Photograph: Anders Jilden/Unsplash
The last year and a half has been especially challenging for everyone due to the Coronavirus pandemic. This globalisation-related phenomenon has had impacts on us all in many ways and has made it more evident than ever how interconnected our world is and how dependent on complex and multinational systems we are.
The growing ravages of nature loss and changing climate, increasing economic inequality, the importance of trust and reliance on our institutions and economic and financial systems, and a higher demand for transparent and fair companies have caused many of us to reflect on the need of rethinking fundamental issues. Among them is the way business is done and how we consume, as well as how we value goods, services and the things we depend upon.
Although half of the world’s GDP is at risk due to nature loss, the decline of biodiversity and ecosystem integrity, together with climate change and pollution, we haven’t seen a solution in the short term. All these issues undermine the world’s progress toward 80% (35 out of 44) of related Sustainable Development Goal targets. In fact, these threats are listed in the top five global risks that humanity will face in the next ten years. These risks are immense. At the same time, opportunities for action and making strategic shifts are equally huge.
Inaction in dealing with these threats is listed in the top five global risks that humanity will face in the next ten years. These risks are immense. At the same time, opportunities for action and making strategic shifts are equally huge.
Where action meets opportunity
Action for nature-positive transitions could generate up to $10 trillion in annual business value and create 395 million jobs by 2030. However, to achieve these figures, financial institutions and companies must improve their understanding of how their operations and investments impact and depend on nature and, therefore, to what extent they are exposed to nature-related financial risks. Now is very much the time to act!
In this context, important changes, efforts and initiatives from governments, regulatory bodies, global organisations, accountancy bodies and businesses have been unleashed in the last months, contributing to a new movement with leaders from public and private policy-making fields, as well as science, business and civil society committing to action. In a move that may reshape decision and policy-making towards sustainable development, the United Nations has adopted a new framework that includes the contributions of nature when measuring economic prosperity and human wellbeing.
G7 leaders announced that our world must become not only net zero but also nature positive by 2030 – meaning enhancing the resilience of our planet and societies to halt and reverse nature loss – for the benefit of both the people and the planet. They have also committed to taking bold actions to deliver ambitious outcomes at COP15 (the 15th Conference of the Parties of the Convention on Biodiversity) and COP26 (the 26th UN Climate Change Conference of the Parties), building on the G7 Metz Charter on Biodiversity and the Leaders’ Pledge for Nature.
With the urgency for green recovery, and to be able to support global nature and climate-related goals, investors and businesses need high-quality and comparable data from companies. A new task force – the Task Force on Nature-Related Financial Disclosures, or TNFD (which complements the work developed by the TCFD (Task Force on Climate-Related Financial Disclosures) – was launched last June to fill this gap. The TNFD is aimed at delivering a framework for organisations to report consistent, comparable and decision-useful data and to act on evolving nature-related risks. They also aim to support a shift in global financial flows away from nature-negative outcomes and toward nature-positive outcomes.
Action for nature-positive transitions could generate up to $10 trillion in annual business value and create 395 million jobs by 2030.
In the fast-changing landscape of reporting, within the framework of the European Green Deal, the EU has set an ambitious path to reorient capital flows towards a sustainable economy while avoiding greenwashing; it has introduced far-reaching legislation, such as the Sustainable Finance Disclosure Regulation and the EU Taxonomy. The Taxonomy establishes a list of environmentally sustainable activities by defining screening criteria. It will support the EU’s 2030 climate and energy targets and the objectives of the EU Green Deal and will enable increased investment in activities deemed environmentally sustainable across a range of sectors, which includes agriculture, buildings, ICT, transport and utilities. Activities in these sectors represent 93.5% of EU greenhouse gas emissions.
The EU’s shift in recognition and reporting standards
The EU Corporate Sustainability Reporting Directive (CSRD) proposal released in April this year replaces the Non-Financial Reporting Directive (NFRD), and it also pursues EU Green Deal goals. The change in name is appropriate and welcome, as it highlights that sustainability issues are also financial issues, rather than opposed to them, and gives sustainability information the same importance as financial information.
Our world must not only become net zero, but also nature positive by 2030 – meaning enhancing the resilience of our planet and societies to halt and reverse nature loss – for the benefit of both the people and the planet.
The CSRD will cover close to 50,000 companies (compared to 11,000 under NFRD), and its main goal is to provide investors with the information needed to consider ESG (environmental, social and governance) aspects in their investment decisions. It also enables civil society organisations and other stakeholders to assess businesses’ impact on society and the environment. An important development in the business reporting sphere, included by the CSRD, is that it introduces a ‘double materiality’ perspective. It means that companies have to report on how sustainability issues affect their business and their own impact on people and the environment.
Rebuilding a nature-positive society
All companies wishing to be front-runners and fit for the future should keep a close watch over the aforementioned sustainability-related developments and initiatives. The powerful momentum behind them has come to stay and shows no sign of abating soon. They strengthen the case for action to build a sustainable economy by paving the path towards rebuilding stronger, more resilient and nature-positive economies and societies, which is the only way we can provide a win-win-win situation for nature, people and business. Therefore, there is a huge opportunity for leadership that cannot be missed.
