Biodiversity, defined as the variety of living organisms and ecosystems on Earth, is essential for the long-term sustainability of natural, social, and economic systems around the world. Despite over half of the world’s GDP being moderately or highly dependent on nature and its services, human activities are causing an unprecedented and accelerating decline at a global scale.
Thanks to the Task Force for Climate-Related Financial Disclosure, corporates have familiarised themselves with two key categories of risk: physical and transition. The risks associated with biodiversity loss can also be understood in a similar way. The loss of biodiversity creates significant physical risks for the private sector due to impacts on ecosystem services such as a stable climate, filtered water, a steady food supply, flood and pest control, and of course the supply of raw materials for industry. Organisations will also face transition risks relating to changes in the economic system to achieve a biodiversity-positive economy, including increased regulation, demand shifts, or brand reputation.
However, correctly identifying these risks and taking transformative actions to reverse nature loss through corporate biodiversity strategies will help companies to also find nature-related opportunities that will enable long-term business growth and stability.
So...where do I begin?
The first step towards a strategic transformation approach to biodiversity conservation is to identify your business impacts and dependencies on nature.
Impacts are defined as the change caused to the baseline state of nature because of actions taken by the organisation to conduct its normal operations. They can be direct impacts if nature's decline is linked to an organisation’s immediate activity, for instance, pollution emitted from a factory, or indirect impacts if they occur over time or through a chain of cause and effect. A company’s GHG emissions are the simplest example of an indirect impact as the emissions are not directly linked to nature loss but are contributing to the change in the global climate linked to biodiversity degradation.
A company’s nature-related dependencies refer to its reliance on or use of biodiversity, including the use of natural resources or “provisioning services” like timber or steel, but also broader ecosystem services, such as pollination, climate regulation, or soil formation.
Graph conceptualises natural capital impacts and dependencies, risks, and opportunities. Source: Natural Capital Coalition. 2016. “Natural Capital Protocol”. Available at: http://www.naturalcapitalcoalition.org/protocol
Why should I get started now?
2023 is being called “the Paris moment for nature” for the strong momentum gained after the signing of the Global Biodiversity Framework (GBF), an international agreement aimed at halting and reversing biodiversity loss.
Cartoon conceptualises the relative importance of biodiversity to human life and the economy. Source: Graeme MacKay, 2020. Available at: https://mackaycartoons.net/2020/03/18/wednesday-march-11-2020/
The time to act is now. As countries work on implementing new regulations to protect nature and customers shift their demands towards products with lower environmental impact, businesses will face challenges. Those that took a step back to assess their impacts and dependencies will find better ways to reduce their risk exposure and take advantage of the opportunities from these market changes.
From improved efficiency, development of new products, access to new and better funding streams, to operational cost-savings from nature-based solutions, seizing biodiversity-related opportunities requires strategic thinking.
In one of our previous blogs [CEO memo: the Net Zero transformation checklist], we discussed how businesses that take a transformative approach to Net Zero, founded on a clear strategic rationale, will benefit from high-value creation opportunities and value capture initiatives. The same logic supports the development and implementation of a sound biodiversity strategy. It’s based on the principle that early adopters and smart adopters of biodiversity initiatives will be on top of regulatory, reputational, and demand side risks. From that advantageous position, they’ll be able to identify practices with the maximum positive impact on nature, the highest co-benefits with other sustainability initiatives, and the highest value to the company.
Here's just one example of value creation opportunities from green roofs and walls being implemented to increase biodiversity in the built environment:
Source: Ampersand Partners, 2023
Many different approaches and frameworks are emerging to support the private sector’s transformation and help them to develop a robust and transparent corporate biodiversity strategy, such as the Science Based Targets for Nature (SBTN) and the Taskforce on Nature-related Financial Disclosure (TNFD).
Both these frameworks are still a work in progress, with their final recommendations expected to be released later this year. However, this should not be taken as an excuse to delay corporate action.
The market standard should not and cannot be the end game. Frameworks are a great way to get companies started on their sustainability initiatives and serve as strong catalysts to get the market moving in the right direction. Yet, it’s important to remember that minimum compliance should not be the end goal.
In fact, companies with a compliance mindset approach to sustainability will most likely only carry the costs of their initiatives without driving any real value from them or generating any real impact on nature.
Interested in learning more about the real impact of biodiversity on your business? Reach out to javiera@ampersand.partners for an introductory chat over a coffee.
by Kristin Marin
Associate at Ampersand Partners
by Javiera Salas Zorrilla
Analyst at Ampersand Partner
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