Biodiversity is the (Near) Future of ESG

Greenhouse gas (GHG) emissions, and the reduction thereof, have become the poster child of corporate ESG programs. For years, companies have been tracking, reducing, and reporting their energy and emissions stats. Managing Scope 1 and 2 emissions remains a common and impactful place for companies to begin their sustainability journey. However, the tides are shifting as other environmental and social considerations begin to enter the spotlight.

Biodiversity loss can also have a significant impact on a company’s bottom line. In one way or another, most businesses rely on ecosystem goods (such as timber and natural pharmaceuticals) and services (such as pollination and air quality regulation) to operate. Another WEF report found that more than half the world’s GDP representing $44 trillion is dependent on nature, revealing the economic risks of unchecked biodiversity loss. Without implementing greater control and reversal of human impact on biodiversity, many of these ecosystem goods and services will become scarce and therefore more expensive, harder to access, or disappear altogether.

Governments and organizations are already acting on biodiversity

As a result of these risks, organizations in the ESG ecosystem are seeking to formalize biodiversity commitments and transparency. At COP26, more than 100 world leaders joined a pledge to halt deforestation – a major factor contributing to rising global emissions and biodiversity loss – by 2030. At the UN Biodiversity Conference in October 2021 (COP15, part 1), government ministers adopted the Kunming Declaration, which aims to reverse biodiversity loss by 2030. In part 2 of the COP15 gathering in late 2022, as WWF calls for, the intent of the declaration must be turned into an action plan to protect nature on land and water, address unsustainable agriculture systems, and embrace nature-based solutions.

Businesses are also taking voluntary action to address this growing risk. Leading companies like Schneider Electric have started to explore their biodiversity footprint to understand its impact and set specific and measurable targets. However, for many companies, expectations for biodiversity progress and reporting may creep up faster than voluntary commitments are moving today.

Data collection is a common challenge for companies that may be preventing them from moving faster on biodiversity goals. However, there are state-of-the-art technologies like GIS, radars, machine learning, and AI which could help overcome these barriers soon. In Schneider Electric’s own journey to reversing biodiversity loss, we pioneered a first-of-its-kind biodiversity footprint assessment with CDC Biodiversité. The outcome of this exercise highlighted hotspots and specific actions to drive strategic decisions around our biodiversity initiatives. The tool used captures the complexity of biodiversity impacts and translates it into actionable metrics for companies to assess and align their strategy with scientific recommendations.

Corporate biodiversity reporting needs to catch up

Despite its clear rise in visibility, biodiversity has yet to receive the same attention and level of detail in ESG reports compared to other issues like climate change risk and carbon management. Based on recent ESG disclosure trends, we predict that within 3-5 years, reporting biodiversity footprint and goals will become just as mainstream as GHG reporting and stakeholders will expect to see significant progress from all companies.

Ready to build an ESG reporting program that delivers value to your organization and to your stakeholders? Download our complimentary interactive guide to corporate ESG reporting.

For its 2022 reporting cycle, CDP has added a new biodiversity section of questions to its annual Climate Change questionnaire. Although these questions will not be scored initially, the addition is a signal to all responding companies that biodiversity impact is not going away. Companies should take it as a notice to get their biodiversity data in order and put resources behind action plans.

To this end, one of CDP’s two key priorities outlined in its 2021-2025 strategy is to restore ecosystem health. They assert that nature needs more attention, that actions taken between now and 2030 are critical, and that we must aim to achieve a nature-positive economic system by 2050. To make this ambition a reality, CDP is expanding its work to cover the full range of planetary boundaries and Earth systems. This includes broadening the scope of its questionnaires to track progress against Land, Biodiversity, Oceans, and more in addition to its existing Climate, Water, and Forest surveys.

Alongside CDP, several new and notable organizations have emerged with solutions to enable companies to act and report on biodiversity goals.

The Science Based Targets Network (a coalition of many of the same organizations behind the SBTi) was formed to develop methods and resources for companies to use to set science-based targets for nature, alongside their emission reduction counterparts. Setting these goals in tandem ensures that nature-based solutions for climate change mitigation will result not only in carbon sequestration but also reverse nature loss, promoting adaptation and resilience of ecosystems.

The Taskforce on Nature-related Financial Disclosures (TNFD) is a kind of ‘sister framework’ to the ubiquitous Taskforce on Climate-related Financial Disclosures (TCFD). Released in March 2022, the draft framework is designed to help companies assess the complex financial risks posed by nature destruction and biodiversity loss. Just as TCFD reporting and disclosures are becoming table stakes for large organizations, TNFD is expected to follow in its footsteps and be complementary to other initiatives designed to make our economy coexist with nature.

