Understanding nature impact and dependencies may be easier than you think
Awareness of the economic value of nature for business is rising rapidly.
Nature is defined as the natural world, with an emphasis on the diversity of living organisms, including people, and their interactions among themselves and with their environment1 . More than half of the world’s economic output is highly or moderately dependent on nature2. The health of nature underpins the health and prosperity of society.
Nature is quickly climbing the ESG ladder, becoming a strategic priority for corporates. This has been emphasised by drivers such as the Kunming-Montreal Global Biodiversity Framework, last year’s release of the Taskforce on Nature-related Financial Disclosures (TFND) recommendations, the expectations of sustainability-conscious investors and recent global and local events such as the Global Nature Positive Summit and CoP 16.
The world’s first Global Nature Positive Summit was held in Sydney in early October. Key takeaways from the Summit included:
- Understanding and measuring nature can have long-term benefits.
- Nature needs to be factored into economic and business decisions.
- Evolving expectations will increasingly impact Australian businesses.
- Nature positive and climate commitments must work together.
Following on from the Summit, Westpac, in late October, hosted a Women in Sustainable Finance panel event to hear from some of Australia’s organisational frontrunners on their early actions, insights and challenges now nature is on the agenda.
Where climate has often been the central focus of ESG strategies, “nature is a fast follower, with organisations becoming increasingly aware of their reliance on nature”, both directly and through supply chains, emphasised moderator Tim Parker, Head of ESG, Climate and Nature.
The strong links between a changing climate and its impact on nature were top of mind for panellists, including Sally Townsend, Head of Sustainability at Blackmores Group, Gautier Desme, Head of Nature and Biodiversity Research at S&P Global Sustainable1, Tadila Barrett, Senior Manager, Climate Change and Sustainability at EY and Harry Jobberns, Senior Manager Climate Strategy at Qantas.
Desme reported to attendees that S&P Global’s research shows that more than two thirds of companies3 have a high dependency on nature, while 85 per cent of the world’s largest companies4 have a significant dependency across their direct operations.
1TNFD Recommendations of the Taskforce on Nature-related Financial Disclosures (2023).
2World Economic Forum ‘Nature Risk Rising: Why the Crisis Engulfing Nature Matters for Business and the Economy’ (2020).
3Based on the S&P Global Broad Market Index (BMI) universe which includes approximately 14,000 companies.
4Based on S&P Global 1200 constituents
Insights from early movers on nature
Individually, however, when it comes to how organisations intersect with nature, their impacts, dependencies, risks and opportunities differ widely, as panellists’ disparate examples revealed.
For health brand Blackmores, one of the major drivers to protect nature is supply chain dependency. Blackmores are not alone in their dependency on nature, with 50 per cent of commercially available drugs derived from natural sources. “There are 50,000 herbs [plant species] being used therapeutically, and 15,000 are facing extinction,” Townsend told attendees.
Nature is also critical for health innovation. Peptides from frog skins, for example, are used in the development of the latest immuno therapies – and amphibians are among the animals most impacted by the changing climate and degrading nature, she said.
By contrast, Qantas’ exposure to nature is all-encompassing. “It’s not only about our impact and reliance on nature as a business, but also how the service we offer connects people to the natural assets of Australia and the world,” Jobberns told the audience.
Both organisations have been early movers on nature. This includes committing to be early adopters of the TNFD recommendations. This has given them a clear vantage point and firsthand experience of the coalescence of connections between nature and climate issues for businesses.
For Blackmores, adoption of the taskforce’s recommendations is designed to demonstrate transparency and model the way forward for its suppliers. Within the organisation “it’s given the business certainty that we’re on the journey”, Townsend said.
She observed that implementing the recommendations, in some respects, has been made easier by the climate-nature correlation. “Seven of the TNFD recommendations have come from the Taskforce for Climate-related Financial Disclosures, while four are very closely aligned. The nature and climate processes can run in parallel,” she said.
Qantas’ TNFD commitment comes with recognition that a portfolio of climate-based solutions can offer big opportunities on the nature and biodiversity front. “If you invest in the right kind of climate projects, you can also have a really positive biodiversity and regenerative outcome,” Jobberns told the crowd.
Executive buy-in on TNFD alignment is one reason the airline has further evolved its partnership with the Great Barrier Reef Foundation to include AUD 10 million support over 10 years for the Reef Restoration Fund to restore corals on the iconic reef, which attracts around two million tourists annually.
Where to start with nature?
A pressing practical question for the panel concerned how organisations can begin exploring their interactions with nature.
From consulting firm EY’s recent experience working with large organisations on their next big sustainability step, evidence has emerged that tackling climate and nature concurrently offers long-term efficiencies and alignment, Barrett reassured the audience.
Many have done some groundwork in their climate analysis and may already have relevant data and information, she said. “Additionally, a lot of organisations have existing environmental management systems, which adhere to legislative requirements and as a result they have a lot of existing information within the business.
“[At EY] we say start with direct operations to discover where you might be interfacing with nature, focus on material impacts and dependencies, and calibrate those into risks and opportunities. However, it is important to not forget the value chain, as data availability can be more challenging,” Barrett advised. Nearly all organisations interface and rely on nature within their value chain, Barrett indicated.
“When it comes to your value chain, the best first step is to perform a hotspot analysis to understand where your most material impacts and dependencies could exist”. “You will need to engage with procurement or finance teams to develop a deep understanding of the value chain and key suppliers of goods and services. The aim is to perform analysis and develop strategies which can help the organisation inform long-term decision-making.
Common ground is not only found in existing data. Bringing together processes, such as stakeholder communications, may also drive efficiencies.
Beyond airports in 140+ destinations, Qantas’ supply chain is extensive – it includes consumer goods, textiles, catering and aircraft parts, along with lounges that operate like restaurants, Jobberns outlined.
With the pressing need to address Scope 3 emissions now on corporate agendas, it makes smart sense to tackle climate and nature at once with suppliers, he said, rather than taking a piecemeal approach.
Plus, new data sources and tools are constantly being released. Desme is involved in the development of datasets and analytics on the environment and nature that allow investors and businesses to identify and quantify nature-related risks in portfolios and operations.
Cross-collaboration is key
Further learnings on the imperative for cross-collaboration internally and externally when assessing nature-related interdependencies came from EY’s extensive work on a series of TNFD pilot case studies for the Federal Department of Climate Change, Energy, the Environment and Water.
The department’s 2023 report covered 23 organisations and six peak industry bodies across five nationally significant value chains. “The big takeaway from the pilots was about bringing everyone on the journey and getting all the right people in the room,” Barrett said. The need for wide-ranging expert perspectives and analysis means “upfront there’s a lot of stakeholder mapping”, she said. Different subject matter experts need to be engaged at different times”. However, doing it that way creates buy-in, investment and accountability within the business. “Ultimately, the sustainability folk will bring it all together,” she said.
The vital importance of collaboration was also one of the resounding themes at the Global Nature Positive Summit, along with the critical need to adopt an integrated approach to climate and nature. Speakers also examined the growing impact of market expectations for Australian businesses and some of the challenges around defining the ‘nature positive’ concept. The long-term value in understanding and measuring nature was another key topic.
The Women in Sustainable Finance event wrapped up on an optimistic note as panellists agreed nature is a topic gaining momentum. Progress towards the next set of corporate sustainability goals is underway. As Barrett concluded: “Nature is a tangible part of all our days, and that makes it an easy concept to buy into and far less controversial in many ways than the climate issue.”
TNFD guidance is available to help organisations identify and assess nature-related issues and inform disclosure.
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