Companies face growing pressure to measure, disclose, and mitigate their nature-related risks and dependencies as new regulatory frameworks from international and European bodies include biodiversity reporting requirements
Key insights:
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Nature-related risks underreported — Companies’ nature-related interfaces are underreported across industries, despite being increasingly seen as decision-useful information for investors and regulators.
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Stricter requirements for disclosure growing — Both voluntary and mandatory frameworks are increasing their requirements for nature-related disclosure.
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Organizations should be proactive — Getting ahead of disclosure trends means that organizations should be measuring their nature-related interface as well as integrating nature-positive transition planning to their business strategy.
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As the impacts of nature loss become more prevalent, companies are seeing adverse impacts on business risk and performance. This is due to both physical nature-related impacts and increasing stakeholder pressure on organizations to integrate long-term nature-positive strategies. Managing nature-related impacts and dependencies is a framework-driven mandate for all boards of directors to consider.
Why nature matters
All businesses impact and depend on the four realms of nature: land, freshwater, ocean, and atmosphere to some extent, with the highest impact sectors being food products, oil and gas, and chemicals. These dependencies could include the provision of water supply to an organization, or services provided by nature to a business, such as flood mitigation. A collapse in ecosystem services could result in a $2.7 trillion GDP decline annually by 2030. In turn, most businesses also positively and negatively impact nature.
Financial flows that were determined to be harmful to biodiversity reached $7.1 trillion (or €6.1 trillion) in 2023, including private investment in high impact sectors, with only $213.8 billion (€184.6 billion) invested in conservation and restoration. Despite this financing gap, less than 1% of publicly reporting companies currently disclose biodiversity impacts, indicating the need to align incentives and policies with nature-related outcomes.
Indeed, nature does not have a single indicator, like greenhouse gas (GHG) emissions; instead, its measurement involves multiple complex, location-specific factors. Despite this, disclosure of nature-related risks and impacts are increasingly being required by regulators.
Regulatory incentives to disclose
The disclosures being driven by regulatory frameworks include material information on all nature-related risks, particularly those requested by the International Sustainability Standards Board (ISSB) and European Sustainability Reporting Standards (ESRS). The ISSB Biodiversity Ecosystem and Ecosystem Services project (BEES) was initially considered a research workplan but was modified to a standard-setting approach.
Through its work, the ISSB identified the need for nature-related disclosures due to: i) the deficiencies in the type of information on nature-related risks and opportunities reported by entities, which are identified as important in investor decision-making; and ii) the requirement of nature-related information that is not included in climate-related disclosures, including location-specific information on nature-related interface and nature-related transition planning.
On Jan. 28, all 12 ISSB members voted to proceed with standard setting, which included two important implications. One is that standard setting is to cover all material information on nature-related risks and opportunities that could be expected to affect an entity’s prospects. And two, it mandated that entities applying International Financial Reporting Standards S1 and S2 for climate-related disclosures supplement these with nature-related risks and opportunities disclosures as well.
Similar to the ISSB requirements to report material nature-related risks and opportunities, the ESRS also requires information to be disclosed for material impacts, risks, and opportunities found in an entity’s double-materiality assessment. The Task Force on Nature-related Financial Disclosures (TNFD) and its European counterparts have been in close collaboration since 2022, and all 14 TNFD recommendations have been incorporated throughout the ESRS environmental standards.
Companies that are required to comply with the EU’s sustainability reporting mandate also will be required to collect similar data for their future ESRS data points disclosure.
Alongside regulatory requirements, there are voluntary requirements and investor pressure to consider for many organizations. These include investor coordination initiatives on nature such as Nature Action 100 and considering which investors look at Carbon Disclosure Project (CDP) data.
To use the CDP as an example, 650 investors with $127 trillion in assets asked the CDP to collect the data they needed in 2025. Further, the CDP is increasing its disclosure requirements for nature-related data in its questionnaire as it progresses to full alignment with the TNFD recommendations. This includes, for example, requiring disclosures on environmental impacts and dependencies for disclosers, enhancing commodities included in the forests questionnaire, and introducing oceans-related questions in 2026.
All of these heightened requirements underscore the need to measure a company’s nature-related impacts and proximity to its nature-related issues.
Implications for company boards
To align with these additional requirements and investor expectations, corporate decision-makers should consider the questions they are asking related to nature, as well as what data is being collected in relation to the organization’s impact on nature. The following steps can give leaders a starting point for how boards should consider this information:
Track relevant developments in regulatory and investor standards — Ensure there is a management-level understanding of how nature is considered in relevant standards for the company based on its current and anticipated locations of operation and specific industry.
Measure nature-related risks and opportunities — Given that identifying material nature-risks, with a particular focus on location specificity, is a common first step across current mandatory and voluntary regulatory frameworks, organizations should conduct a regularly updated, location-specific assessment on the company’s interface with nature, especially in instances in which these issues are material. Organizational leaders should also produce financial quantification of these risks within an overall materiality assessment and corporate risk register. For guidance, the best practice across these regulatory and disclosure frameworks is to utilize the TNFD’s resources.
Make further disclosure of any material nature-related information, including financial quantification — Frameworks such as the ESRS require further disclosure of any risks that are found to be material, including financial quantification and scale of the risk.
Integrate mitigation of nature-related risks in business strategies — Upcoming standards and research, such as that from the ISSB, indicates that missing disclosure includes company’s nature-positive transition planning. Consider how to integrate nature into long-term business strategies for full alignment with upcoming regulations and standards, including establishing nature-related governance.
Adopting these processes and integrating nature into corporate decision-making will provide corporations with a more future-proof and resilient business model. The increased adoption of nature within these frameworks is driven by the clear economic impact that our current loss of nature is having. This will only continue to become more of a priority as the impacts of nature loss are increasingly felt worldwide.
You can find out more about the sustainability issues companies are facing around the environment here
