A climate for nature: how to tackle nature-related threats in your business?

Q&A with Emma:

As business approaches to net zero and decarbonisation advance, is nature the new carbon on board agendas?

Yes, I'd echo those words to say there's a long way to go still on net zero and decarbonisation and I'd question whether nature is the new carbon - indeed, is that what we're trying to aim for?

I think what we're trying to do is get to a place where nature and carbon are considered holistically and intrinsically linked - and we've got some new drivers that are really helping us to get there. In terms of board focus, we're seeing a lot of organisations responding to the mandated disclosure requirements of CSRD (Corporate Sustainability Reporting Directive) coming from Europe. But we are also seeing action voluntarily, through the likes of the Taskforce for Nature-related Financial Disclosure frameworks (TNFD), and driven by increasing investor or other stakeholder pressure, or from businesses that see a mandatory disclosure requirement as an eventual inevitability.

That is certainly bringing nature to the fore, but it's a way off being up there, in terms of the level of focus, alongside carbon. I think there's been a few things recently that have also triggered further profile raising for nature: for example, the recently published legal opinion on director's duties has raised an awareness that the issue here goes beyond nature just being something that's a nice to have or something that, philanthropically, organisations need to think about; and I think we're also seeing a shift in customer base and employee base expectations - particularly in certain sectors - for nature to be taken into consideration in an organisation's activities. All of these things combined mean that nature is certainly featuring more on boardroom agendas, which is great news.

I feel like we've got a real opportunity to get greater engagement by talking about nature as opposed to simply carbon. It's so evocative, and by using the lens of ‘nature’ we create more powerful storytelling, because people do have a connection with it; albeit probably a distant connection, because how we live in today's world means we don't have a deep connection with nature all the time but people do relate to it. For some, that might be just looking out of their window and seeing robins on the fence, or taking the dog for a walk and noticing a beautiful tree that you shelter under for shade or protection from the rain. I think that is so much more tangible and relatable than carbon.

Is measurement one of the key challenges - particularly as nature factors in one location are very different to another?

Yes, I mean there's an inherent complexity in nature, particularly from the perspective of geographical spread, as nature looks different in every location across the globe. You can't compare a cloud forest in Costa Rica to a meadow in Kent for example, in the sense that each has its own scientific value, as well as a completely different cultural value. So there is that inherent complexity, but we are used to dealing with complex information as a global society. Think how complicated a business is, for example Gowling WLG. Think about how many different people, departments, cost centres exist across its business. You know, there's an inherent complexity in lots of things across the world and so I don't think the issues for nature are completely insurmountable.

I think nature can be measured and has been measured - for hundreds of years, in fact. The Victorians in Britain were very good at it, and, over time, we have developed lots of ways to measure nature - plus how to simplify those measures and provide indicators to show the changes in nature that don't have to be completely scary, although it might feel overwhelming initially. I think that's why having more ecologists and nature specialists working within businesses is going to be increasingly important. Technology is also advancing so quickly now - the ability to assess and measure impacts on nature is easier than ever before and there are multiple nature-tech companies already coming up with fantastic solutions to make this work much easier for businesses of all sizes. Having someone on the board that's able to make really big decisions on nature for that business is crucial, as is the need for them to be informed by people within the business that understand nature and organisations' impacts and dependencies upon it.

Is this area of measurement something businesses of all sizes should be getting to grips with? And, potentially, harder for smaller companies?

I think that's an interesting perspective. I was talking to someone at the UK Business and Biodiversity Forum the other day and they were saying that there's this incredible guy - a member of the forum and a small hairdressing business owner - who's put together his own nature strategy, including setting targets which demonstrate a real understanding of his company's material impacts on nature and outlining his ambitions, together with a clear strategy to take him towards 2030 and becoming nature-positive.

And actually when you think about it, smaller organisations probably have much less complex value chains then larger, multinationals that are these global businesses with really quite intricate supply chains, value chains etc. While they might have wider resources, knowledge and skills, it's significantly more complex to unpick those chains. So I think smaller businesses, SMEs, could well be the trail blazers and the pioneers in including nature in their business strategies.

Organisations such as Business for Nature provide a really clear framework that businesses and other entities can go to, to help them take those first steps. In addition, the Taskforce on Nature-related Financial Disclosures (TNFD) framework provides guidance on the identification and assessment of nature-related issues through its LEAP (Locate, Evaluate, Assess and Prepare) approach. There are also the science-based target networks, so there's lots of guidance and hand-holding opportunities, even for organisations that don't have an ecologist or a nature specialist in-house.

Therefore, yes, I would possibly challenge the idea that the big companies are going to be the trail blazers.

