Article

A New Biodiversity Paradigm for Business

Posted May 23, 2022 | Sustainability | Leadership | Amplify
Biodiversity

AMPLIFY  VOL. 1, NO. 5
  
ABSTRACT

P.J. Stephenson and Judith Walls call for a “new biodiversity paradigm for business.” They show that current corporate guidelines for engaging on biodiversity are inconsistent and confusing, leaving companies unable to manage nature-based risks, capture nature-based opportunities, and prevent disruptive climate change. To correct these inconsistencies, they identify fundamental issues that businesses and other actors must resolve in the links between market systems and the nature systems that generate biodiversity.

 

Biodiversity is an urgent grand challenge that busi­nesses must address to manage risks, pursue nature-based opportunities, and contribute to the fight against climate change. Business activities are inte­gral to addres­sing risks and solving challenges like anthropogenic climate change and biodiversity loss.1 Biodiversity — the diversity of life in genes, species, and ecosystems — is declining at an unprecedented rate.2 This trend is worrying: nature provides the foundation for life on Earth and contributes between US $44 trillion and $150 trillion to the world’s economy.3

Biodiversity is inherently linked to business operations and supply chains. When businesses fail to address biodiversity, they expose themselves to substantial operational, legal, financial, and reputational risks that accumulate to our entire economic system.4 For example, 75% of agricultural crops, worth $2.4 trillion, rely on insect pollination, and insect populations are rapidly declining, threatening not just the industry but our food security.5,6

Biodiversity is also an opportunity for business. More than 60% of cancer-fighting agents have natural origins, a market worth $112 billion annually, with a human well-being value that is incalculable.7, 8 Nature-based solutions can also address up to 30% of climate change mitigation.9 Businesses have strong reasons to focus on biodiversity.

In the last decade, the private sector has made significant contributions to reducing greenhouse gas emissions but only limited efforts to tackle the biodiversity crisis. Considering that 96% of business leaders are not well-informed about biodiversity, it is difficult for them to know how to embed biodiversity in their sustainability governance practices and introduce necessary systems changes.10 Business leaders need ways to find nature-positive solutions and resources to help them make informed decisions about biodiversity.

Business & Biodiversity: Fundamental Issues

Several fundamental issues need to be resolved to connect biodiversity to business, as we explore below.

Biodiversity Is Daunting for Business & Poorly Understood

Although the connection to biodiversity is evident in sectors like agriculture, fisheries, forestry, and mining, companies in other sectors may not see an immediate link, especially if they have multiple product lines with long supply chains. Food cultivation and resource extraction sectors account for 63% of the total share of pressure on biodiversity. However, when the entire supply chain is taken into account, 90% of the pres­sure on biodiversity is linked to food and beverage (including packaging), infrastructure and mobility, energy, and fashion.11 The fashion industry, for example, relies on exploitation of land, plants, and fresh water to produce raw materials for fibers while creating pollution across its value chain.

These types of links can be difficult for companies to map out, especially if their supply chains are geo­graphically dispersed. In turn, finance and insurance institutions struggle to become enablers of nature-based solutions. Part of the difficulty is that biodiversity terminology is often new and confusing to business leaders, a problem compounded by the use of varied definitions and approaches. The growing array of tools, standards, best practices, metrics, and platforms designed for business can be difficult to navigate and prioritize.

Businesses Aren’t Focused on Long-Term Biodiversity-Related Risks

Positive ecosystem impacts can take many years to realize, so biodiversity solutions require long-term vision. Executive turnover and shareholder pressure to produce immediate results can make businesses myopic, leading them to favor what benefits them now over what would benefit them later.12

Flooding, droughts, storms, and sea-level rise make climate change risks evident; the many serious risks of biodiversity loss (transitional, physical, legal, and systemic) are less well understood.13 So, while some companies reap the reputational benefits of investing in natural capital, most struggle to find holistic solutions, tackling biodiversity issues unilaterally or with a small circle of colleagues or consultants. This compounds the impression that biodiversity is daunting and increases the urgency for clear biodiversity decision-making tools for business.

