In a world where business relies heavily on nature to supply much-needed goods and services, it is time for organisations to recognise that the interconnectedness of business and nature is not only essential for navigating emerging risks but also for uncovering new opportunities for growth and resilience.
Imagine a future where circularity, efficiency, and striving for net zero become the new norm. CEOs and business leaders are navigating a shrinking space of natural resources that, once gone, cannot be replenished. This is true even in the local context where once abundant resources are now in short supply, at risk of overexploitation or under threat. But within this challenge lies a profound opportunity, a chance to steer your company in a promising, nature-positive direction.
We need to keep in mind that nature isn’t just a backdrop for our lives; it's the foundation. Risks stemming from nature, such as dwindling resources, water scarcity, and drought, could also reveal pathways to innovation and growth.
As business leaders, we are the ones poised to take on tomorrow and revolutionise how businesses tackle climate change and nature-related risks. While our natural world provides us with the raw materials that fuel our societies and our economies, our financial systems have been somewhat shortsighted and tend to fail to account for the full value of nature’s bounty.
PwC research shows that 55% of global GDP is either moderately or highly dependent on nature. This therefore isn’t just an environmental issue, it is an economic one. With so many natural ecosystems at risk of extinction, even in Malta, businesses have a crucial role to play in restoring natural ecosystems and preserving the value the world gets from nature.
There is a rapidly growing expectation for transparency, as the accelerating pace of ecosystem decline and societal response makes nature loss as urgent a problem as climate change. Reporting on nature is specified in the European Union’s Corporate Sustainability Reporting Directive (CSRD), while in parallel, the market-led Taskforce on Nature-related Financial Disclosures (TNFD) has created a framework for nature reporting, with support from industry and numerous governments. These developments should bring consistency to the way that companies measure and report on nature-related issues. A myriad of stakeholders, including shareholders, insurers, and banks, already, and will increasingly demand to understand how businesses are navigating their natural risks as they seek assurance that their capital isn’t flowing into enterprises blind to the environmental crisis at hand. Financial services, seasoned in risk management, now grapple with these new dimensions of risk, requiring detailed information to channel investment responsibly.
Three things to do now
If they haven’t already, it may not be long before nature-related issues affect your company’s bottom line. For that reason, we recommend that executives prepare to place nature on a par with climate change in their risk assessments. Regardless of whether to prioritise risk mitigation, value creation, or both, all executives stand to gain from taking three actions to manage their company’s nature dependence:
- 1. Measure your nature baseline
- 2. Improve decision-making and transparency with better data
- 3. Set ambitions to manage risk and capture opportunity
1. Measure your nature baseline
As in other realms, a good step toward effective management of nature is assessing baseline performance or the extent of a company’s nature dependence and impacts. Various resources can help you set a nature baseline at multiple levels of detail. For instance, the Integrated Biodiversity Assessment Tool (IBAT), the ENCORE database, and the Aqueduct water-risk tools can help identify potential impacts and dependencies at the regional level; and new technologies such as low-cost environmental DNA (eDNA) sampling can enable accurate site-level monitoring of changes in biodiversity. Executives can translate material dependencies and impacts into risks and opportunities, carrying out scenario analyses to understand different outcomes such as an instance in which an ecosystem failure disrupts business operations.
2. Improve decision-making and transparency with better data
To manage nature dependencies and impacts well, you will need highly reliable data sources, systems, and controls. These resources will also help with meeting disclosure requirements and explaining to investors and other stakeholders why you’re choosing to pay attention to nature issues. That said, the same resources could take some time to put in place, so leaders should plan accordingly. The Carbon Disclosure Project, an organisation that benchmarks corporate sustainability reports, estimates that companies need 12 to 18 months to prepare for partial nature-related disclosures, and two to three years to get ready for full disclosure. The process might involve accounting for site-specific requirements, given that nature-related risks and opportunities can be highly localised.
3. Set ambitions to manage risk and capture opportunity
Once you know your company’s baseline levels of nature dependence and impact, you can set goals for mitigating risk and creating value by better managing interactions with nature. The Science Based Targets Network (SBTN) provides one framework for companies to formalise their nature ambitions using scientific measures of various outcomes. In more general terms, levels of ambition range from “do less harm” to “cause no net biodiversity loss within own operations” to “achieve a net positive impact on biodiversity along the value chain.”
To remain compliant, but more importantly, to preserve competitive advantage, businesses must not only disclose their environmental impacts but must also actively work towards mitigating and adapting to these risks. This isn’t merely about survival; it is about thriving in an era where being nature-positive is the new benchmark for success. Now is the moment for businesses to pivot, reevaluate their relationship with the environment, and lead with nature in mind.
