on soil fertility and pollination services from bees to grow crops. Water-intensive industries like textiles and beverages require clean water supplies for their production processes.

Business activities, like natural resource extraction and cultivation, directly alter the state of nature, leading to biodiversity loss. Land conversion, manufacturing, and transportation also have indirect impacts.

Through interactions with nature, businesses contribute significantly to the five pressures on biodiversity loss: 1) land, freshwater, and ocean use change; 2) climate change; 3) resource exploitation; 4) pollution; and 5) invasive species.

Risks and opportunities

The loss of biodiversity poses increasing business risks, such as supply chain disruptions, potential regulatory costs, and diminished trust from stakeholders and customers. The 2024 World Economic Forum Global Risk Report identifies “critical changes to Earth systems” and “biodiversity loss and ecosystem collapse” among the top three risks for the next decade, underscoring their significant and irreversible consequences. 

By engaging sustainably with nature, businesses can unlock new opportunities for market expansion, brand reputation, and cost reduction. For example, adopting sustainable farming and aquaculture practices not only helps preserve local habitats but also attracts eco-conscious consumers. Real estate developers incorporating green spaces and eco-friendly designs can reduce long-term maintenance costs and increase property values.

The graph below illustrates the interconnections between business models and the biodiversity-related impacts, dependencies, risks, and opportunities.

Connections between dependencies and impacts on nature and nature-related risks and opportunities (Adapted from TNFD)

Connections between dependencies and impacts on biodiversity and nature-related risks and opportunities (Adapted from TNFD)

Why should companies act now?

1. Escalating, irreversible impacts on the Earth’s systems

We are rapidly crossing the safe limits for six of the nine planetary boundaries necessary to maintain Earth’s stability for humanity. These include escalating risks from climate change, biosphere integrity, chemical pollution, freshwater use, and deforestation, leading to irreversible impacts on the Earth’s systems.

According to the IPBES 2019 report, human activity has drastically transformed 75% of the land surface, caused cumulative impacts on 66% of the ocean area, and reduced over 85% of wetlands areas. Since 1970, monitored wildlife populations have declined by 69%, with freshwater populations experiencing the largest impact, marked by an 83% drop.

The evolution of the planetary boundaries framework. (Source: Stockholm Resilience Centre)

The evolution of the planetary boundaries. (Source: Stockholm Resilience Centre)

The interconnected nature of planetary boundaries means exceeding one boundary can destabilize others. Therefore, addressing biodiversity and nature challenges requires a systematic approach. The IPCC and IPBES also acknowledge the linkage between climate change and biodiversity loss, urging organizations to tackle these issues simultaneously and equitably. While businesses have made progress in fighting climate change, integrating biodiversity into their strategies is crucial for tackling the full spectrum of environmental challenges and building long-term resilience.

2. Evolving regulatory pressures

Biodiversity-related disclosures are expected to follow the trajectory of climate regulations, which have transitioned from voluntary to mandatory in many countries. Companies proactively integrating nature-positive strategies will gain an edge in future compliance and market competition.

Here are some of the European Union (EU) regulations related to biodiversity:

  • Regulation of Deforestation-free Supply Chains: This regulation aims to minimize the risk of deforestation and forest degradation associated with products entering the EU market, addressing climate change risk and biodiversity loss. Companies offering commodities with high deforestation risks (palm oil, cattle, coffee, cocoa, timber, and rubber) or derived products (such as beef, furniture, or chocolate) must comply with due diligence requirements.
  • CSRD-ESRS: The Corporate Sustainability Reporting Directive mandates comprehensive sustainability reporting for companies operating in the EU, implemented following the European Sustainability Reporting Standards (ESRS). It includes a standard specific to biodiversity—ESRS E4 Biodiversity and Ecosystems, and three related—E2 Pollution, E3 Water and Marine Resources, and E5 Resource Use and Circular Economy. ESRS E4 requires double materiality assessment and disclosures on biodiversity policies, targets, and impacts.
  • EU Taxonomy: This classification framework aims to identify economic activities that contribute to achieving Net Zero by 2050 and broader environmental objectives. It helps guide investors toward projects supporting the green transition. One of the six environmental objectives in the drafted Delegated Acts focuses explicitly on biodiversity protection and restoration.
  • CSDDD: The Corporate Sustainability Due Diligence Directive requires large EU companies to identify, prevent, and mitigate their impact on human rights and the environment in their operations and value chains, including those related to biodiversity.