Businesses Don’t View Biodiversity as an Interdependent System

Businesses typically interact with biodiversity on a piecemeal basis and are rarely charged with governing entire ecosystems. A corporation usually sources from a relatively small portion of land with the purpose of maximizing the utility of that space. Furthermore, economic models tend to assume natural resources are replaceable — if a tree is used as a raw material, it can be replaced. But this approach overlooks the adverse effects of replacing old trees with young ones, the interactions with the rest of the ecosystem, and the incompatibility of replacing one species with another (or natural capital with other sources of capital).14

Figure 1 shows the Mitigation Hierarchy, a tool to help companies limit their negative impacts on biodiversity by considering four actions in setting no-net-loss or net-gain targets.15 Although the first two steps in the hierarchy encourage the avoidance or minimization of negative biodiversity impacts through appropriate site selection or operational planning, the other two perpetuate the idea that biodiversity can either be restored or its destruction offset by restoring elsewhere.

Figure 1. The Mitigation Hierarchy (adapted from Mitchell)
Figure 1. The Mitigation Hierarchy (adapted from Mitchell)
 

In reality, the restore and offset steps are complex, expensive, and difficult to measure and achieve. Environmental impact assessments (EIAs) promote the idea that business pressures on nature can be easily predicted and replaced, but EIAs often fall short of adequately addressing biodiversity impacts.16

Biodiversity Measures for Business Are Inadequate

Numerous biodiversity-related indicators have been developed for corporations, many striving to find a single metric — an animal or plant equivalent of carbon dioxide units (see Table 1). These indicator frameworks are generally rigorous, replicable, and consistent, but none of them cover all business applications in all biomes. Most are still under development, and many use one blunt metric (e.g., mean species abundance) that does not reflect the complex differences between ecosystems and species.17

Table 1. Examples of biodiversity indicators and monitoring and disclosure frameworks developed specifically for business
Table 1. Examples of biodiversity indicators and monitoring and disclosure frameworks developed specifically for business
 

More importantly, the indicators developed for busi­nesses are different from those used by govern­ments, environmental nongovernmental organizations (NGOs), and conservation experts. This reflects a difference in framing goals:

  • The draft goals, targets, and indicators of the Post-2020 Global Biodiversity Framework of the Convention on Biological Diversity (CBD) focus on species and habitats in terrestrial, marine, and freshwater ecosystems.

  • The draft Taskforce on Nature-Related Financial Disclosures (TNFD) framework focuses on a confusing mix of realms (land, freshwater, ocean atmosphere), biomes, environmental assets, and ecosystem services.

  • The Science Based Targets Network (SBTN) guidance for business separates biodiversity from other aspects of nature (climate, freshwater, land, and ocean).

Since climate change and biodiversity loss are inherently linked and self-reinforcing, it is a false dichotomy to treat them separately. If the private sector continues to treat biodiversity planning and monitoring differently from public and civil society sectors, understanding will be hindered, and oppor­tunities for cross-sectoral lessons learned and data sharing will be significantly reduced.

Biodiversity Data Is Not Accessed or Used

Accurate, reliable, timely data is essential for corporate biodiversity governance. Nevertheless, companies face challenges accessing existing data or collecting new data, especially geo-referenced data that links activities to specific sites, supply chains, species, and habitats. This may be the reason only 3%-12% of European and US companies report anything on biodiversity.18 Even when companies do report, the information is often not specific, measurable, or time-bound, making it difficult to determine business impacts.19

Business indicators for biodiversity mostly rely on secondary data and modeling rather than direct measurement, using assumptions that may not be accurate. Companies do not know how to collect their own data or where to source existing data. Thus, there is an urgent need to develop biodiversity decision-making tools to help companies access the biodiversity data and methods needed for successful monitoring and governance.

Signs of Change: Shifting Toward a New Paradigm

In spite of the ongoing challenges, there are signs of a paradigm shift in the corporate sector.

