According to World Economic Forum (WEF), over half of global GDP directly depends on nature – and the other half indirectly depends on it. We, as individuals and communities, and by extension the businesses that underpin them, rely intrinsically on nature. The loss of biodiversity and the disruption of ecosystem function is leading nature past its tipping point with devastating effects for business, and society at large, as seen with the outbreak of COVID-19.
By recognising the potential impacts of biodiversity loss on our businesses, not only will we address and avoid future systemic risks, but we also open the door to a wealth of business opportunities. To be ready for the future, businesses need to understand what is at stake but also what can be gained by including biodiversity into their mainstream risk and opportunities assessments.
Repositioning Business for the future
By incorporating biodiversity into their strategies, businesses can protect themselves from:
- Operational risk: the loss or degradation of natural assets or ecosystem services can affect the financial performance of entire sectors. For example, it is estimated that the agricultural sector will annually lose between $235 billion and $577 billion in global food production due to the reduced number of insects available to pollinate crops.
- Regulatory risk: Biodiversity-driven regulations are coming. COP15 will instigate a wave of stricter rules on the use of specific habitats, reporting requirements and subsidy reforms, to name a few. Many countries have already started. For example, the UK has established a 10% biodiversity net gain requirement for all development projects. Early adoption can pre-empt significant regulatory compliance costs.
- Investor risk: Banks and investors are increasingly adopting rigorous biodiversity requirements in their lending and investment policies to get ahead of the regulatory curve and avoid stranded assets created by new biodiversity regulations. Failing to consider biodiversity in their assessments and strategies, will leave businesses at risk of higher costs of capital and challenges acquiring debt or equity.
- Reputational risk: Failure of a business to recognise negative impacts on biodiversity – directly or indirectly – can in turn negatively impact its image. Such reputational risks are becoming more significant as consumers, employees, investors, policymakers and local communities decide which companies to support based on their behaviour towards social and environmental issues.
Furthermore, businesses that proactively consider biodiversity in their decision-making will uncover countless opportunities. WEF found that contributing to nature’s recovery could unlock $10 trillion and create 395 million jobs by 2030 . In a business context, for every risk described above, there is an equivalent opportunity to be gained.
- Operational savings: Supporting the recovery and increasing the resilience of natural assets and ecosystem services by implementing nature-based solutions can help companies save costs whilst achieving multiple other benefits. For a water company, planting reed beds is a less costly nature-based alternative to conventional engineering solutions that could not only reduce water treatment costs and increase the reliability of water supply, but also enrich the biodiversity and resilience of local ecosystems and enhance the quality of life of communities.
- Regulatory compliance: As biodiversity policies become more rigorous and are implemented, businesses can decide to actively engage with governments in the development of these policies and incentives for outcomes that benefit both nature and business.
- Investor confidence: Being at the forefront of biodiversity policy will give confidence to business investors, attracting them and unlocking more favourable financing terms.
- Reputational confidence: Adopting and implementing genuine (and validated) measures that positively impact biodiversity will enhance a business’s standing in the community. As people become more environmentally mindful, they will choose to work for and buy from like-minded businesses; local communities will support developments that improves their local environment in favour of others; and decision-makers will look more favourably on projects that help deliver their biodiversity targets.
To put it most simply, there is a lot to lose from getting biodiversity wrong, and much more to gain from getting biodiversity right.
Looking towards COP15 and beyond, companies will be increasingly expected to disclose how they are impacting nature, and what they are doing to address these impacts. With strategic thinking and careful planning, nature and biodiversity can be positively connected to every facet of a business’s activities. So, it is in all businesses’ interests to start considering biodiversity in their business-as-usual.