What’s Behind New Reporting Framework for Food and Beverage Companies?

The food and beverage industry is under pressure to operate more sustainably, and now regulators from Brazil, Europe and India may soon demand greater action and transparency on environmental issues.

What’s more, many requirements apply not only to companies local to those countries, but also to international firms operating in those markets.  

Staying on top of this rapidly changing landscape requires a cross-functional effort that goes beyond your sustainability team. Here are a few things food and beverage leaders need to know.

The U.S. Securities and Exchange Commission has paused its climate-related disclosure requirements, but those requirements aren’t the only — or even the broadest — environmental regulations being advanced today.  

Around the world, hundreds of new regulations have been proposed: Corporate Sustainability Due Diligence Directive, EU Green Claims Directive, The California Climate Disclosures and more. Among the growing number of regulatory frameworks, the EU Corporate Sustainability Reporting Directive (CSRD) is generally considered the most far reaching.  

CSRD requires companies with substantial activity in the EU to make disclosures on a broad range of issues that go well beyond climate and include a deeply related issue: nature.

Preparing for upcoming nature-related disclosures can help companies identify and act on emerging business risks and opportunities, and the Taskforce on Nature-Related Financial Disclosures (TNFD) framework can help identify and address critical questions. 

TNFD is made up of 40 individual members representing companies with over $20 trillion (yes, trillion) in assets, supported by the United Nations, national governments and prominent NGOs. The Taskforce worked closely with groups such as the International Sustainability Standards Board (ISSB) and GRI, which are responsible for major sustainability reporting standards, to develop tools to analyze, disclose and act on evolving nature-related questions.  

ISSB recently announced that it will commence projects to research disclosure about risks and opportunities associated with biodiversity, ecosystems and ecosystem services. ISSB will look at how it might build from relevant pre-existing initiatives including relevant aspects of the work of TNFD.

This most recent announcement from ISSB only reinforces this message: TNFD will be widely used by investors and referenced by standard-setting agencies to understand the company’s nature-related risks and opportunities. 

Specifically, TNFD covers questions around governance, strategy, risk and impact management, and metrics and targets. In many ways, TNFD is a corollary to the Taskforce on Climate-Related Financial Disclosures (or TCFD), reflecting the idea that climate and nature are two sides of the same coin.

Critically, TNFD has several sector-specific frameworks and it’s not surprising that guidance for the food and beverage industry was among the first to be drafted, as it is among the most important sectors for action due to its unique dependence on nature and its critical importance in reversing the loss of habitat and biodiversity. As TNFD food and agriculture sector guidance points out, agriculture has historically driven 70 percent of losses in terrestrial biodiversity and been the single biggest contributor to the deforestation of natural habitats. The agricultural sector is entirely dependent on natural ecosystems for its productivity and economic viability.

For now, TNFD’s sector-specific guidance for the beverage industry is in draft form and open for public consultation, with the final version expected by Dec. 30. However, that’s not stopping some companies from starting now. 

In early 2024, 320 organizations from more than 46 countries committed to nature-related disclosures aligned with TNFD. Major players in the food and beverage industry, such as Asahi Group and Coca-Cola Bottlers Japan, top the list. These early “TNFD adopters” can reap the benefits of further understanding how a range of nature-related topics – including land use, water consumption, climate impacts and pesticides – can impact their business and supply chains.  

TNFD adopters also benefit from considering what critical components of a nature-positive program might look like, which is embedded in the assessment process.  

Making the most of TNFD requires a cross-functional team that can collect essential data, interview key stakeholders, interpret findings to identify gaps and opportunities, evaluate current targets and propose new ones, and engage in reporting.  

Here are three initial steps that can help:

Take a LEAP

TNFD LEAP approach stands for Locate, Evaluate, Assess and Prepare. It starts with the business exploring its processes to “locate” interfaces with nature, both within operations and across the value chain.

Next, companies “evaluate” and measure dependencies and impacts, considering environmental assets and ecosystem services (think: crops like almonds that depend on the “services” of bees or the economic value of water purification provided by forests, which may be at risk.)

During the “assess” stage, teams explore opportunities as well as risks. The outcome of a nature-related risk assessment will then be used as an input to the materiality assessment. By considering the likelihood of risks and the potential business impact, they can re-prioritize existing risk mitigation and opportunity management.

“Prepare” involves developing resource allocation plans, new targets and reporting and presentation strategies. Companies like Nestle and Suntory have already conducted this type of assessment and are piloting Science-based Targets for Water.

Get Connected

TNFD alignment is important to ensure compliance and bolster current corporate responsibility reporting and can provide information of interest to stakeholders such as investors and customers. There is also considerable benefit to the LEAP process itself.

Companies can use interviews and workshops to collect information, validate results and generate buy-in around the importance of action on nature-related issues. Companies also should consider ways to integrate TNFD into existing approaches to enterprise risk management and reporting.

Understand from the start that this can take months to implement and could take years to develop a strong level of maturity around this process. It can help to develop a long-term project plan, breaking more complex elements into manageable tasks and looking for ways to build trust and engagement. 

Value the Value Chain

In the food and beverage industry, the majority of nature-related impacts and dependencies are likely to center around farms from which a company’s ingredients are sourced. Trusted relationships and greater transparency throughout the supply chain can lead to more accurate and informative TNFD assessments, strategies and actions.

Two primary drivers of farm-level nature-related impacts and dependencies are location (such as water-stressed or biodiversity-rich areas) and farming practices, which can variously contribute to environmental degradation or advance soil quality and nature’s regenerative properties. Encouraging nature-positive farming practices is one way that many forward-thinking food and beverage companies are already strengthening their supply chains and aligning with TNFD guidelines.  

Pending regulations in a number of countries may make this level of assessment and disclosure a requirement for most large companies, which can have a knock-on effect as suppliers are asked similar questions. 

TNFD can benefit companies benefit through its collaborative approach, sector-specific guidance and alignment with other reporting frameworks.

There also can be real first-mover advantages. Companies that align with TNFD ultimately can strengthen the resilience of their operations and supply chains while simultaneously managing regulatory risks and fostering stakeholder trust.

That’s why we expect the network of TNFD adopters to continue to grow.

Sidney Chen is a WSP project consultant for TCFD and TNFD. He consults on a variety of corporate reporting issues.