The Business Case for Biodiversity: a place to begin

3 April 2024

WWF defines biodiversity as the incredible variety of life harboured by our planet, including bacteria, fungi, plants, as well as insects and animals. All these actors work together in complex ecosystems to provide us with everything we are so dependent on food, clean water, medicine, and shelter. Without this cooperation of the full spectrum of actors in resilient ecosystems, the very foundation of life on our planet is under threat. 

Note: Biodiversity and approaching it from a company-perspective is a very broad subject – if tackled carelessly, you may find yourself navigating shallow waters. That is why, for the purpose of this article, we focus on the main driver of biodiversity loss, namely land use change, and how companies could address the issue.

But why should you be integrating biodiversity into your business strategy?

Biodiversity is set to become one of the leading edges of environmental concerns – and although deeply related – transcending even the critical issue of climate change. The term ‘biodiversity’ is not merely a measure of the variety of life, but a critical indicator of the health and resilience of our planet. A holistic framework that aims to quantify the environmental state of our planet is the concept of planetary boundaries. When considered through this lens we find that the integrity of our biosphere – which refers to the health and stability of our planet’s ecosystems and the diversity of life they contain – is more overshot than climate change.

The Kunming-Montreal Global Biodiversity Framework (GBF), adopted at COP15 in December 2022 is a testament to this urgent reality. The agreement marks a global consensus to safeguard Earth’s biodiversity, setting a clear agenda for countries and businesses alike to take decisive action. This is imperative, not only for our planet, but also for our economic system. A PwC analysis from last year found that an astonishing 55% of global GDP  is dependent on high-functioning biodiversity and ecosystem services. In essence, most companies depend on nature in some degree to deliver the products and services they produce. 

The introduction of the Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS), particularly the ESRS E4 focusing on biodiversity, signifies a turning point for corporate responsibility. Under these new regulations, large companies are mandated to disclose their material impacts on biodiversity within their operations and across their value chains. This directive not only applies to large enterprises but also carries significant implications for Small and Medium-sized Enterprises (SMEs). While listed SMEs are directly subject to CSRD from 2027 onwards, non-listed firms are also indirectly affected as part of the larger value chains’ stakeholders. Their role as suppliers to bigger corporations demands a proactive approach to biodiversity conservation, as their larger counterparts will increasingly favor partners who can demonstrate tangible efforts towards enhancing biodiversity.

The focus on biodiversity, driven by the GBF and codified in regulations like the CSRD, underscores a broader shift in how businesses approach their environmental impact. No longer peripheral to core business strategies, biodiversity conservation is becoming integral to achieving sustainability objectives. 

The metric maze

One of the most significant hurdles in the path to effective biodiversity conservation is the lack of a common metric. While carbon accounting is certainly not without its complexities – especially when dealing with biogenic emissions – the existence of CO2-equivalents as a standard measure offers a level of clarity and comparability that is currently missing in biodiversity metrics.

Biodiversity, by its very nature, encompasses an enormous variety of life forms and ecological functions. And so, to encapsulate its value and state of health within a single, unified unit of measure is extremely challenging.

There have been various attempts to quantify biodiversity and the impacts that human activities can have on it ­­– for instance through the introduction of units to measure ecotoxicity or quality-hectares. While the diversity of metrics is necessary to address the multifaceted nature of biodiversity, it also presents a barrier to creating standardised and easily comparable measures of biodiversity impact across different industries and regions – and in reporting on and tracking individual companies’ impacts and efforts over time.

Framework in the making

Concomitant to the issue of metric diversity is the current lack of established frameworks for biodiversity reporting and target setting. Although initiatives are underway – with organisations like the Taskforce on Nature-related Financial Disclosures (TNFD) and the Science Based Targets Network (SBTN) leading the way in developing comprehensive guidelines and standards – the landscape of biodiversity conservation is still in a formative stage.

This rapid evolution, while indicative of the steadily growing recognition of biodiversity concerns in the corporate world, also means that companies are navigating (mostly) uncharted waters when it comes to integrating biodiversity considerations into their sustainability strategies.

We know this may feel discouraging and overwhelming, and that is why we have come up with actionable insights to help you set your footing on more solid ground.

We can’t (or should not) act upon that which we don’t understand, and that is why the heart of biodiversity action is precisely in understanding the factors that threaten it. To understand the root cause of biodiversity loss, consider the five key drivers of biodiversity loss:

    1. Invasive species
    2. Land and sea use change
    3. Climate change
    4. Pollution
    5. Direct exploitation of resources

Among these, land use change is considered the greatest driver, as it erodes the very foundation of which biodiversity is dependent on, namely intact ecosystems.

The solution appears straightforward: preserve lands with high biodiversity, especially those in sensitive areas. But “preserve” is a delicate term. Over the years we have seen how protected areas, when isolated and forgotten, do not necessarily become more resilient but often quite the opposite. The focus therefore should not only focus on preserving separate pieces of land, but rather on exploiting their connectivity, amplifying their value, and creating a more robust ecosystem. Several connected smaller areas will have a far higher positive impact on biodiversity than dispersed land, even if the sum of hectares is the same. We could then target low-biodiversity areas for intervention, e.g. through rewilding.

Alright, now we have the main drivers, but how do we go about them?

