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Six steps corporates should take toward achieving nature positivity

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24 Apr 2023

Corporate sustainability is facing greater urgency with global and EU regulations requiring firms to develop and disclose nature strategies.

In brief: 

  • The world is currently experiencing a loss of species and ecosystems that contribute to global biodiversity, at a distressing rate.
  • Given the reliance of businesses on natural resources, it is crucial for corporates to adopt measures to reduce their impact on the environment.
  • In response to mounting demands from the EU and other regulatory bodies, companies need to implement six key actions to attain a state of nature-positivity.

Nature, with its diversity, is our life support mechanism. Human civilizations have always been, and still are, fully reliant on the goods and services provided by nature, collectively known as ecosystem services. The biosphere provides clean air, food, water, raw materials, pest and pathogen control, climate stabilization, and flood protection, in addition to having intrinsic social and cultural value.

Besides underpinning human livelihoods, prosperity and wellbeing, the ecosystem services provided by nature pose significant economic value and present material financial risks if degraded. More than 50% of the world’s total GDP (US$44t) is moderately to highly dependent on nature. Biodiversity, the variety of genes, species and ecosystems play a critical role in the delivery of ecosystem services. Additionally, high levels of biodiversity provide resilience to shocks. For example, biodiverse forests have reduced forest fire risks, while more crop diversity reduces the risk of disease outbreaks.

Are we at crossroads in addressing the biodiversity crisis?

The world is currently losing species and habitats that underly global biodiversity, at an alarming rate. According to the Living Planet report and the Living Planet Index (LPI) from the World Wildlife Fund (WWF), there’s been an average decrease of 69% in the 32,000 monitored species populations. The freshwater LPI has been hit the hardest, with an average population decrease of 83%.

These losses are a result of human activities such as ecosystem degradation and land use, exploitation of wild animals for food and trade, pollution from fertilizers and pesticides, the introduction of foreign species and the release of carbon into the atmosphere (which causes climate change). These alarming trends are degrading the ecosystem services we rely upon, risking catastrophic losses. Degraded biodiversity often starts with local consequences, like the increase of agricultural pests, reduced water quality and the spread of zoonotic diseases. These can then lead to global impacts on productivity, food security and human migration patterns. Transformative change is essential to tackle the key drivers of biodiversity loss and reduce nature-related risks.

Biodiversity risks share many characteristics with climate change. Both are far-reaching in breadth and magnitude and contain tipping points beyond which recovery may be impossible. They are uncertain yet also foreseeable, with consequences that will be determined by our short-term actions. While there is recognition in both scientific and policymaking circles that climate change and biodiversity loss are interconnected, in practice, they are largely addressed within separate domains.

Recent global shocks — including those caused by changing weather patterns and an increase in zoonotic diseases — are characteristics of more volatile ecosystems. To avoid more turbulence for our global society and deliver on the Sustainable Development Goals (SDG), we must act at the pace and scale the biodiversity crisis demands and work toward a low-carbon, nature-positive and sustainable future.

Nature positivity refers to the collective action taken to avoid and reduce pressures on nature and contribute toward nature regeneration — judging success not only by the outcomes of the individual actor but also the wider ecosystem in which it is embedded.

A global effort to address the twin crisis to climate change

The latest UN biodiversity summit that happened in December 2022 culminated with almost 200 countries agreeing to set new goals and targets to “halt and reverse” biodiversity loss by the end of the decade. The most noteworthy are the 30x30 ambitions to preserve 30% of the world’s land and ocean by 2030, and the mobilization of US$230b toward reaching the 23 final targets.

Corporate action needs to accelerate

A new EY report, “Enough: A review of corporate sustainability, in a world running out of time,” presents a critical review of the ability of corporate sustainability to rise to the challenge it has set for itself — to embody the goal of sustainable development. So far, we’ve seen a great surge in commitments, higher engagement in sustainability initiatives and an increase in reporting. But the results do not reflect targets. Aquatic and terrestrial biodiversity is still declining, and the corporate nature footprint is increasing.

