Biodiversity is increasingly becoming a focal point in global regulations and corporate reporting. Here’s an overview of the latest trends and developments in biodiversity regulation and disclosure.
Key Developments in Biodiversity Regulation
Increased Disclosure Requirements: The percentage of S&P 500 firms disclosing biodiversity policies jumped to 34% in 2023, up from 18% in 2022, according to a recent Harvard study. This surge is driven by stringent European Union (EU) reporting standards that require companies to disclose not only their biodiversity policies but also the risks their operations pose to biodiversity and the impact they have on ecosystems. Additionally, the trend seems to be maintained in 2024.
Emergence of Biodiversity Credits: Similar to carbon credits, biodiversity credits are being developed to help companies offset their environmental impact. These credits face challenges similar to those encountered with carbon credits, including ensuring that they deliver tangible ecological benefits.
Strategic Integration: Companies are increasingly incorporating biodiversity goals into their business strategies. For example, some firms are investing in regenerative agriculture to restore ecosystems, while others are enhancing supply chain transparency to ensure their operations do not harm critical habitats.
Global Commitments and Policy Frameworks
UN Biodiversity Commitments: Global leaders committed to ambitious biodiversity targets at the 2022 UN Biodiversity Conference, including achieving no net loss of biodiversity by 2030 and full recovery by 2050.
EU’s Green Deal and Biodiversity Strategy: Under the EU’s Green Deal, the biodiversity strategy includes the proposed Nature Restoration Law, which aims to set binding targets for habitat and species restoration. The EU has also expanded protected areas and adopted new regulations for reforestation, afforestation, and soil health.
Taskforce on Nature-related Financial Disclosures (TNFD): Building on the TCFD framework, TNFD focuses on nature-related risks, including biodiversity. It provides a structured approach for companies to disclose dependencies on natural systems and the impacts of their activities on ecosystems.
ISSB (International Sustainability Standards Board): ISSB is working to integrate biodiversity into global sustainability standards, focusing on financial materiality and guiding companies to disclose biodiversity-related risks and opportunities that could impact their financial performance.
Corporate Disclosure Frameworks: Various other frameworks are guiding companies in their biodiversity disclosures:
- CDP (Carbon Disclosure Project): CDP’s Forests and Water Security questionnaires include biodiversity-related questions, encouraging companies to disclose their management of biodiversity impacts, particularly in deforestation and water risk areas.
- GRI (Global Reporting Initiative): GRI 304 and GRI 413 standards require companies to disclose the impacts of their operations on biodiversity, particularly in high biodiversity value areas, and their strategies to mitigate these impacts.
- SASB (Sustainability Accounting Standards Board): SASB standards highlight biodiversity as a material issue in industries like Oil & Gas and Mining, where companies must disclose their biodiversity management practices.
Implications for Industry
As biodiversity becomes more central to regulatory frameworks, companies are likely to face stricter policies governing the use of natural resources, especially within their supply chains. For instance, the EU’s Nature Restoration Law could require companies to adjust operations in areas covered by the law, leading to increased disclosure obligations to demonstrate how ecosystem risks are managed. Failure to comply with these evolving regulations can result in significant penalties, particularly in regions like the EU and the US, where biodiversity-related laws are gaining momentum.
Harmony Analytics and Your Business
Harmony captures corporate compliance, including penalties related to supply chain issues and pollution. Our platform enables users to benchmark a company’s profile against its peers, identifying risks and opportunities for development. If you’re navigating the complexities of these new disclosure requirements or interested in understanding these insights further, connect with the Harmony team.
