Nature-related topics, including biodiversity and water, are on the rise in corporate sustainability circles, becoming some of the most urgent topics on companies’ leadership agendas. In many ways, business and nature are inextricably linked, especially for businesses which rely on natural resources (e.g., water, sand, and metals) and ecosystem services (e.g., pollination, water purification, and carbon storage) more heavily. Therefore, understanding nature-related risks and opportunities becomes critical to maintaining business operations and competitiveness. Recent research has estimated that $44 trillion of economic value generation, over half the world’s gross domestic product, is moderately or highly dependent upon nature and its services.
The pressure on businesses for nature-related corporate disclosure is rising. Just as the Task Force on Climate-related Financial Disclosures (TCFD) Framework supports more comprehensive reporting on climate, the Taskforce on Nature-related Financial Disclosures (TNFD) will help guide companies in disclosing information related to nature-related risks and opportunities.
The Financial Stability Board established the TCFD in 2015 to provide climate-related risk guidance to corporations and to support investors in understanding companies’ climate change exposures. In 2021, a group of NGOs and multilateral organizations launched the TNFD, building upon TCFD by developing a parallel framework for nature-related risks and opportunities. ERM has been on the frontlines of the TNFD’s development, working in-house to support the World Business Council for Sustainable Development (WBCSD), one of six official TNFD piloting partners, with its TNFD pilot program. This pilot program has been ongoing since October 2022 and is currently finalizing its feedback and outputs.
Overview of Program Structure
WBCSD’s TNFD pilot program is organized into three priority sectors and their value chains —energy, land-based (food & agriculture and forest), and built environment. ERM is leading the energy pilot on behalf of WBCSD, and other organizations include Business for Nature, World Business Council for Sustainable Development, and World Economic Forum.
Our recent publication, Prepare to LEAP: Updates to the TNFD Framework and Planning for the Future, discusses updates to the most recent draft of the framework and explores how companies can and should prepare today for the framework’s launch in September 2023. As a complement to that piece, we share our experts’ perspectives as participants in the WBCSD TNFD pilots, to bring an added layer of deep understanding to what this process has been—from lessons learned, challenges overcome, and surprises sprung.
Challenges & Insights
We have identified metrics, data, and supply chains as the areas most likely to present challenges that companies will have to overcome.
- Companies need time to test their metrics and ensure they work before disclosing; however, there is no time to waste as 2030 is soon. In some cases, companies have developed new metrics that fully suit their purpose.
- It is not easy to navigate the various data sets and identify the ones most suitable to use—many online tools are designed for high-level screening, and few offer the level of detail required.
- Most global companies’ supply chains are large and complex, and the collection and verification of data is not easy. Most suppliers cannot share the data needed and some information is commercially sensitive. A work-around is then required.
The most exciting aspect of the piloting process has been working together with all of the companies in the program to really figure out TNFD and address the challenges that arise in implementing the LEAP framework in particular. Different companies are piloting different approaches, and we have found that there is no right way or wrong way to do the TNFD’s assessment. It’s clear that companies need to just start somewhere—with an approach that is top down or bottom up, or both!
How to Get Started
All new disclosure frameworks, including TNFD, can seem overwhelming at first—they are unavoidably technical, complex, and lengthy. However, our following key findings will help companies realize that it is in fact not so difficult to get started:
- Similarity with TCFD: There is a significant amount of overlap with TCFD so companies will not need to start from scratch. We recommend that companies lean on TCFD’s existing structure.
- Integration with existing disclosure: Draw from the metrics and indicators that are already being used, either for assessments of disclosures via TCFD, CDP and GRI.
- Align with net zero and ESG strategies: Use TNFD to your advantage by helping to align company climate action and other sustainability-related goals.
- Focus on material issues: TNFD’s recommended LEAP process exists to help companies focus their attention on material issues. Scope your initial assessment to avoid becoming overwhelmed, then reiterate the assessment and expand your scope.
- Explore your most suitable metrics and look out for forthcoming sector guidance: The number of global core disclosure metrics expected from TNFD total 14. Additional disclosure metrics that are important to specific sectors are still being developed and will be published as sector guidance.
Pitfalls to Avoid
Along with the key findings, we think it will be helpful for companies to know what some common misconceptions have been:
- We don’t have material impacts on nature: Many companies start out unaware of their material impacts on nature but how business is conducted in today’s society makes it nearly impossible to not have material impacts on nature. We suggest that companies take a precautionary approach rather than a risk-based one when assessing this, broadening your scope and depth into your supply chain.
- We manage biodiversity enough already through our project permits: “Nature positive” is not just a way to think about companies’ direct operations; it is instead a systems-level change. We invite companies to think larger! Think through your impact on supply chains, value chains, consumer decision-making, advocacy, and biodiversity awareness, monitoring, and restoration.
- IUCN (International Union for Conservation of Nature) Red List, IBAT (Integrated Biodiversity Assessment Tool), and Encore tools are too generic: While it’s true that these tools are generic, they are intended to be designed this way as they are screening tools only, so they are high level. Work is underway to improve these tools in terms of granularity and relevance. We advise companies to use them for screening, and then build further with more contextual datasets.
Although nature scenarios present challenges, we suggest using them, and the rest of the TNFD processes, to drive strategy and performance improvement rather than just viewing TNFD as another disclosure burden. Most companies are finding momentum within sustainability teams, and companies that are more advanced are working with finance and procurement teams as well. We suggest that companies begin wherever they can.
Our experiences working on a range of nature-positive projects with clients has led us to two recommendations for any company starting to think about how to approach TNFD:
1. Do not let the perfect be the enemy of the good: You may feel overwhelmed by the multitude of new requirements and by the sheer size of task of the nature assessment. Just get started with a nature-related double materiality assessment embodied in the LEAP framework and then focus on the most material priorities step by step. After that, work your way towards a more comprehensive, system-wide approach to managing nature related impacts, dependencies, risks and opportunities.
2. Focus on the key business drivers and the business case as you seek executive management support to embark on your nature journey: In particular, maintaining a focus on opportunities offers new perspectives on ecosystem services that can deliver cost reduction or additional revenue for your company.