3. Growing demand for voluntary reporting

Due to the increasingly recognized risks from biodiversity and nature loss, voluntary disclosure practices are evolving rapidly in response to demand from investors and stakeholders. Major reporting frameworks like GRI and CDP have recently updated their guidance on biodiversity disclosures.

  • GRI released its updated biodiversity standard in January 2024, aligning with the Kunming-Montreal Global Biodiversity Framework, to help companies better understand and manage biodiversity risk in their operations and value chains.
  • CDP introduced an integrated questionnaire in April 2024, which combines previously separated themes of climate, water and forests to accelerate holistic environmental management efforts. It also includes biodiversity questions for all organizations and has increased alignment with TNFD on nature-based assessment.

How to start your biodiversity journey

Companies can embark on their biodiversity journey following the guidance of the Task Force on Nature-related Financial Disclosures (TNFD) and the Science Based Targets Network (SBTN). These two global frameworks offer practical guidelines and resources to help businesses integrate biodiversity considerations into their decision-making process.

TNFD establishes a global framework for financial institutions and companies to assess, disclose, and manage their impacts and dependencies on nature. It has been integrated into standards and frameworks, including ISSB, ESRS, CDP, and GRI. Building on the TCFD, TNFD offers 14 disclosure recommendations, including new metrics for priority sectors and biomes. These recommendations center on four pillars—governance, strategy, risk and impact management, and metrics and targets.

SBTN develops science-based targets (SBTs) for nature, extending SBTi’s climate focus. It guides companies and cities to avoid and reduce pressures on nature, restore and regenerate natural habitats, and address the drivers of nature loss through systemic changes. Currently, it focuses on impacts on land, freshwater, and ocean ecosystems from direct operations and upstream activities, with potential future expansion into downstream impacts.

Companies can benefit from using both frameworks due to their complementary approaches. SBTN offers a prescriptive method, providing tools and methodologies for setting quantifiable targets to reduce negative biodiversity impacts. In comparison, TNFD focuses on principles and guidelines for nature-related financial disclosures and risk management, addressing both positive impacts and negative impacts on nature.

Here are three steps that aggregate the TNFD and SBTN guidance for companies to get started:

  1. Understand business interface with nature: Conduct a material screening of related sectors and activities across the value chain to identify where business activities, directly and indirectly, interact with nature.
  2. Assess and prioritize material dependencies, impacts, risks, and opportunities: Develop detailed material assessments using TNFD/SBTN recommended indicators to understand critical dependencies and impacts on nature and nature-related risks and opportunities to inform business strategies for target setting and risk management.
  3. Measure, set targets, and disclose: Follow SBTN guidance to measure baseline impacts and set freshwater and land targets for issue areas and associated locations. Prepare TNFD disclosures by creating responses to material issues, strategies, action plans, and risk management processes to achieve targets.

Download our whitepaper to view the detailed breakdowns of TNFD and SBTN guidance, illustrative metrics and results, as well as additional resources for assessment.

Aligned Incentives’ approach to biodiversity

Aligned Incentives offers AITrack, an AI-powered enterprise sustainability planning solution trusted by the world’s largest organizations. It helps companies efficiently assess all environmental issues—including climate change, water stress, biodiversity, and more—to achieve Net Zero goals and drive business success.

  • Custom LCAs at scale: We develop life cycle inventories tailored to the unique materials, technology, timeframe, and production region of your complete product portfolio, covering all business activities in your operation and value chain.
  • Systematic approach: You can quantify all types of environmental footprints consistently and efficiently based on the unified LCA Our future-proof solution enables you to create strategies that improve overall environmental impacts, preventing the optimization of one issue at the expense of others.
  • TNFD/SBTN aligned: We provide comprehensive assessments of corporate biodiversity using science-based methodologies and metrics recommended by TNFD/SBTN, allowing you to effectively pinpoint hotspots, set targets, and develop disclosures aligned with nature-based frameworks and regulations.

Request a customized demo🡲

Aligned Incentives

AI-powered enterprise sustainability planning trusted by the world’s largest organizations.