Businesses depend on nature: how to measure this interdependence?

Putting nature at the heart of decisions is also crucial for business and finance. Just think of the many productive activities that depend on water and impact water availability and quality, with significant operational risks and community consequences.
Focusing only on reducing emissions into the atmosphere is no longer enough. It is urgent to start considering impacts on water, biodiversity, land use and the atmosphere, and thus on nature, to recover biodiversity. Although the protection of biodiversity is a commitment that first and foremost calls for politics, it is clear that it cannot disregard economic and production aspects.

There’s no business without biodiversity

It is increasingly essential for companies to be able to calculate and report on their dependencies on natural capital without neglecting impacts, risks and opportunities to contribute to a nature-positive future. The Task Force on Nature-related Financial Disclosures (TNFD) originates from this background. It is a global, science-based and government-supported initiative that provides companies and financial institutions with valuable recommendations and guidance on reporting their management of risks, opportunities and impacts on nature.

After two years of development through an ‘open innovation’ consultative process with a pool of 200 pilot companies and financial institutions, TNFD published 14 recommendations on natural capital risk, dependence and opportunity in September 2023. All recommendations align with the significant non-financial reporting standards (GRI, ISSB, ESRS) and the Kunming-Montreal Global Agreement for the Protection of Biodiversity requirements. The main objective is to channel financial flows towards activities aligned with the goals of the Kunming-Montreal Agreement, i.e. the achievement of a nature-positive economy with full biodiversity recovery by 2050. Risks related to natural capital are thus officially added to those arising from climate change, completing the picture of financial, economic and operational risks associated with environmental issues.

What changes for companies?

As of 2024, an annual status report on TNFD reporting is foreseen, and it will develop just like the reporting on climate-related risks with the Task Force on Climate-related Financial Disclosures (TCFD), the starting point for the work of the TNFD. The same four structural pillars are in place: governance, strategy, risk and impact management, targets and metrics. TCFD reporting was voluntary, although the recommendations were later fully integrated into the European Mandatory Reporting Standards (ESRS). The same happened with the TNFD recommendations recently included in these standards. To anticipate regulatory reporting risks, companies and financial institutions can act strategically and start reporting voluntarily, laying the groundwork for collecting data on their natural capital dependencies and their impact on natural capital.

With the LUCAS approach, developed by Etifor, it is easier for companies to map dependencies on natural capital and identify risks related to biodiversity loss and land use, air pollution, overexploitation and/or pollution of water resources. Quantifying and localising impacts on nature is the first step to systematically managing and reducing them. LUCAS is aligned with the TNFD recommendations and allows all the required data to be collected and reported correctly. From this data, it will be possible to take concrete action to protect nature, on which the company’s products, services and operations depend.

The commitment to a nature-positive future was the focus of the European Business and Nature Summit, a major international conference held in Milan in October 2023 and of which Etifor was co-organiser.

Want to know more about it? Check the summit recordings here!