Does integrating nature into your business strategy have short-term benefits or is the focus on the medium and long-term outcomes?

I think there are definitely some really quick, short-term wins and, obviously, those medium to longer term wins. It's about creating that sustainable resilience in a business longer term, but the short-term wins have got to be things like, for example, as soon as you start to talk about nature and address nature in your operations, then you should also ensure you talk about it with your shareholders, lenders and employees. Retaining talent that cares about nature and sustainability is increasingly important and also valued by your customer base.

These are things that you can immediately start talking about, as soon as you start that process. You don't have to have fixed everything before you start to engage your stakeholder groups on the subject; and you certainly don't need to be in a nature-positive position in order to be open and transparent about the fact that you are taking it seriously and doing something about nature in your business activities. So those are the types of short-term wins, I would say.

But also, taking into account your risks and dependencies on nature can take time to actually implement. So the sooner you start, the sooner you're going to be able to address those risks. In turn, not taking nature into account in your strategy actually puts you in quite a vulnerable position. You could be taking action now on carbon, for example, by making adjustments in your operations that only address carbon, and which might, inadvertently, have an adverse impact on nature. So if you're not taking nature into account now as part of your carbon actions, then you could almost inadvertently be causing yourself more harm as a business. Simply by ensuring that it's captured in all of your decision-making and made part of that decision-making process, you're managing risk and also potentially making efficiencies and cost savings; because you can probably find solutions that deal with both carbon and nature together, which is obviously going to be a more effective way to deal with challenges than carbon and nature separately.

What are some of the initial steps senior managers or directors should consider in building their approach to nature?

It probably feels completely overwhelming at first, particularly in some of these bigger organisations, as they are really complex operations. First of all, it's about finding the people in-house or externally that understand nature and have that skill set. I think it's really key to have people around you who understand the issues, because it's a much more efficient way of considering your impact and dependencies. An ecologist or a nature specialist, or even a broader environmental specialist, will probably quite quickly be able to identify what types of environmental impacts are going to be material to you as a business. If you're reliant on people that don't have that knowledge, then it will most likely take you a lot longer and you might get it wrong. So it's good business sense to get the right people in the room.

But the first action is really about an initial assessment of materiality - what should you be prioritising. There's currently no expectation, through any of the frameworks, that organisations should consider every single tiny impact their operations have on nature and climate. It's about prioritising those that are material and that is the first step really. So if you're a food and beverages company, for example, it's a matter of thinking that water scarcity and water quality might be one of your absolutely key material risks, and it might have particular relevance in geographies where there have been consistent droughts for the last few years. You could probably arrive at those conclusions quite quickly with the right people in the room.

Then the second steps are really about going into more granular detail around those assessments. Once you've identified your priorities, then you can start to drill down into those areas and begin measuring what the impacts are. Essentially, you want to start creating a baseline of information and data around where your starting point is at that stage.

Navigating what nature means for a business can be challenging. Should decision-makers work incrementally, starting with a key division or location?

Yes, I think it's absolutely key. I think the directors duties announcement was all about taking nature into consideration - but at the same time, there isn't an expectation for perfection here. There is a recognition that the level of complexity of businesses, together with the level of complexity of nature, means that it is difficult to define everything and that's not the expectation. What we want to get to is a place where organisations feel they can make those first steps, knowing that it's going to be a journey for everyone and one that will look very different for every organisation. What's important is to encourage those first steps and help ensure processes and systems are put in place where nature is taken into account.

Breaking it down and only focusing on priorities has been a conscious decision of the TNFD framework, for example, which talks about materiality for a really good reason. It's because they want to focus your efforts and finances on those areas that are most important.

You're taking a lead in relation to the new biodiversity net gain regime in England. Is this work on biodiversity just of interest to the real estate sector BNG impacts, or more broadly?

I think that's a really great question, because with the new biodiversity net gain (BNG) legislation, the focus is all on this compliance or offsetting market for the construction industry, where there's a very direct and clear impact on the ground on which you're building houses or warehouses, or whatever. There's an actual direct loss of nature on the ground and, of course, that comes with an associated impact that needs to be mitigated; and that's why the new legislation has been brought in to combat that issue.

In the UK, there was a 70% decline in biodiversity in less than 50 years and the construction industry has really only been a small part of that. Nature is degraded through a whole range of impacts, not just direct loss from construction. Things like logistics, transport, deposition from driving our cars. Just general, slow, low-level disturbance over time, which year after year after year has degraded nature in that way. Habitats are also degraded through water abstraction or poor water quality, or increased flooding events. So nature is being impacted from all angles and in ways that go beyond just developing on top of them. All organisations that have activities on the ground, including the transport of goods/people via cars, trucks or aeroplanes, have an impact on nature. Therefore, the construction or development sector is just one small part and, actually, what we're seeing is a much bigger contribution to nature decline when you look at the global economy as a whole.

