Businesses are urgently demanded to provide answers on how they will take action to improve the state of nature.
Terminology
Biodiversity
Biodiversity, the diversity of living nature, encompasses the range of ecosystems (natural capital), the abundance of species, and the genetic variation within species. This diversity safeguards the prerequisites for life on Earth. Ecological diversity can be examined within specific habitat types or comprehensively on a global scale. It forms the foundation for all our activities, as diversity enables ecosystem services such as clean water supply, climate regulation, food and medicine production, and flood protection. In turn, ecosystem services are essential for the existence of societies and the entire economy.
Ecological Footprint and Handprint
The ecological footprint of a person, product, service, or organization represents the overall impact on biodiversity. Generally, the ecological footprint measures the harm a specific activity or service imposes on nature. Uncovering this requires the analysis and modeling of complex and international supply chains since factors like raw material sourcing, production processes, and usage must be considered throughout the entire lifecycle of a product. The positive impacts on nature resulting from a product or service are referred to as an ecological handprint.
Nature loss
Human-induced biodiversity loss refers to the decline in the diversity of nature caused by human activities, leading to the deterioration of habitats and the endangerment of species. In practical terms, this translates to the loss, fragmentation, and reduction of species and natural habitats, accompanied by a narrowing of genetic diversity. Biodiversity loss has significant impacts not only on the environment but also on the economy, with up to half of the world's GDP directly dependent on natural ecosystems. The primary drivers of nature loss include changes in land use, direct exploitation of species and natural resources, climate change, pollution, and invasive species.
Net positive impact
Net Positive Impact (NPI) refers to a situation where the beneficial effects on nature outweigh the negative ones, meaning that the activity enhances biodiversity. Following the mitigation hierarchy, the detrimental impacts on nature should primarily be avoided, then minimized, and as a last resort, rectified and compensated for. However, in addition to avoiding or minimizing biodiversity loss, actions that strengthen biodiversity, such as restoration, rehabilitation, conservation, and management activities, must also be undertaken to ensure that the net effects remain positive.
Regulation and Frameworks for Nature Impacts
Science Based Targets for Nature (SBTN)
Science Based Targets for Nature (SBTN) is a framework developed for businesses and cities to establish science-based nature goals. It enables measuring the impacts on and dependencies of nature while setting science-based and comparable targets for safeguarding biodiversity. Similar to Science Based Targets for Climate, which has become a widely accepted climate standard, SBTN provides a leading framework for combatting biodiversity loss. It is set to be launched in 2023 and is anticipated to become the equivalent leading reference framework for addressing nature loss.
Taskforce on Nature-related Finance Disclosures (TNFD)
A framework and tool aimed at incorporating nature impacts into economic and business decision-making, as well as guiding more consistent reporting of companies' nature-related financial information. The initiative is market-driven and science-based, rooted in the United Nations' biodiversity convention's goals of 'no net loss by 2030 and net gain by 2050'. Through this framework, organizations can identify, analyze, and respond to the risks and opportunities related to their nature impacts. The framework facilitates a better understanding of environmental impacts, advanced data, and clearer decision-making criteria, thereby becoming more mainstream.
The Corporate Sustainability Reporting Directive (CSRD)
The Corporate Sustainability Reporting Directive (CSRD), approved by the EU Council, introduces new requirements for companies' sustainability reporting and will gradually come into effect from 2024. As a result of this legal change, investment funds and financial market participants will find it easier to direct funds towards sustainable investments. An open digital database also enables stakeholders to review sustainability data, enhancing transparency and helping companies attract new investments. The content of reporting will be more precisely defined by the sustainability reporting standard ESRS.
European Sustainability Reporting Standards (ESRS)
ESRS define the more detailed content required by the Sustainability Reporting Directive and will become mandatory for companies across different industries in a staggered manner, depending on the size and nature of the company. The first draft standards were published at the end of 2022, and the delegated regulation is expected to be released in the summer of 2023. In addition to environmental aspects, the reporting scope encompasses social impacts and corporate governance practices. In the future, companies will need to integrate sustainability reports into their financial statements' management report and have the information verified by an auditor or another official party.