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.
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:
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.
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.
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.
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 biodiversity and nature-related risks and opportunities (Adapted from TNFD)
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. (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.
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:
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.
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:
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 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.