To understand your impacts and reliance on biodiversity, and how to go about addressing them, these are some of the key points you could start working on:

  1. Look for the current regulatory frameworks

Luckily ESRS (particularly E4) offers a roadmap for large companies to understand their impacts. However, what about SMEs? As a starting point, EFRAG’s Voluntary ESRS for non-listed small and medium-sized enterprises (VSME ESRS) offers a simplified standard. It is thought to enable SMEs to participate in the journey towards a sustainable economy while mitigating the so-called trickle-down effect (that is disproportionate reporting requirements on SMEs in larger companies’ value chains). Interestingly, in relation to biodiversity, the VSME ESRS focuses on the main driver of biodiversity loss, namely land use change. In the VSME ESRS B 5 – Biodiversity, SMEs are asked to disclose the following:

  • total use of land;
  • total sealed area;
  • total nature-oriented area on-site;
  • total nature-oriented are off-site.

2. Beyond direct effects on biodiversity lie indirect impacts. These could be because of the goods and services your company purchases or the activities performed elsewhere in your value chain.

In general, companies with high direct biodiversity impacts are typically found in land and sea-intensive sectors like food, agriculture, fisheries, textile, and paper, not to mention the extractive sectors such as mining and fossil fuels.

However, companies with high indirect impacts are found across a multitude of sectors. While there might not be direct land or sea use, exploitation of natural resources, or pollution in your own operations, consider your value chain: is there a high consumption of water in your upstream value chain? Are there polluting chemicals being emitted as an intermediary step in producing the components found in your products? And what about packaging – how is it being manufactured and what are the impacts thereof?

3.   Knowing is half the battle; the next step is action.

For businesses with operational control over land, enhancing nature-oriented can have significant conservation benefits while fostering a sustainability culture. These are some ways in which we think you could start working on these issues:

  • If your organisation has land in its own operations, think about how you can increase nature-oriented areas. Even small green spaces contribute to conservation efforts and have the added benefit of increasing visibility, fostering a sustainability culture among employees, and impressing visiting clients, potentially leading to new business opportunities.
  • If you have control over limited amounts of land, look at your own operations and procurement: seek to reduce energy, water, and raw materials, and procure products with credible eco-labelling where possible. Here, many companies benefit from climate-related work they have done, particularly if they have an overview of their procurement from their scope 3 inventory, including their main suppliers.
  • If, on the other hand, your company belongs to an extractive sector or you identify high indirect impacts on biodiversity, you should focus your attention upstream by engaging with suppliers, avoiding to purchase materials from suppliers in hotspot areas etc.

Now, what if your company and value chain do not have a high impact on nature, but you still want to do something for biodiversity? In that case, you should strongly consider supporting actors that are working for nature. We recommend prioritising projects in your local area. This increases not only your sense of ownership and has added benefits of marketing value, but also gives you the possibility of doing company outings to these locations, further developing a sustainability culture in the company.

In Denmark, the need for protected areas is particularly pressing: according to the Danish Biodiversity Council’s yearly report for 2023, only 1.6% of Danish nature can currently be categorised as protected. These include national parks, state-owned untouched forests, and areas owned by nature foundations. Thus, if you have operations in Denmark, consider looking towards supporting foundations such as The Danish Nature Fund and the Danish Bird Protection Foundation (Fugleværnsfonden), who directly buy up land with biodiversity in mind.

However, no matter what you choose to prioritize, without the collective involvement and agreement of all stakeholders, executing company initiatives becomes a significant challenge. You can start working on it by clearly defining your ambition levels for biodiversity, ensuring they resonate with your broader sustainability and business goals. Convincing management and securing their full support is essential, as their leadership is key to driving the initiative forward. Leveraging existing environmental analyses, such as a greenhouse gas inventory, can provide a strong foundation, informing the development of a robust biodiversity strategy that aligns with our company’s values and objectives.

Nevertheless, keep in mind the previously mentioned metric maze. Hesitating to act until you have a clear and quantified baseline of your current biodiversity impact is not feasible, not for the planet nor for you as a company. When it comes to biodiversity, we recommend timely action rather than waiting for the perfect moment.

To sum it up:

The journey towards halting and reversing biodiversity loss is complex and multifaceted, requiring a collective effort from businesses of all sizes. By understanding how your company affects and is dependent on nature, embracing best practices, and supporting conservation initiatives, companies can contribute significantly to the preservation of our planet’s biodiversity. As we await further guidance from leading frameworks, it is imperative for all companies to begin taking action by educating themselves on their impacts and dependencies on nature and implementing best practices, setting the foundation for a sustainable and biodiverse future.

Further resources

Definition of biodiversity: https://www.worldwildlife.org/pages/what-is-biodiversity

PwC: Managing Nature Risks: https://www.pwc.co.uk/issues/esg/now-for-nature.html

Planetary boundaries: https://www.stockholmresilience.org/research/planetary-boundaries.html

Developing metrics for biodiversity:
https://www.thebiodiversityconsultancy.com/our-work/our-expertise/data/developing-metrics/

5 drivers of biodiversity loss: https://www.ipbes.net/models-drivers-biodiversity-ecosystem-change

VSME: https://efrag.org/Assets/Download?assetUrl=%2Fsites%2Fwebpublishing%2FSiteAssets%2FVSME%2520ED%2520January%25202024.pdf

Author details

David Færgeman

Senior Consultant