Worlds are colliding in Colombia this week as global leaders, environmental advocacy groups, and business executives gather for the United Nations Biodiversity Conference, more commonly known as COP 16.
One of the primary purposes of the meeting will be to review the current state of implementation of the Kunming-Montreal Global Biodiversity Framework, a landmark agreement adopted by 196 countries in 2022. One of the agreement’s primary objectives is to maintain, enhance, or restore natural ecosystems, while closing the biodiversity finance gap that exists between nations.
If you are not aware of this initiative, you are not alone. Though the Kunming-Montreal Framework has been dubbed by some to be the “Paris Agreement of nature,” it has not yet had the same level of visibility as efforts focused on climate issues such as the reduction of greenhouse gas emissions and meeting net zero targets.
Case in point, one of the big headlines that emerged ahead of COP 16 is the fact that more than 80% of signing countries – over 170 in total – have failed to meet the deadline to submit plans on how they will meet these goals. Similarly, business participation in the initiative has paled in comparison to the kinds of corporate support we’ve seen for climate initiatives. While a handful of businesses have taken voluntary measures to introduce nature strategies, the majority have so far sat on the sidelines when it comes to embracing the concept of biodiversity risk. But that’s all about to change.
Sustainability Risks Become Financial Risks
As I wrote in February, a host of new standards and regulatory mandates have recently been introduced that will force business to start taking a serious look at the biogeophysical effects of their activities on natural ecosystems. Among them, the European Union’s Corporate Sustainability Reporting Directive (CSRD) will require in scope companies to disclose biodiversity risks, opportunities, dependencies, and impacts starting in 2025; the GRI 101: Biodiversity 2024 biodiversity standard which will require disclosures on direct drivers of biodiversity loss, and will formally go into effect in January 2026; and the Taskforce on Nature-Related Financial Disclosures (TNFD) recommendations, are already guiding businesses to start reporting and acting on nature-related dependencies, impacts, risks and opportunities.
Beyond these, the International Financial Reporting Standards (IFRS) Foundation’s International Sustainability Standards Board (ISSB) announced in April that its next two areas of research would be biodiversity, ecosystems and ecosystem services and human capital. This is significant because the IFRS/ISSB has rapidly become a de facto global driver of sustainability related reporting standards through its deliberate and carefully developed introduction of accounting standards that link sustainability risks directly to the financial statements of the world’s largest corporations.
Putting Data Behind Nature Risk
Want to spur businesses to take action? There is no faster path than telling them the failure to do so could potentially result in a liability on their balance sheets.
In yet another sign that corporate biodiversity risk is increasingly entering the crosshairs of investors, the financial data giant Bloomberg used the arrival of COP 16 as a launching pad for a new data and analytics solution designed to help investors assess nature-related impacts and dependencies for up to 45,000 companies.
Taken as a whole, these are significant developments in the world of nature-related sustainability issues because they mark a turning point away from the erroneous and pejorative perception of do-good/feel-good ideals of environmentalists and toward the data-driven, objective and pragmatic world of financial risk and reward. That heady mix of government mandates, accounting standards, and investor metrics will be a tough one for businesses to ignore without suffering serious consequences.
Businesses Recollect the Ghost of Rachel Carson
The idea of holding businesses accountable for their contributions to nature-related impacts is not new. In 1962, the marine biologist Rachel Carson was widely credited with playing a key role in launching the conservationist movement with her book Silent Spring, a work which ultimately led to the outright ban of the pesticide DDT and the formation of the U.S. Environmental Protection Agency (EPA). More recently, as corporate sustainability practices have entered the spotlight, biodiversity has taken a bit of a backseat to greenhouse gas emissions, decarbonization and various other corporate environmental, social and governance (ESG) issues.
One of the big reasons for this lack of focus is complexity. Tracking a business’ impact on nature is extraordinarily difficult. In manufacturing, for example, where large corporations will draw on resources from vast networks of suppliers across multifaceted and multinational supply chains it can be difficult to identify all the individual ingredients in each product, let alone track their potential for adverse ecological and biodiversity impacts along the way. Understanding what good looks like, identifying where the impacts, risks and opportunities lie, developing the right processes, data collection and management, and many more elements – before any steps can even be taken to start to mitigate biodiversity risk – is going to be a huge challenge that many companies may not yet be ready to tackle.
As the spotlight increasingly turns back to the fundamentals that gave birth to one of the foundational origins of corporate sustainability, it has become critical for businesses to get a handle on their own biodiversity risk. Because if they don’t, regulators will, and that is a risk businesses simply cannot afford. Which leads all eyes back to Cali, Colombia and the output from the next two weeks.