The time for Nature is upon us, and it is evolving rapidly. Over the last ten years, the need to take accountability for our impact on Nature has grown substantially with the development of several Nature-related assessments and disclosure frameworks. These include the European Sustainability Reporting Standards (ESRS), Global Reporting Initiative Standards (GRI), International Sustainability Standards Board (ISSB), Nature Capital Protocol, Science Based Targets Network (SBTN), and most recently the Taskforce on Nature-related Financial Disclosures (TNFD). These are in addition to location specific legislation many countries are rolling out within their borders.
With the TNFD framework building upon the TCFD (Taskforce on Climate-related Financial Disclosures) framework – which ultimately led to the mandatory reporting of Scope 1, 2, and 3 emissions in Australia – it is expected that reporting on Nature-related impacts will soon become mandatory as well. And by soon, I mean in the next couple of years. But Nature is everything around us, Nature is esoteric, so what does reporting on Nature-related impacts mean?
The TNFD recommendations are a framework to guide businesses on how they might approach reporting their Nature impacts. The framework has four pillars; Governance, Strategy, Risk & Impact Management, and Metrics & Targets. Within each pillar there are 3-4 recommended disclosures to include in a report. These recommended disclosures are very similar to those recommended by the TCFD, and consistent with IFRS Standards. This means businesses already reporting on emissions will already have some of the tools in place to investigate and make these extra nature-related disclosures.
Whilst the TNFD is a framework to allow transparency and accountability in business behaviour, it will also play a pivotal role in allowing businesses to identify and incorporate nature-related risks and opportunities within their strategic planning. By using this framework to develop a reciprocal, rather than exploitative, relationship with the environment, businesses will be able to operate into the future. Note that in the near future many businesses will be compelled to complete this reporting, as they have been with TCFD recommendations and emissions reporting.
There is no better time than now to start setting up the process, working out the kinks, and showing leadership in the Nature space.
Step 2. Start a gap analysis
Looking at the TNFD’s pillars and recommendations, the first step is to be aware of what you know, and what you don’t know. This doesn’t have to be an in-depth investigation; it can be quite high level to determine how your efforts should be split amongst the pillars.
For example, if you are reporting on climate with scope 1, 2, and 3 emissions, you might already have a decent appreciation of the visibility of Nature-related impacts within the governance structure. You might already know the level of engagement of business management in managing and assessing those dependencies, impacts, risks and opportunities. Additionally, you may know the locations of your assets and activities in your direct operations that are dependent on Nature for production– for example the increase of erosion, salinity, and the rising water tables decreasing crop outputs, ultimately resulting in unusable farmland. You probably also have a good understanding of the locations at risk of disruption such as physical risks like landslides, floods, or fire, or transitional risks from market changes, litigation, and changing consumer preferences. The disclosure recommendations in the Strategy pillar overlap or share similar risks and dependencies as found in your climate impact investigations, and these investigations should go upstream and downstream in your value chains.
Due to the push to release mandatory reports on time, there is a risk you make statements or claims which place the business at risk of greenwashing accusations.
What you might be missing, or lacking an understanding of, is how you are interacting with Nature. You might be able to identify a likely dependency in an area of your business, but you don’t know exactly what that is or looks like. Due to the knowledge gap, there is an inherent greenwashing risk. This isn’t to suggest there is malicious intent behind such statements in order to hide true operations, but statements made with a lack of expert knowledge on Nature interactions open the door to litigation, and the resulting loss of reputation and investment.
Step 3. Choosing your metrics
As an ecologist, and when speaking with people across industries from financial to educational, the question I am usually asked is not ‘why does Nature matter or why does the reporting matter?’, but instead ‘how do I measure Nature, what are the metrics I am meant to be using?’. Before I can answer which metrics you should be using, first I need to know if you know how your business is interfacing with Nature – I can’t provide you guidance on meaningful metrics if you haven’t understood how Nature impacts your business and vice versa. The next thing to know is that there isn’t a single metric that is the magical metric of Nature-related impacts. Each business will impact upon and be impacted by Nature in their own way, and whilst there will be commonalities between businesses, the metrics that are the most meaningful and telling of your impacts will be somewhat bespoke to your business and operations.
For example, if I consider the impacts upon Nature and vice versa of a farm that is in my business portfolio, this is very different to a business who has no direct farming in their assets or value chains. Owning a farm, I can measure the impacts of operations on the environment through deforestation, pesticide use and related pollution potential and run-off, as well as invasive species management. I can then take the next step and look at my supply chains for their Nature-related impacts, such as the source of the pesticides and interrogate how they are interacting with the environment. At the other end, I can look forward into my value chain to see where my farming products end up and the impact; through transportation, storage practices, and food waste. For a farm, these interactions would make large contributions to our interaction with Nature, however, for a business with limited farming practices in the value chain, these interactions would be less of a focus. Instead, perhaps the supply of office products is a more significant contributor to Nature impact.
An important tool developed by the TNFD is the LEAP approach, which will allow you to identify and assess many of the aspects of your Nature-business interface that will be needed in the coming reporting. The LEAP approach and outcomes are not mandatory, but they are a useful tool for guiding your approach to this complicated task.
