How Can Boards Approach Nature and Biodiversity in a Practical and Efficient Way?

The topic of nature and biodiversity is increasingly getting momentum and can be approached both in terms of impacts and in terms of risks and opportunities. 

Following the footsteps of climate transition plans, many companies now recognise the importance of working on a nature transition plan to reduce negative impacts on biodiversity. 

And in a world of supply chain tensions and disruptions, being aware of dependencies on natural resources and ecosystem services and how to mitigate those risks is also becoming an unavoidable consideration for future resilience. 

Nevertheless, many companies are still finding their way in approaching and measuring this technical topic in a relevant manner. And boards often do not address nature as part of the company’s strategy, its risk appetite & risk management.

So how should governance bodies get involved and discuss the technical notion of Biodiversity? The TNFD (Task Force on Nature-related Financial Disclosures) has published some practical guidance in this area highlighting some useful questions to address within the governance structures.
 

1. UNDERSTANDING THE RELEVANCE OF NATURE IN THE BUSINESS

Management should provide a mapping of current and future dependencies and impacts (whether positive or negative) that will depend on the sector and how the activities are organised.  A good starting point can be the double materiality assessment if it has already been done.

Nature-related risks can be divided into physical risks, transition risks and systemic risks that are interrelated:

Management should provide board members with insights into:

• material dependencies, risks and opportunities evaluated on the basis of their magnitude and likelihood
• material impacts based on severity and likelihood
• In which geographies and business operations these dependencies, impacts, risks and opportunities (might) occur
• revenues, cash flows and capital expenditures potentially impacted.

Based on that information, the first steps could enable the company to mitigate or manage nature-related risks. In a second step, management should highlight how the strategic transformation of the business model can actively halt or reverse the loss of nature.
 

2. INTEGRATING NATURE INTO DECISION-MAKING

Management should regularly reassess climate risks and nature risks and their interplay. Regular feedback on the review of potential new opportunities and on the time horizon of nature related issues should also be provided by management to board members. In this context, a well-designed selection of indicators followed up year after year can be the foundation for decision-making and transition plans.

Another central element for tailoring the strategy around nature is to organise adequate stakeholder engagement with Indigenous Peoples, Local Communities, affected stakeholders and other stakeholders to inform the local evaluation of nature-related issues. 
 

3. UNDERSTANDING THE EXTERNAL CONTEXT

Board members should also have a clear view of the expected regulatory changes as well as, sector-specific, market and location-based expectations towards nature and how these nature-related issues could change over time. In this context, scenario analysis, internal engagement and technology innovations are important inputs to anticipate these changes.
 

4: ORGANISATIONAL COMPETENCE ON NATURE RELATED ISSUES

Organisations are increasingly expected or required to explain their governance of nature-related issues beyond climate change. The board and management therefore need functional fluency on nature-related issues to adequately manage nature-related risks and opportunities. Independent expert advice can play an important complementary role in supporting board and management level assessments and discussions.
 

5. BOARD REFLECTIONS

Finally, board members should evaluate their confidence in dealing with nature-related issues and make sure that they understand their duties in this context. They should also consider if they have adequate oversight of management in relation to nature issues.

Boards may also consider treating nature as a stakeholder in its own right almost as if it were a member sitting at the board table and explicitly ask themselves: if nature were here with us, what would it ask?
 

CONCLUSION

In conclusion, nature, including climate change, is a strategic management issue that must be integrated into core business processes and decisions and discussed within governance bodies.

Would you like to give a headstart on nature-related strategy? Our team is there to support you.