Sunlight shines trough green leaves in the forest during spring
Sunlight shines trough green leaves in the forest during spring

When will transparency drive action to protect and restore nature?

The first EY US Nature Risk Barometer provides a baseline analysis of nature-related corporate disclosures against TNFD recommendations

In brief
  • While 87% of companies analyzed have disclosed against at least one of the 14 TNFD recommendations, the overall alignment of the disclosures is limited.
  • Companies disclosed the most around describing their nature-related dependencies, impacts, risks and opportunities over the short, medium and long term.
  • Nature-related disclosures are anticipated to increase with the release of the final TNFD framework in September 2023.

The purpose of the first EY US Nature Risk Barometer is to provide companies with an understanding of the current state of nature-related disclosures consistent with the Task Force for Nature Related Disclosures (TNFD) draft beta v0.4 framework and recommendations¹. The barometer provides a baseline analysis of nature-related disclosures across ten sectors based on an assessment of over 100 US-based S&P 500 companies’ public disclosures on nature-related topics.

On average, companies disclose some aspects of nature-related dependencies, impacts, risks and opportunities in their public disclosures. However, the extent to which and how companies are reporting on nature is limited when compared against the TNFD framework and recommendations.

How EY can help

Coverage of and alignment to the TNFD recommendations is not widespread

Companies were scored on two metrics for this analysis: coverage and alignment. Coverage means that a company provided at least some level of information toward each of the 14 TNFD recommendations, while alignment is the extent to which a company’s disclosures align with the 14 TNFD recommendations. The analysis, which leveraged a scoring methodology to assign each company a rating for coverage and alignment, found that of the companies analyzed, the average score for coverage of the 14 TNFD recommendations was 51% while the average score for alignment toward the 14 TNFD recommendations was 13%. These scores indicate that while companies on average are reporting on nature-related disclosures aligned to over half of the TNFD recommendations, the extent to which they are aligning to the recommendations is limited. These score are likely because nature-related frameworks, such as, the TNFD Framework were releasing their beta recommendations and guidance when companies were drafting their 2022 disclosures.

The TNFD pillar that had the highest coverage and alignment scores was the strategy pillar with slightly higher than average scores at 59% coverage and 15% alignment. Within that pillar, companies had the highest alignment for disclosing the organization’s nature-related dependencies, impacts, risks and opportunities and the effect they have on the company’s business, strategy and financial planning.

Some sectors demonstrated greater alignment to the TNFD recommendations, while others received lower scores

Coverage scores by sector ranged from 25% to 80%, and alignment scores ranged from 6% to 28%. The food and beverage sector had the highest average scores, followed by consumer goods and infrastructure. The transportation, financials and health care sectors had the lowest average scores of all sectors.

The food and beverage sector, which demonstrated the greatest average coverage of and alignment to the TNFD recommendations, had 100% coverage scores for 60% of companies analyzed within the sector. Additionally, 80% of the companies analyzed within the sector disclosed locations where there are assets and/or activities tied to the company in priority areas, specifically in water-stressed or biodiversity hot spots, which is alignment against on the TNFD recommendations in the strategy pillar.

The infrastructure sector had the second highest coverage score of all sectors and the third highest alignment score. All companies analyzed within this sector had disclosures that covered at least one of the TNFD recommendations in each of the strategy, risk & impact management and metrics & targets pillars.

The consumer products sector had the third highest coverage score of all sectors and the second highest alignment score. Companies analyzed in this sector had the highest alignment against TNFD recommendations within the governance pillar.

The nature-related disclosure landscape will continue to evolve

The final version (v1.0) of the TNFD Framework will be published in September 2023. Following the release of v1.0, the TNFD plans to focus on scaling market adoption of the framework and create a global baseline for nature-related reporting.²

Additionally, some companies are already adopting nature-related disclosures. It is anticipated that the coverage and alignment of disclosures will increase in future years.

Five actions companies can consider to increase transparency and impact

There are specific actions companies can consider taking to create more in-depth nature-related disclosures and to better protect and restore nature.

  1. Understand and identify location-specific nature interfaces and priority risks and opportunities across the company’s value chain
  2. Develop a nature and biodiversity organizational strategy
  3. Implement that strategy and establish effective governance
  4. Evaluate and report on performance
  5. Build internal nature and biodiversity knowledge and capacity and identify opportunities to collaborate with others

Summary 

While companies are disclosing nature-related dependencies, impacts, risks and opportunities in alignment with the TNFD recommendations, companies’ transparency around how they are preventing harm to and protecting nature is still limited when measured toward the TNFD framework.

The future of nature-related disclosures is evolving and there are steps companies can take to create more robust nature-related disclosures to help protect and restore nature.

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