Businesses Are More Engaged & Working with Others to Address Biodiversity

Businesses are more engaged with, and integrated into, global biodiversity processes than they were a decade ago.20 There was a Business and Biodiversity Forum at the 2018 CBD Conference of the Parties, and the CBD’s draft Post-2020 “Target 15” specifically commits businesses to increase positive impacts. The trend for increased business engagement is also reflected in biodiversity monitoring and reporting. Disclosure to the CDP (previously the Carbon Disclosure Project) on the top­ics of water and forestry increased dramatically from 2010 to 2020 (see Figure 2). (Note: About half of the disclosures are not made public. In 2021, water and forest disclosure represented 25% and 7% of total disclosures, respectively. By comparison, more than 99% of companies disclosed on climate change.21)

Figure 2. The number of companies disclosing information on water and forest biodiversity to the CDP from 2010 to 2021
Figure 2. The number of companies disclosing information on water and forest biodiversity to the CDP from 2010 to 2021
 

These trends indicate an ongoing transformation, although the impact is varied. For example, although a third of companies disclose on forests, commodity-related deforestation continues.22 The gap between disclosure and positive impact is commonly referred to as greenwashing. However, relationships between the private sector and civil society have improved, with many partnerships and initiatives helping companies become more accountable to rigorous, meaningful biodiversity targets (see Table 2). Many companies are also making unilateral commitments to enhance sustainability. Between 2001 and 2016, 66 companies from around the world made no-net-loss or net-positive impact commitments, with half of the companies specifying their biodiversity goals.23

Table 2. Summary of the main cross-sectoral and finance sector guidelines, tools, and standards developed or under development to help businesses address biodiversity
Table 2. Summary of the main cross-sectoral and finance sector guidelines, tools, and standards developed or under development to help businesses address biodiversity
 

Small Steps & Legislation Encourage Businesses to Act on Biodiversity

Reservations about biodiversity and complicated action options persist, but some recent guidelines encourage companies to begin with small steps, planning change for one specific raw material, process, or product rather than all company activities.24 Companies can also break down activities into more manageable units and define and monitor biodiversity goals at a level of granularity relevant to their operations (e.g., product line, raw material, supplier, type of operation, asset type, asset location).

Stakeholder engagement is key and, given that bio­diversity is not the core business of most companies, working with external experts (e.g., international organizations, NGOs, academic institutions, consultants) will remain important.

In Europe, legislative frameworks are shifting toward more non-financial disclosures, as demonstrated by the EU’s Non-Financial Reporting Directive and the pro­posed Corporate Sustainability Reporting Directive. In parallel, the Platform for Sustainable Finance (including private sector representatives) is developing details on which company operations can be considered sustainable as part of a new green taxonomy.

An International Sustainability Standards Board is being set up to work with investor-focused initiatives such as the Climate Disclosure Standards Board and the TNFD. This combination of growing interest and engagement and increasing policy and legislation incentives will facilitate a significant upsurge in corporate biodiversity commitments in coming years, with Europe as a key hub.

Biodiversity Guidelines & Tools for Business Are Being Improved & Harmonized

New guidelines, tools, and standards are being developed to help businesses navigate biodiversity, some taking lessons from conservation science and practice, applying them to the business context25 and removing the divergence between sectoral approaches.

Companies, international organizations, NGOs, and consultancies are starting to collaborate and develop linkages and synergies on biodiversity, coalescing around the concept of nature positive and moving toward improving biodiversity and the biomes it’s found in by 2030 (see Figure 3).26 The faster we can harmonize business biodiversity guidelines and build and test decision-making tools in business settings, the sooner we can ramp up business interaction with biodiversity governance and deliver impact.

Figure 3. A graphical representation of a global goal for nature positive (source: Locke et al.)
Figure 3. A graphical representation of a global goal for nature positive (source: Locke et al.)
 

