Organisations and biodiversity impact: what you need to know about new environmental reporting

At the United Nations Biodiversity Conference (COP15), the Global Biodiversity Framework (GBF) was agreed upon and adopted. The framework is a vision to halt and reverse nature loss. It sets out four overarching goals and defines 23 targets to drive action along the way. One of the most notable goals is known as ‘30 by 30’; to protect at least 30% of land, marine, and coastal areas, and restore at least 30% of degraded ecosystems by 2030 ¹.

In the 2020 Nature Risk Rising report, the World Economic Forum found that over half of the world's GDP is highly or moderately reliant on nature and its services ², with the remainder also being dependent and underpinned by nature, but to a lesser extent. This highlights the immediate need for companies to adopt sustainable business models which operate within ecological limits as a minimum and aspire to become nature positive across their operations and supply chains. Preserving biodiversity is a critical priority if we want to secure a sustainable future.

Most corporations are not considering the impact of their supply chains and operations on nature, nor are they considering how nature impacts their business. Many companies also lack sufficient information to understand how nature affects their bottom line. Consequently, investors and lenders are unable to accurately evaluate the potential risks and opportunities related to nature across their investment portfolios. However, there is an increasing awareness of the nature crisis, and the significance of biodiversity is gaining momentum ^3.

The GBF Target 15 on monitoring, assessing, and disclosing risks, dependencies and impacts on biodiversity is significant and effectively sets out the mandate for the Taskforce for Nature-related Financial Disclosures (TNFD) ^4.

The TNFD was established in 2020 to address the increasing need for businesses and organisations to manage their environmental impacts. This initiative aims to create a global reporting framework for financial risk and opportunity management and disclosure related to nature. Currently, the initiative is in the development phase, and the v0.4 beta framework has been published. This represents a final draft of the core components of the TNFD framework. The Taskforce is scheduled to publish the final recommendations and v1.0 of the TNFD framework in September 2023.

Timeline of the TNFD framework development

Design and development phase

• July 2020 - TNFD Launched
• March 2022 - V0.1
• June 2022 - V0.2
• November 2022 - V0.3
• March 2023 - V0.4

Framework Launch

• September 2023 - V1.0

The TNFD framework is closely modelled on the Taskforce for Climate-related Financial Disclosures (TCFD) framework, which was designed to enhance the reporting of financial information pertaining to climate. In contrast, the TNFD aims to assist organisations in understanding and disclosing the risks and opportunities linked to nature. Each framework encourages organisations to integrate this knowledge into their decision-making processes. The TNFD includes areas not covered by the TCFD, such as soil erosion, ocean plastics, biodiversity, and more. Both frameworks are well aligned, with the TNFD adopting the same pillars as the TCFD (Governance, Strategy, Risk Management, and Metrics and Targets) and all 11 recommended disclosures. As a result, the TNFD advises companies to utilise both TNFD and TCFD for a comprehensive view of financial risks and opportunities related to climate and nature.

Comparing the two frameworks reveals that climate has relatively straightforward metrics, such as greenhouse gas emissions, whereas equivalents for nature are more intricate. This is because assessing the impact of many components of nature requires consideration of location, regional and country-specific aspects, as well as the need to consider systemic risks that arise from the failure of an entire system. The TNFD has taken steps to address this complexity in its v0.4 release by proposing both "core" and "additional" disclosure metrics. The latter includes metrics that companies or financial institutions can choose based on their specific industry, location, and/or regulatory requirements ⁵.

The TNFD may become mandatory in the future considering the success of the TCFD, the endorsement it has received from the G7 Finance ministers ⁶, and the weight of support generated through the ‘Make it Mandatory’ campaign led by the Capitals Coalition ⁷.

Early engagement with the TNFD process will not only prepare and position your organisation for the upcoming framework but will demonstrate commitment to a nature positive future. To get a head start in measuring and managing nature-related risks, companies can take the following steps:

• Understand the TNFD framework: Companies should familiarise themselves with the TNFD framework (v0.4) and its requirements.
• Plan: Build internal capability by allocating a member of management or the board to lead on nature-related disclosures.
• Evaluate: your nature-related impacts and dependencies by starting to test and pilot the TNFD framework. Start the process by using the LEAP approach (a voluntary risk and opportunity assessment process) to manage your nature-related risks and opportunities.
• Prioritise: Begin identifying material impacts and dependencies on nature by assessing your operations and supply chains, such as biodiversity loss, ecosystem degradation, and resource depletion. This will help to prioritise reporting efforts and focus on the areas that are most significant.
• Engage: stakeholders in reporting to ensure they understand the company's approach to nature-related risks and opportunities.
• Feedback: Review the draft framework on the TNFD platform and provide feedback via the TNFD digital pilot testing platform at www.tnfd.global.
  
  

Learn more about how GHD Advisory can help support your organisation’s sustainability journey.

^{1. UNEP. (2022) “COP15 ends with landmark biodiversity agreement.” Available at: https://www.unep.org/news-and-stories/story/cop15-ends-landmark-biodiversity-agreement}

^{2. WEF. (2020) “Nature Risk Rising report.” Available at: https://www3.weforum.org/docs/WEF_New_Nature_Economy_Report_2020.pdf}

^{3. UNEP. (2021) “Becoming #GenerationRestoration: Ecosystem Restoration for People, Nature and Climate.” Available at: https://www.unep.org/resources/ecosystem-restoration-people-nature-climate}

^{4. Environmental Finance. (2023) “Environmental Finance’s Biodiversity Insight 2023” Available at: https://www.environmental-finance.com/content/downloads/environmental-finances-biodiversity-insight-2023.html}

^{5. TNFD. (2022) “TNFD Nature-Related Risk & Opportunity Management and Disclosure Framework, v0.4 Beta Release.” Available at: https://framework.tnfd.global/}

^{6. TNFD. (2021) “G7 backs new Taskforce on Nature-related Financial Disclosures.” Available at: https://tnfd.global/news/g7-backs-new-taskforce-on-nature-related-financial-disclosures/}

^{7. Business for Nature, Capitals Coalition, CDP. (2022) “Make It Mandatory: the case for mandatory corporate assessment and disclosure on nature.” Available at: https://capitalscoalition.org/publication/make-it-mandatory/}