The Biodiversity Disclosure Project has a protocol that provides guidance for companies on how to develop a biodiversity impact inventory, measure and account for the impact, and other best practices for verification, reporting, and disclosure. This protocol is designed to supplement other impact measurement tools and approaches to ensure that disclosures are comparable across industries and countries.

According to research cited by WEF, humans have modified approximately 14.6% of land on earth, or 18.5 million km 2, equivalent to an area greater than all of South America. This human impact comes in many forms, but no small part is due to the land that is built up as cities and towns. Though the real estate sector has contributed to the destruction of natural habitats, it has a significant role to play (and opportunities to embrace) in designing and renovating areas to be more symbiotic with nature. WEF estimates that transitioning our infrastructure and built environment toward nature-positive designs could generate over $3 trillion in additional annual revenues and create 117 million new jobs by 2030.

One approach to building the case for biodiversity is to adopt the Net Positive Impact (NPI) concept, which drives businesses to achieve net positive gains for biodiversity from project outcomes. Operationalizing NPI involves applying a decision-making framework for business planning and strategy that considers natural impact avoidance, rehabilitation, and then biodiversity offsetting alongside other measures such as profit, customer acquisition, and growth. As demonstrated by climate change mitigation and adaptation goals, biodiversity management through NPI can drive innovation, process or product improvements, and other competitive advantages that otherwise might be unfounded. For example:

• Avoiding costs and delays caused by protests about the biodiversity impact of new building projects
• Benefitting from the credible reputation for sound biodiversity management in buildings
• Getting ahead of increasing biodiversity regulations and investor expectations

Implementing green infrastructure is one viable way for real estate businesses to enhance the biodiversity potential of our buildings and cities and reap the associated benefits. Examples of green infrastructure strategies that benefit biodiversity when added to building and development plans include:

• Nature-based solutions: cost-effective solutions designed to protect, sustainably manage, and restore natural or modified ecosystems while delivering societal, economic, and biodiversity benefits.
• Ecosystem-based adaptation: the use of biodiversity and ecosystem services as part of a broader climate adaptation strategy that reduces the vulnerability of human habitats to climate change impacts.
• Natural Water Retention Measures: aim to manage and protect water resources by restoring ecosystems and maintaining ecosystems and natural features of water bodies using natural means and processes.
• Ecosystem-Based Disaster Risk Reduction: management, conservation, and restoration of ecosystems that support disaster risk reduction and adaptation to climate change.
• Natural Capital and Natural Capital Accounting: an approach to valuing goods and services
  provided by biodiversity to improve the management of natural resources that contribute to economic development.

Green infrastructure in commercial spaces transcends the environmental spectrum of ESG, offering significant additional social and economic benefits. From a financial perspective, strategies to harmonize the built and natural environment can help create jobs to build and maintain the green infrastructure, reduce costs such as by minimizing reliance on sewer infrastructure or reducing energy usage, and increase property values. From a human health perspective, green infrastructure and natural aesthetics have been shown to reduce stress, increase productivity, protect cultural heritage, reduce urban heat island effects, and may have links to reduced inner-city crime and violence.

There are numerous frameworks and guidance documents distributed by credible organizations to help businesses incorporate principles of biodiversity into their strategies and goals. The International Union for Conservation of Nature (IUCN) is the global authority on the status of the natural world and a great place to start when building a corporate biodiversity program. IUCN has published a series of guidelines and protocols that are regarded as effective frameworks for driving corporate engagement and change. These include:

• How to build a business case for Net Positive Gain or No Net Loss of biodiversity
• Steps to plan and monitor corporate biodiversity performance
• Protocol for the adoption of the biodiversity mitigation hierarchy approach (avoid, minimize,
  rehabilitate, then offset)

These guidelines will further support the practical application of biodiversity goals and reporting for
businesses of all sizes.

Having a best-in-class ESG performance program demands companies to explore and address many facets of sustainability, from climate change and emissions to social justice and human rights. Biodiversity is rising to the top of the list of issues that will influence the future of corporate ESG programs and reporting. Although it is a new frontier in sustainability for many organizations, biodiversity is intertwined with all aspects of ESG. Putting measures in place to limit and reverse our impact on nature will complement climate action programs that companies are already establishing, benefit humans in unique and transformative ways, and ultimately future-proof the profitability of businesses.

This article was written by Kristi Plume, Sustainability Consultancy Manager at Schneider Electric

This post first appeared on GRESB's website. To read the original, click here.