Biodiversity Importance in Business, ESG & Global Economy
Learn all about biodiversity and why it’s fast rising up the list of ESG priorities for organisations today
What is biodiversity in ESG?
Biodiversity in ESG (Environmental, Social and Governance) refers to the enormous variety of life on Earth, which is under threat by human activity. It is an important aspect of the "E" component of ESG.
Biodiversity encompasses the richness of life on Earth, including the diversity of species, genes, ecosystems, and ecological processes. It is critical for maintaining ecosystem services that humans rely on, such as clean air and water, pollination of crops, climate regulation, and disease control.
Within the framework of ESG investing and corporate sustainability, assessing and addressing biodiversity involves the following:
Conservation and preservation
The impact of company operations on local and global biodiversity. This may involve protecting and preserving habitats, species, and genetic diversity.
Ecosystem services
Protecting the services that ecosystems provide to human society, such as water purification, carbon sequestration, and flood control.
Supply chain impact
Many industries depend on natural resources and ecosystems for their supply chains. Biodiversity considerations can extend throughout a company's value chain.
Regulatory compliance
Ensuring operations are in compliance with relevant laws and regulations.
Stakeholder engagement
Engaging with local communities, indigenous groups, and other stakeholders is important for understanding the potential impact of business activities on biodiversity.
Reporting and transparency
Companies are increasingly expected to disclose information about their biodiversity-related risks and impacts. More on this below.
Why is biodiversity so important?
As part of broader ESG efforts, addressing biodiversity can contribute to a company's long-term sustainability and resilience, enhance its reputation, and help mitigate risks associated with ecosystem degradation. It also aligns with global conservation goals, such as those set out in the United Nations' Sustainable Development Goals (SDGs) and the Convention on Biological Diversity.
Without biodiversity, we stand no chance of achieving net zero carbon. In fact, it has been called the “next big theme in responsible investing” by Financial Times and “as urgent as efforts to prevent global warming.”
Responsible investors and biodiversity
Sustainable investors now have more opportunities than ever to contribute to funds designed to slow this alarming loss of nature. Fidelity International has launched the Sustainable Biodiversity fund, which “invests in the full value chain of solutions to biodiversity loss, in order to provide comprehensive, effective and enduring protection.”
Robeco launched the Robecosam Biodiversity Equities fund, which invests in stocks of companies in countries globally that “support the sustainable use of natural resources and ecosystem services to help reduce biodiversity loss.”
Furthermore, an uncomfortable spotlight is being pointed at companies that are contributing to the destruction of natural habitats and Earth’s biodiversity. Data science firm RepRisk recently launched a biodiversity risk tool, which identified that nearly three quarters (73%) of all oil and gas projects are close to environmentally sensitive sites, with a whopping 81% being located within 10km.
ESG biodiversity disclosures
As more organisations, investors, and world leaders commit to reducing the environmental impact of human activities, ESG biodiversity disclosures will become a more prominent component of corporate ESG reporting.
The Taskforce for Nature Related Financial Disclosures (TNFD) has now released v3 (beta) of its biodiversity risk management and reporting framework. Market-led and science-based, this framework enables companies and financial institutions to integrate nature into their decision making.
Business, biodiversity and the global economy
“Why is biodiversity important for business?”
According to a recent Goldman Sachs report, “Biodiversity is the cornerstone around which most sustainability objectives sit and an area to which we think corporates and investors will likely pay increased attention in order to meet sustainability and economic goals.”
Organisations are now realising that biodiversity underpins the global economy. A study by Swiss Re Institute shows that a fifth of the world’s countries are at risk of ecosystems collapse, while 55% of global GDP depends on high-functioning biodiversity and ecosystems services.
Not only are the environmental stakes high, so are the financial stakes. WEF’s 2022 Global Risks Report advises that the consequences will be irreversible “for the environment, humankind, and economic activity”.
In fact, while seemingly unrelated, the COVID-19 global pandemic is considered by many to be the most recent example of the impact of biodiversity loss on business. Loss of habitat has allowed viruses to move easily from nature to humans, and the rapid spread of COVID-19 has had disastrous and potentially irreversible effects on business and supply chains worldwide.
“What can my business do to protect biodiversity?”
Protecting biodiversity as a business involves a combination of strategies and actions that contribute to the conservation and sustainable management of ecosystems, species, and genetic diversity.
Here are some steps to take
1. Understand and assess impact
Start by understanding how your business operations, supply chain, and products/services impact biodiversity. Conduct a comprehensive assessment to identify potential risks and opportunities. Check your status: Take the Ansarada ESG pulse check
2. Set biodiversity goals
Establish clear and measurable biodiversity goals that align with your business values and objectives. These goals could include reducing habitat destruction, promoting sustainable sourcing, or supporting conservation initiatives.
3. Integrate biodiversity into business strategy
Integrate biodiversity considerations into your overall business strategy, decision-making processes, and daily operations. Incorporate biodiversity into your company's mission, vision, and values.
4. Sustainable sourcing
Ensure that your supply chain is environmentally responsible. Source raw materials, products, and services from suppliers that adhere to sustainable and responsible practices, especially in industries linked to deforestation, agriculture, and fisheries.
5. Habitat protection and restoration
Identify opportunities to protect and restore habitats on your company's properties or in partnership with local communities. Support initiatives that conserve and restore ecosystems, such as reforestation projects or wetland restoration.
6. Biodiversity-friendly design
If your business involves construction or development, design projects with biodiversity in mind. Incorporate green spaces, wildlife corridors, and other features that promote biodiversity on your properties.
7. Reduce pollution and waste
Minimise pollution and waste generated by your operations to prevent harm to ecosystems and species. Implement waste reduction, recycling, and pollution control measures.
8. Promote sustainable consumption
Encourage customers to make sustainable choices by offering environmentally-friendly products and services. Provide information on how your offerings contribute to biodiversity conservation.
9. Support conservation initiatives
Contribute to biodiversity conservation efforts by supporting local and global conservation initiatives financially or through partnerships.
10. Employee education and engagement
Educate and engage your employees about biodiversity and its importance. Encourage their participation in volunteer activities or initiatives related to biodiversity conservation.
11. Communications and reporting
Communicate your biodiversity-related efforts, progress, and achievements to stakeholders through sustainability reports, websites, and other channels.
12. Innovation and research
Invest in research and innovation that supports biodiversity conservation. Develop and implement technologies or practices that minimise negative impacts on ecosystems.
13. Collaboration
Collaborate with other businesses, governments, and NGOs to leverage resources and expertise for larger-scale biodiversity conservation initiatives.
60-second takeaways
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Biodiversity is an important aspect of the Environmental component of ESG.
ESG biodiversity disclosures are becoming a more prominent component of corporate ESG reporting.
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Addressing biodiversity can contribute to a company's long-term sustainability and resilience, enhance its reputation, and help mitigate risks.
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COVID-19 is considered by many to be the most recent example of the impact of biodiversity loss on business.