As the report highlights, corporates need to put sustainability as the destination, not the journey. Sustainability needs to revert to being a noun and not a verb. Sustainability is not an activity, nor is it an industry or a theme — it is a specific point at which economic activity is maintained within sustainable limits. It is that, or it is nothing.

Upcoming EU regulations and global reporting standards

Upcoming EU regulations and global reporting standards will require companies to develop and disclose their nature strategies.

How EY can help

Physical and systemic nature-related risks are now increasingly being accompanied with risks associated with the societal aims of halting biodiversity loss — broadly centered around regulation, litigation and reputation. Newly developed frameworks such as the Taskforce on Nature-related Financial Disclosures (TNFD), co-created by heavy hitters in the insurance and banking sector, show how concerned long-term investors are about companies understanding their interference with nature across the entire value chain.           

Corporates will be forced to describe nature-related dependencies, impacts and related financial risks, as well as their management. Governance and strategies related to biodiversity and the 30x30 goals will be pushed through the European Sustainability Reporting Directive (ESRS). 

Some sectors will likely face further regulations and require extensive due diligence. Value chains, with large negative impacts on drivers of biodiversity loss and nature degradation, are under increased scrutiny. Expectations are higher, and so is the financial risk.

As of now, there have been a series of voluntary commitments from companies in the insurance and banking sector which have introduced policies to ensure a reduction of deforestation in their asset portfolios. The EU, however, recognizes that this is not enough. To further boost the legislative foundation, the EU recently proposed a regulation that poses significant financial risk to commodity suppliers in the European market, especially around soy, beef, palm oil, wood, cocoa and coffee, and processed products such as leather, chocolate and furniture. 

Nature-related risks in the Global Insurance Sector, Sustainable Insurance Forum

EU regulations — such as the EU Taxonomy, EU Corporate Sustainability Reporting Directive (CSRD), Corporate Sustainability Due Diligence Directive (CSDD) and Sustainable Finance Disclosure Regulation (SFDR) — will all require reporting related to biodiversity. In 2023, the four remaining environmental objectives in the EU Taxonomy, including protection and restoration of biodiversity and ecosystems, will enter into force. The first draft of CSRD published in April 2022 includes a draft standard on biodiversity and ecosystems. Financial actors will also have to report according to the SFDR, which has specific points related to biodiversity. 

As business is dependent on nature, corporates must understand their relationship with nature and how they can address their nature footprint.

James Higham

Senior Manager, Nordic Climate & Nature Lead, Climate Change and Sustainability Services

A new horizon for nature

Business is dependent on nature. Therefore, we’ve made a short to-do list for those businesses that have nature on the agenda for 2023: 

  1. Get familiar with upcoming regulations, reporting frameworks and required indicators. 
  2. Understand your company’s impact boundaries and operational control for dealing with nature.
  3. Map your value chain footprint and assess impacts and dependencies.
  4. Evaluate potential risks and opportunities in relation to stakeholders. 
  5. Develop KPIs and implement strategies.
  6. Act to address impacts and report progress.

EY teams can support all the stages toward nature positivity with our team of dedicated ecologists, environmental engineers and other professionals, supported by market-leading tools that simplify the process.  

A high-level framework illustrating nature-related risk to business and the economy.

Why EY teams?

As biodiversity takes center stage in a decade where society aims to “halt and reverse” biodiversity loss, we have strategically prepared our services to meet the demands of businesses and financial services with high materiality of biodiversity-related issues.  

Through our global network of consultants, EY teams combine a vast network of technical professionals in ecology and natural resources management with business strategists and sectoral experience. We have the latest thinking and knowledge on the interface between business and biodiversity, backed by experience with implementation strategies for nature-positive value creation.

Summary

The environment is being destroyed at an alarming rate, threatening the global economy and the future of mankind. Although some companies are taking steps toward nature-positive strategies, corporate action must accelerate to meet the challenge. With new regulations requiring companies to report on their nature strategies, EY teams can provide tools for companies to understand their impacts and transition to a nature-positive approach.  

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Climate change and sustainability services
Climate-related reporting
Sustainability
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