Why Businesses Should Care about Biodiversity, and What They Can Do About It

The 2022 United Nations Biodiversity Conference (COP 15) highlighted the widespread loss of biodiversity and the corresponding negative consequences for the health of the planet, human well-being, and the global economy, making it an important topic for corporations to engage with. Likewise, the 2022 World Economic Forum (WEF) Global Risks Report lists biodiversity loss as one of the top risks to people and planet for the next 10 years. COP 15 emphasized the need to implement the Kunming-Montreal global biodiversity framework, which includes targets focused on legal, administrative, and policy actions to encourage businesses to assess and disclose their nature dependencies and, in turn, the impacts their operations and supply chains have on biodiversity.

Why Should Businesses Care about Biodiversity?

Biodiversity loss and ecosystem collapse are largely driven by human activity—namely the use of natural resources and changes to land and sea use, among other factors. While nature loss is increasingly acknowledged, understanding of how it affects businesses is still in its early stages. According to the WEF, over 50% of global GDP is dependent on nature. The three largest nature-dependent sectors are construction; agriculture; and food, beverages, and tobacco, which together account for nearly $8 trillion in gross added value (GVA).

What Are the Risks and Opportunities?

Dependence on nature carries a number of risks to businesses, including physical risks and others related to climate targets and the energy transition.

• Businesses with nature dependencies may face financial and supply chain performance risks due to physical loss of healthy ecosystems, which will have negative consequences for their operations and supply chains. For example, loss of biodiversity among pollinator species, which are essential to 35% of crop production, will affect the agriculture industry and global food production.
• Businesses are subject to increasing regulatory and legal pressures following COP 15, as well as expectations from investors and customers. Business activities related to nature loss may lead to reputational risks, difficulties in accessing capital, and loss of customers. Several water companies, for instance, are facing penalties up to £250 million ($319 million) for causing pollution and failing to meet environmental targets.
• Industries contributing to biodiversity threats (e.g., pollution, land-use change, exploitation of natural resources, etc.) will face subsidy reforms, taxes, and fines. For example, the UK’s 2021 Environment Act requires businesses to report their due diligence and prohibits them from using commodities linked to wide-scale deforestation. This legislation also implemented a biodiversity net gain to ensure developers deliver a minimum increase in biodiversity of 10%.

In addition to the risks posed by nature loss, there are also opportunities for businesses in protecting and restoring ecosystems. This includes mangroves, as mangrove insurance products could play a critical role in restoring both coastal habitats and public infrastructure. A second opportunity is product development, such as replacing fish oil with less biodiversity-threatening ingredients (e.g., algae oil gained through fermentation).

What Can Businesses Do about It?

Businesses interested in mitigating the risks associated with nature dependencies and biodiversity loss should start by exploring the following actions:

1. Begin with identifying interactions with nature.
2. Actively engage in assessing and disclosing nature dependencies and impacts to preempt both continued negative impact on nature and vulnerability to regulations.
3. Scale up nature-positive actions and investments to attract investors and strengthen reputation.
4. Implement nature-based solutions. For example, corporations affected by concerns over water quality and supply could support the restoration of wetlands as opposed to primarily focusing on site-level solutions.
5. Familiarize themselves with science-based targets and the Taskforce on Nature-Related Financial Disclosures framework (to be launched in September 2023) to gain a greater understanding of nature-related risks and opportunities.

For further reading, the International Union for Conservation of Nature provides information on nature-based solutions, biodiversity, and other relevant topics.