Biodiversity is declining faster than ever, threatening food security, health and quality of life. This trend puts business at risk as well, considering that sectors which generate more than half the world’s GDP are moderately or highly dependent on nature. Yet an estimated $10 trillion worth of opportunities* await companies that adopt nature-positive business models.
The nature agenda for business is gaining momentum following the adoption of the Post-2020 Global Biodiversity Framework (GBF), heralded as the ‘Paris Agreement for Nature’, at 15th Conference of the Parties to the UN Convention on Biological Diversity (COP15) in December 2022.
A new report by PwC China and the World Economic Forum highlights the most business-relevant aspects of the draft GBF and provides case studies of companies from various sectors around the globe taking pro-active measures to manage their nature-related risks and impacts. The private sector will play a pivotal role in achieving the goals and targets of the GBF – halting biodiversity loss and paving the path to a ‘nature-positive’ economy.
‘More than half the world’s GDP is moderately or highly dependent on nature and its services and, as a result, exposed to risks from nature loss.’
What the GBF means for businesses
As noted, more than half of global GDP is dependent on nature and ecosystem services. To put that another way, companies and financial institutions could pay steep costs as a result of nature loss. Some costs are associated with the physical risks caused by the decline of the ecosystem services on which businesses depend – for example, reduced protection from natural disasters or decreases in crop yields and fish catches. For financial institutions, unmanaged exposure to nature-related risks in their portfolios could cause difficulties that may then spill out into the overall financial system. (At the same time, society’s efforts to address biodiversity loss could lead to what are called transition risks, arising from factors such as increased regulation, technological developments, litigation, or shifts in investor and consumer preferences.)
The GBF seeks to halt and reverse biodiversity loss with a set of targets that will guide national governments in setting their nature-related policies. To help corporate leaders understand the implications of the GBF, the report highlights the ten proposed targets that are most likely to bring changes to business strategies and operations.
Target 15 (Sustainable business, production and supply chains) is especially noteworthy for companies. With unsustainable production and supply chains among the main drivers of biodiversity loss, this target directly addresses the private sector’s role in protecting nature. It calls on national governments to compel businesses and financial institutions to regularly monitor, assess and transparently disclose their impacts on biodiversity, with the aim of ultimately reducing negative impacts and increasing positive impacts.
Other key targets address the five direct drivers of biodiversity loss (namely, changes in land and sea use, climate change, pollution, exploitation of natural resources, and invasive species), as well as harmful subsidies, financing for the protection and restoration of biodiversity, and the participation of Indigenous peoples and local communities in decision making.
The white paper also features six business- and regulator-led approaches to halting and reversing nature loss that will need to be scaled up to achieve the targets of the GBF. These include deforestation-free supply chains, biodiversity net gain or no net loss requirements, financial institution policies to address drivers of nature loss, extended producer responsibility schemes to drive the circular economy, payment for ecosystem services programmes, and regenerative agriculture.
Resources to guide business action
Companies can tap into a growing body of resources to advance on their nature-positive journey, including the risk management and disclosure framework developed by the Taskforce on Nature-related Financial Disclosures (TNFD). This framework provides end-to-end guidance, from assessing dependencies on nature, to creating a strategy and organisation to manage the relevant risks and opportunities, and ultimately to reporting on the aforementioned considerations.
Business will be critical to delivering the innovation, investment and business models needed to halt and reverse biodiversity loss. The rewards for companies that get this right could be significant.
Sources
*Waughray, D, Khatri, A. 2020. New Nature Economy Report II: The Future of Nature and Business, World Economic Forum in collaboration with AlphaBeta, foreword, pp. 4, executive summary, pp. 8, ch. 5, pp. 95.
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