Opportunities Are Emerging for Enhanced Data Availability & Sharing

Conservationists have learned that strong planning is a prerequisite of successful biodiversity monitoring. Business can learn from this experience to develop indicators set against goals and objectives to provide meaningful management information.27 Data can be aggregated from local to global levels and presented in formats that facilitate decision making (dashboards, graphs, maps), using terminology understood by business.

This is best achieved by using a set of common key performance indicators (KPIs) across a company’s scope of influence, preferably harmonized with indicators used by conservationists. Large, global biodiversity data sets and guidance on how companies can mon­itor biodiversity are increasingly accessible.28,29 For example, satellite-based remote sensing data is readily available to measure land use, and ground-based and water-based sensors (from camera traps to acoustic recording devices) are improving the ease of monitor­ing species and habitats, as are environmental DNA analyses.

There is also global growth in national policies for private sector biodiversity monitoring.30 Making biodiversity data open access, and therefore shareable, will be key. For instance, many companies are collecting biodiversity data when they conduct EIAs. Making that data freely available will make it possible to build a global picture, assess cumulative impacts, and allow more efficient use of data for decision making.31

How Businesses Can Shape a Future Centered on Biodiversity

To drive systemic change and embed the economic sector into ecological systems, a new corporate biodiversity paradigm is needed, with the same scope and scale we recently witnessed for climate change governance. We believe several trends are needed to support this process:

  • Science-informed biodiversity goals and targets for business are critical to successful action. Goals must be based on scientific data and set in collaboration with other sectors, government agencies, and NGOs. More companies should make public commitments on biodiversity, based on risk assessments across space (location) and time (long-term horizons). Corporate goals must be harmonized with CBD’s Post-2020 Global Biodiversity Framework and UN Sustainable Development Goals.

  • Companies need to move toward a nature-positive agenda linking biodiversity and climate change. No-net-loss is becoming a concept of the past as the corporate sector steps up to join governments and civil society in going beyond avoidance and mitigation to proactively protect and restore species and natural habitats. As such, committing to a nature-positive agenda may even represent a rethink of what defines ethical business practice. Business invest­ment in nature-based solutions must become more prominent, especially through solutions tackling both climate and biodiversity, like the restoration of mangrove forests, which can conserve species while sequestering four times more carbon than rainforests.32

  • Reporting frameworks must be improved. These frameworks should be harmonized and standardized to avoid confusion within and between companies and better link monitoring to goals and targets, enhancing data and lesson sharing. The most successful indicators will likely be those based on conservation science and practice and include not only measures of responses and pressures, but also impacts on the state of biodiversity.

  • Companies must leverage new forms of data and technology. The increased use of remote sensing combined with artificial intelligence can help companies move away from inaccurate modeling with out-of-date secondary data toward near-real-time collection of primary data. Financial institutions and data organizations must increasingly embed spatial data to connect company assets and sites to biodiversity indicators.

If we are to witness such transformative change, com­panies must adopt a long-term, embedded perspective of nature rather than focusing on short-term financial growth metrics. Many investors and stakeholders (including banks and insurance companies) are increasingly aware of the potential downsides of businesses that fail to address climate change and biodiversity. Companies will find it easier to raise capital and insure assets if they consider their overall, long-term impact on nature — a genuine win-win for business and the planet.

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About The Author
PJ Stephenson
P.J. Stephenson is Research Project Manager at the University of Lausanne, Switzerland, Chair of the IUCN SSC Species Monitoring Specialist Group, and an independent conservation and sustainability consultant. Since 2017, he has focused much of his work and research on tackling business sustainability issues. Dr. Stephenson has worked in biodiversity conservation for Scottish Natural Heritage in the Cairngorms, WWF in the Democratic Republic of… Read More
Judith Walls
Judith Walls is Full Professor and Chair of Sustainability Management at the Institute for Economy and the Environment, University of St.Gallen, Switzerland. Prior to academia, she worked in investor relations as Head of Research, Consulting and Business Development for Technimetrics (later Thomson Reuters) in Europe and Asia-Pacific. Dr. Walls also spent many years working with conservation organizations regarding the human-wildlife conflict… Read More