Step 4. Adding value to nature
Once you understand where you are interacting with the environment, and how you add value to those interactions, you can then determine your most costly and risky impacts and where the most significant opportunities and next step plans could focus.
For example, if you managed an investment portfolio with properties or businesses impacted by the 2019-20 Black Summer Bushfires or the 2022 Eastern Australian Floods – exacerbated by our land management practices (greater erosion, poor bushfire risk management) – you will have seen significant impacts to Nature from those extreme events. But you will also have seen significant impacts to your asset values, productivity, insurance rates, repairs, and regeneration of value from those events. This can guide you as to what Nature-related impacts look like as a risk, and identify opportunities to add resilience to your business.
Once you know the impacts and the risks, and you can start to put a value on them. These can then inform your most valuable metrics, your most valuable actions, and where you need to change behaviours.
Step 5. Finding the data
So where do you find the data? Perhaps surprisingly, a lot of the data is already sitting in your business. We measure so many things during day-to-day operations that by looking at your data with an ecological lens you may be able to determine your Nature impacts.
For example, if you have looked at your supply chains for Modern Slavery to remove such practices from your business value chain, you will have by extension begun the investigation into Nature-related impacts. Often, not only are people being exploited in these circumstances, but the environment is too.
There is also a significant amount of public data that can help you determine the scale of your impacts, whether government databases or citizen science projects.
Perceived data shortages are not the reason to wait to act.
I often hear requests for more up-to-date information, either because there is a belief the actions of the business in recent years has magically reversed the historic trend (i.e. they’re still clearing trees for development but think they haven’t cleared as many as the clearing trend might indicate), or they think there is a lack of accurate data to capture the Nature-related impacts. The truth is there is already a significant amount of data available, and we are at a point now where we must act on this data and refine as we move forward, not before we move forward.
This is where again, the involvement of an ecologist, someone with expertise in the environment, is essential. Not only can they help to understand the Nature-related impacts of your business and provide guidance as to what you should do next to start repairing those impacts, they can also help protect you from the risks of greenwashing without realizing you are greenwashing. Often, as ecologists, we see many actions and claims from businesses they believe are good actions for the environment, or statements of good intent. However, upon interrogation it becomes apparent to us these statements or actions have been done without a deep understanding of the environment and environmental processes, again risking greenwashing accusations.
Step 6. Report and next steps
Lastly, most businesses are familiar with the process of preparing and releasing reports, to stakeholders, to the public, especially with reporting requirements like ISSB and NGERS. It takes significant time to not only collect and analyse the data needed for this reporting, but to prepare that report. Even though it’s often seen as the last step, there is an additional component to look at the next steps of where strategies can be realigned to improve our interactions with Nature and where resources need to be reallocated to achieve that.
After examining your business, your value chains, you will hopefully have a set of targets that are valuable to the continued operation of your business, whether they be identified risks that you wish to mitigate, or opportunities for you to develop into, or a combination. You will also then have the metrics you need to measure progress against those targets, whilst also being able to estimate the value of Nature to your business. The targets you set should be meaningful, and scientifically valid, to not only “offset” your impact on Nature, but to begin the road to repair and regeneration. We will all benefit from a healthy interaction with the environment, and the more we put in now, the greater the pay-offs will be. Again, this is where an ecologist, and expert in the environment, should be involved. This is to ensure your targets are sound, that your actions follow scientific recommendations such as the mitigation hierarchy (avoid, minimise, restore, offset), and are achievable and SMART.
It is also important to highlight that these recommended disclosures reiterate a function of Nature that ecologists, conservationists have been saying for decades, and Indigenous Peoples have been saying for thousands of years.
Nature isn’t separate to us, it is part of us.
When we are assessing our impacts, when we are examining our governance and determining our next steps, we must also be considering the impacts and role of our human rights policies, and the involvement of Indigenous Peoples and the local communities impacted by our actions and activities from our business and our supply chains.
So now you are more comfortable with the TNFD, the last, and possibly most important point, is to start. The reporting is going to be ugly to begin with, everyone has skeletons in their closets, people are going to be tempted to point to the positive things they have done, or how they aren’t as bad as someone else, but that’s missing the point of the reporting. We need to take a long and uncomfortable look at our practices and be truthful and transparent with our actions. We need to take accountability for the things that have happened and report openly about them. Then, most importantly, we need to not stop at the report, we need to identify those next steps that will start to improve those weak spots we’ve found and change our impact from negative to something positive. Things are going to get hard in the coming years, the gap between the haves and the have-nots will increase, businesses will fail, life will become less enjoyable outdoors, many species will go extinct and rapidly.
There has never been a more urgent time to start, and people are falling over themselves wanting to make it happen, so let’s make it happen.
To learn more, check out the TNFD recommendations report and supporting documentation and workshops to help you understand what’s involved and what tools may already be at your disposal. You can also reach out to those working at the coalface of measurements and metrics, such as Accounting for Nature and Xylo, two businesses finding ways to measure your impacts and help value your Nature assets. It’s also worth looking at how others are doing it, including the published Nature and Climate reports from GPT and Forico, and don’t forget to keep an eye on the early adopters for their reports.