Quite rightly, that's what new frameworks - voluntary and mandatory frameworks like CSRD and TNFD - are trying to capture; identifying and measuring those impacts that go well beyond land development itself. So that broader market is likely to be much more significant, much bigger than the development sector offsetting market; particularly in England at the moment. But it's extremely nascent. It's very, very early days and, of course, in England at least there is no regulatory requirement for organisations to genuinely understand their true impact on nature; therefore, there aren't really very strong drivers for them to start investing in nature recovery.

Now, BNG units in England are really robust, because they are a compliance product and they could, in theory, be used for a whole range of other reasons and other market needs that could look well beyond those of the development sector; and that is something that lots of providers, including us, are exploring at the moment. We are speaking to clients where there is no regulatory obligation on them to purchase biodiversity units, but they see them as a robust mechanism for looking to meet the wider nature-positive ambitions in their business strategy. So it's quite an exciting time for BNG units, which could be used for broader purposes, beyond the net gain legislation itself.

The overall voluntary biodiversity credit market at a global level is still uncertain: credits look different; there's no consensus on market infrastructure; there's no consensus on what good looks like; and there's no consensus on even what a biodiversity credit is, so it's extremely early days on that front. However, the biodiversity credit discussion is kind of an aside, as what we are seeing is corporations with an appetite to invest in nature-positive projects, and I think that's ultimately what we want to see more of. We want to see more drivers to grow that appetite for consumption of nature-positive projects, if you like, and the volume of those buying into them. Whether it's packaged up in a voluntary biodiversity credit or its simply about measuring the benefits of those projects, is neither here nor there, what we want to see is money channelled into nature recovery.

Do you feel that lessons learned from the challenges experienced with the voluntary carbon market of ten years ago are being taken into consideration?

Yes, I mean hugely. There's an inertia there for real, transformative scaling of the voluntary carbon market, because of a nervousness that comes from the challenges carbon markets have faced in the last few years. But it's also a brilliant opportunity, right? We've learned a lot from the carbon market and we've also seen the carbon market suffer significantly because of scrutiny around the integrity of some of the projects that contribute to that market. And there's loads of lessons to be learned there. So, let's not make those same mistakes in the biodiversity market, let's start with creating the market infrastructure that ensures there's high integrity outcomes for nature right from the beginning.

I think personally - and our view at Environment Bank is - that the carbon market in itself isn't the problem, and the concept of even offsetting isn't the issue. The challenges in the carbon market have been around governance and a lack of governance that, therefore, has questioned the integrity of some of the projects that contribute to that market.

If you can get the governance right and the structures in place that manage risk around governance and integrity, then I think that's what creates the stable market and a safe place for buying and investing in projects. So, that's what we want to do and that's what we want to see in the voluntary biodiversity space as well.

Can you share any recommendations on how company boards might approach the nature-related threats impacting their business?

Top tips. I mean, I've sort of touched on it already but if you want to think about nature in your business, then do get someone that knows about nature in the room. It seems an obvious point - and as an ecologist, I would say this, of course - but it's really the time for ecologists to shine. We do have this very long history of nature conservation and ecological impact assessment in the UK, in particular, but even at a global level you don't need to do this on your own. There are people who can provide support to quite quickly get to grips with nature in your business.

So, I definitely encourage that and I'd say the second thing I would encourage is to simply get going on it. We are in a biodiversity climate crisis right now. This isn't something that's going to happen in a few years, it's 2024 and by 2030 if we want to get anywhere near meeting the global biodiversity goals, we really do need to start acting now. So don't be afraid of not getting things perfect. There isn't an expectation for perfection, just one to get moving into action. Get the systems and processes and infrastructure in your own businesses to ensure that nature is taken into account, and act now.

Thirdly, there's currently a real focus of effort, funding and finance on the disclosure elements around nature. Everything's about disclosure and lots of consultants are really good at advising on disclosure, reporting and accounting, which is great, but disclosure in itself isn't going to move the dial. What we also need is action on the ground - whether it's through investing in your value chain or investing externally in high integrity nature recovery projects, I would really recommend organisations seek to do those two things in tandem.

And finally, if organisations want to reach a nature-positive position, or even a nature-neutral position, they will need to invest in nature recovery because every organisation, even residually, will always have an impact. They will have to invest if they want to even get to that neutral position. So why not start looking for those opportunities right now?