Integrating Nature into Business Operations
The purpose of this article is to explore how the concepts of nature and biodiversity have begun to be applied to business in recent years, particularly following COP15 in Montreal in December 2022. Awareness of the critical state of our natural environment is growing globally, yet the measures in place to protect it remain insufficient. However, younger generations are becoming increasingly conscious of these issues, and businesses are beginning to integrate nature into their strategies due to a new understanding of the risks posed by biodiversity loss to their operations and financial results, as well as the pressure from emerging regulations. The direction towards a nature-positive economy appears to be underway.
Increased Awareness of a Human Issue
Most countries worldwide have regulations to protect nature, with established fines and penalties for individuals and companies that violate them. However, these measures alone haven’t been enough to stop human impact and raise awareness about businesses’ externalities. To illustrate this, one of nature’s most vital components, biodiversity, is at risk. Human activities have pushed ecosystems toward an inflection point of a mass extinction of species, often referred to as the sixth extinction. The planet has experienced five previous mass extinctions, all caused by natural phenomena; however, this latest one has been caused by human activity. Approximately 1 million species are currently at risk of extinction, and to emphasize this fact and show that we have been driving species to extinction for a long time, there are some iconic cases such as the Dodo bird (1681), the Tasmanian tiger (1936) and the Spix’s macaw (2018), famous for the movie Rio. Fortunately, the Spix’s macaw has been part of re-introduction programs.
According to the latest information from the Stockholm Resilience Centre in 2023(1), six out of the nine planetary boundaries have been crossed, including biosphere integrity, which encompasses two components: genetic diversity and functional diversity. In practice, this means that the loss of genetic diversity and the decline in ecosystem functions have exceeded safe levels, increasing the risk of large-scale, abrupt, and irreversible environmental changes.
This may sound catastrophic, especially when estimating the changes that could occur, but there are likely countless other impacts we cannot even imagine due to the complexity of the interactions between climate change, nature, and other variables. When considering nature alone, there are many interactions between species that we do not fully understand; eliminating a single species could start a chain reaction with difficult-to-assess consequences.
Not everything is lost, though—awareness is definitely increasing. We understand the impact of nature on our lives and businesses better than we did a decade ago. New generations are more conscious of how people and the global economy relate to and depend on nature, Making them more prepared to seize new opportunities and avoid unnecessary risks. In the Global Risks Report 2024 published by the World Economic Forum(2), the ranking of short-term (2 years) global risks is led by misinformation, disinformation, and extreme weather events. However, respondents place environmental risks in the top four positions when asked about long-term risks (10 years), with biodiversity loss and ecosystem collapse in the third position. It is interesting to note that younger respondents rank this topic much higher over the two-year period compared to older age groups. This trend shows the increasing awareness among younger generations about nature loss and how it’s changing the world’s perspective.
In the long term, all stakeholders (civil society, international organizations, academia, government and private sector) place biodiversity loss and ecosystem collapse in the top five global risks. This highlights growing concern about the issue and how the changes we’re causing today may not be felt immediately, but the planet will certainly feel the impact within the next 10 years and beyond.
Thirty years have passed since the first COP, and more concrete results were only just achieved at the most recent COP15 held in Montreal. This convention set an important milestone with the adoption of the Kunming-Montreal Global Biodiversity Framework (GBF) by 196 countries. This framework includes four goals for 2050 and 23 targets for 2030, which are intended to drive government policies to align businesses and people toward a common objective of a nature-positive economy.
Nature’s Complexity Should Not Hinder Its Integration into Businesses
Trying to measure the relevance of nature and biodiversity in the economic context is not easy, and translating these broad concepts into the financial impact they have within a company is even more challenging. Assessing risks and opportunities that arise from nature may be evident in some sectors, such as food & beverage or healthcare, due to their dependencies on nature, but it is not as obvious for others.
Nature is complex, and evaluating the financial risks associated with nature loss, poses significant challenges for any company. We must consider that businesses have been dealing with climate change for some time, however this topic is not fully understood by all organizations. In the case of nature, its understanding is just beginning, and it is in its early stages of being included in company governance and strategy. It gets even more difficult when it comes to risk assessment, metrics, scenario analysis, and disclosures. According to the Global Survey of Nature Risk Management at Financial Firms 2024 conducted by GARP(3), only 25% of firms have identified nature-related risks or opportunities, and just 17% of firms are using metrics, targets, or limits to evaluate drivers of nature-related risks. The good news is that nature-risk staffing and training are on the rise, as well as awareness of the topic, mainly triggered by a growing regulatory focus on nature risks.
Another study by the World Benchmarking Alliance(4) of 816 companies in more than 20 industries between 2022 and 2024 found that only around 5% had conducted science-based assessments to understand how their activities impact nature and biodiversity. Less than 1% had carried out an assessment of their dependencies on nature.
The lack of interest in this topic shows that people and companies have taken nature’s benefits for granted—specifically, what we get from a balanced natural environment. We are incapable of fully grasping the impact of losing the ecosystem services we currently depend on. This issue is closely related to the tragedy of the commons, as the detriment to the ecosystem could become a tragedy for all of us if we do not address the problem soon. Climate change is closely linked to this issue, but nature loss also influences climate change, and they share common causes.
