Importance and complexity of biodiversity
Biodiversity is all but ignored by corporate America, unlike climate change, which has attracted a lot of attention over the last ten years. However, like climate change, biodiversity loss is one of the most urgent crises facing the planet.
What is biodiversity?
Taking a step back, what is biodiversity? Biological diversity, or biodiversity, is “the variety of life on Earth,” and it is essential in maintaining healthy people and strong economies. Despite its importance, biodiversity is rapidly declining as a result of human-caused activities, including deforestation, climate change, and water use.
Historically overlooked by companies as compared with other environmental issues (e.g., carbon footprint), biodiversity is finally moving to the forefront of corporate sustainability. In 2020, we wrote about the need for companies to protect biodiversity in the supply chain. Since then, corporate biodiversity strategy has entered the mainstream, as reflected in recent publications from the Environmental, Social, and Governance (ESG) raters ISS, MSCI, and Sustainalytics, which offer investors the ability to compare how companies are doing on ESG metrics. ISS declares biodiversity “The Next Frontier in ESG Assessment,” citing research from the World Economic Forum, which ranks biodiversity loss as one of the top three most severe global risks, along with climate action failure and severe weather. The risk assessment firm Moody’s similarly observed that “biodiversity is fast moving to the top of the agenda for investors as they seek to understand investee companies’ nature-related impacts and dependencies.”
However, biodiversity is more than a buzzword or an isolated issue. More accurately, it is part of an interconnected network of environmental and social challenges. The examples below illustrate a small fraction of the connections between ESG issues:
- Deforestation contributes to climate change, as trees are important carbon sinks.
- The destruction of species-rich forest habitats also reduces biodiversity.
- Climate change diminishes biodiversity by altering the plants on which pollinators depend, thereby threatening our food supply, and by enabling the spread of invasive species, which outcompete natives.
- Water use reduces biodiversity through the degradation of wetland habitats (wetlands are also important for building community resilience to extreme weather events, which are projected to increase with climate change).
- Climate change exacerbates water scarcity (and water-stressed regions are often home to vulnerable species).
In short, business activities that affect any one of these issues (e.g., sourcing raw materials from forests; siting facilities in drought-prone areas) likely have repercussions across many other issues and can result in an array of multiplying financial and reputational risks. This diagram does not even scratch the surface of related social issues (e.g., indigenous peoples’ rights). Businesses should take a holistic view of how they are responsible – throughout the life cycle of their products or services – for impacting all of these issues.
Where to begin in crafting a biodiversity strategy for ESG disclosure
Alongside disclosures on climate change mitigation and other sustainability initiatives, responsible companies are measuring and publicly sharing their performance on biodiversity conservation. If your organization is just getting started with tackling biodiversity, the following questions may help in establishing a path forward that fits your priorities and values:
- What is your overarching vision with regard to biodiversity, and how can you distill this vision into guiding principles and a biodiversity policy?
- What are the key performance indicators (KPIs) along which you will measure your performance on biodiversity conservation over time? Examples might include:
- Number of native species present at job sites
- Number of deforestation controversies in the supply chain
- Number of employees engaged in conservation efforts
- Number of dollars contributed to conservation organizations
- Specific scores achieved from ESG raters on biodiversity-related topics
- Specific recognition achieved from non-profit organizations (e.g., number of sites containing NWF-certified wildlife habitat, analogous to LEED-certified buildings)
- What are the corresponding SMART goals (Specific, Measurable, Achievable, Relevant, Time-Bound) with which you will track your progress on these KPIs, and how do these goals dovetail with your other ESG priorities? Sample goals corresponding to a few of the KPIs above include:
- Increase the number of native species at each job site by 10% by 2030
- Maintain zero annual deforestation controversies
- Engage 75% of employees in conservation initiatives by 2025
- How does biodiversity fit into your organization’s governance structure? For example:
- Who is responsible (individuals or roles at the organization) for collecting data points and tracking the KPIs?
- Where do they store the data? (new or existing software platforms)
- When does the Board and/or CEO receive updates on biodiversity metrics? (e.g., monthly, quarterly)
- How are biodiversity goals incentivized (e.g., linked to executive compensation, awards, etc.)?
- Are there opportunities to partner with conservation organizations (e.g., non-profit groups; government agencies) to gain credibility and maximize the impact of your work
- What are the biodiversity stories that you wish to tell, who are the target audiences, and what are the appropriate cadences and channels of communication? For example:
- Internal – a biweekly newsletter for team members, about opportunities to get involved in volunteer habitat restoration events
- External – a monthly blog post targeting prospective customers, about how your organization is helping to protect charismatic flagship species, like the monarch butterfly (which was just declared endangered)
- External – a biodiversity section in the organization’s annual ESG report, providing investors and raters with updated metrics, along with an analysis of year-over-year trends
How to be on the cutting edge of biodiversity disclosure
Once your organization has aligned on the basics of a biodiversity strategy, you can secure a leadership position by aligning your disclosure with a reputable third-party framework, allowing for standardized comparisons across firms (this practice is already the norm in climate disclosure). Emerging frameworks for biodiversity include the Taskforce on Nature-Related Financial Disclosures (TNFD), which is currently in beta testing, and science-based targets for species and ecosystems. Early adopters of these frameworks have the potential to carve out reputations as the biodiversity leaders of their respective industries. Corporate momentum around biodiversity strategy, impact, and disclosure is only continuing to increase in the wake of COP 15, the 2022 United Nations Biodiversity Conference.
How Third Partners can support your biodiversity work
We are ready to meet your organization at any phase of its biodiversity journey to build a roadmap with actionable steps that enable you to stay ahead of demand from investors, raters, and other stakeholders. Our service offerings include custom benchmarking research to assess where you stand in comparison to peers on biodiversity conservation and how you can integrate best practices to gain a competitive advantage. We have also advised corporate clients on partnering with environmental non-profit groups, and we have expertise in facilitating these relationships at organizations of all sizes. Our team of environmental scientists and management consultants is uniquely qualified to guide you on this journey. If you need help with your CSR strategy or ESG strategy, contact us for a free consultation.