What a company can do to mitigate climate change will also positively impact nature, but initiatives should not stop there. Nature should have its own assessment and follow the same path that climate change has taken within organizations in terms of governance, strategy, risk assessment, and metrics.
Initiatives have been created to guide companies through the complexities of nature-related risk, and some of the most widely used frameworks are ENCORE (Exploring Natural Capital Opportunities, Risks, and Exposure), TNFD (Taskforce on Nature-related Financial Disclosures), and Science Based Targets for Nature. All of these frameworks have been used voluntarily by trailblazer companies. Together, these frameworks provide a solid foundation for companies to start incorporating nature considerations into their operations and to manage this topic as a primary concern, rather than associating it with or including it under climate change. Emerging regulations will help accelerate this process, ultimately benefiting everyone, including the most skeptical organizations.
Key Emerging Regulations Supporting the 30x30 Initiative
New regulations that aim to protect and restore nature have been implemented in the European Union (EU), the United Kingdom (UK), and the United States (US). However, they are not the only ones; other countries with similar developments under the umbrella of the 30x30 initiative include Australia, Canada, and China. It is important to note that in both the EU and the UK, the inclusion of the supply chain, although necessary, poses an additional challenge for companies.
European Union
Following COP15 and the adoption of the Kunming-Montreal Global Biodiversity Framework, Target 3 became one of the most well-known targets and is colloquially referred to as 30x30. This target is a global conservation effort aimed at protecting 30% of the Earth’s land, freshwater, and ocean areas by the year 2030. This initiative forms the basis of one of the most ambitious regulations in the EU, the Nature Restoration Law. To underscore the law’s importance, the European Environment Agency has stated that 81% of habitats in the EU are currently in poor condition.
The Nature Restoration Law was approved in June 2024 and came into effect in August of the same year, following two years of deliberation since the European Commission’s proposal and several months of debate within the EU Council. The primary arguments against this law centered on concerns about food production and security in the EU, as well as the potential reduction in renewable energy capacity, such as hydropower and biomass. Now, EU member states must develop national restoration plans and policies to comply with this law, with a deadline of mid-2026 to submit these plans to the European Commission.
Another relevant law in the realm of nature is the Regulation on Deforestation-free Products. This regulation entered into force in June 2023 and covers “the placing and making available on the Union market as well as the export from the Union of relevant products, that contain, have been fed with or have been made using relevant commodities: cattle, cocoa, coffee, oil palm, rubber, soy and wood.” These commodities were chosen because of the significant influence their production has on deforestation. Initially, operators and traders had 18 months to implement the rules, but the Commission proposed an additional 12-month phasing-in period to ensure proper and effective implementation. If approved, the law will come into force in December 2025 instead of December 2024.
UK
The UK has the Environment Act 2021, which includes legally binding targets to halt species decline by 2030 and increase species populations by at least 10% by 2042. It also aims to create or restore 500,000 hectares of wildlife-rich habitats by 2042 and tackles deforestation by removing commodities produced through illegal deforestation from UK supply chains. In the UK’s case, the commodities identified as key drivers of deforestation are cattle, cocoa, palm oil, and soy. The use of illegally harvested timber in supply chains is regulated separately through the UK Timber Regulations.
An important concept introduced through the Environment Act 2021 is Biodiversity Net Gain (BNG). This approach to development ensures that habitats for wildlife are left in a measurably better state than they were before the development. This means that any new development must result in an overall increase in biodiversity value by at least 10%. The BNG requirement will be implemented in phases: the first phase for smaller projects already started in April this year, and the second phase for large infrastructure projects will begin in late 2025.
United States
In 2021, the Biden-Harris administration launched America the Beautiful, a 30x30 initiative which aims to conserve 30% of U.S. lands and waters by 2030. It includes executive orders and policy directives to protect biodiversity, enhance climate resilience, and support local economies. This initiative primarily focuses on voluntary and locally led conservation efforts. Unlike the EU and the UK, which rely more on strict regulations and penalties, the US has a different approach to achieving 30x30, focusing primarily on investments, grants, and other incentives that directly promote nature conservation and projects that benefit and preserve biodiversity in special places. For example, the Bipartisan Infrastructure Law’s (2021) main objective is to modernize and improve US infrastructure, but it also includes initiatives designed to protect and restore nature, such as creating more equitable access to parks and nature in communities and investing $1.4 billion in ecosystem restoration and resilience.
As a final thought, from a business perspective, it is important to pay special attention to the emerging regulations related to nature and biodiversity, as they will become increasingly relevant in the coming years. It is worth starting to consider the risks and opportunities that this topic will create, in the same way companies have progressively included climate change in C-suite and board meetings, as well as in the operations of the organization. Climate change initiatives cannot be isolated from nature, nor can businesses be detached from the state of the planet. In the end, the planet’s wellbeing is necessary for all.
Evalueserve’s ESG tailored solutions, powered by our cutting-edge GenAI proprietary tools, ensure you stay ahead of the curve. Discover here how Evalueserve can add value to your business strategy.
