Another issue is that companies appear not to be acknowledging nature-loss as a material factor affecting their value chains, as they should do under commitments made under the SBTi. With value chains that are extensively linked to commodities that could be driving significant nature degradation (cattle ranching for beef production in South America is one example), companies that do not acknowledge nature loss as a material factor, or do acknowledge it but do not have concrete, measurable plans to take action, risk falling far short of their carbon-emissions targets. That represents a huge financial and reputational risk for companies that are not on top of their impact on nature.
One of the challenges companies face in their relationship with nature is understanding what steps to take and how to measure their impact. Acting on climate change is relatively straightforward in terms of what individual businesses need to do because the science is understood and methodologies exist for measuring greenhouse-gas emissions. But when you get into talking about moving beyond doing less harm to nature, stopping nature-loss, and moving towards being regenerative, the concepts are less well understood.
WBCSD has been working on establishing what being nature-positive means in practice. We have published a guide that sets out a series of building blocks to break down the principal concepts of nature-positive action – and to translate them into clear steps that help businesses to take action.
Our study highlights several priority areas that companies must address to ensure that they are acknowledging nature and biodiversity as material factors affecting their business – and that they set out clear plans and goals to act on them.
One of them is to recognize that their impacts and dependencies on nature go way beyond the company’s operations. Engaging with stakeholders, including all suppliers and actors along the length of the supply chain, to reach a detailed and accurate understanding of what the company’s impact on nature, will help with assessing how material these issues are.
Internally, companies should take steps to align their sustainability ambitions with enterprise risk management so that the first is fully reflected in the second. In our study, only two – or less than four per cent – of the 54 companies examined had full alignment of the two.
One third of companies have either no or a very low level of alignment between what they deem to be material issues and risk, and that highlights a worrying disconnect. Risk and sustainability experts may not be talking to each other, which leads to the question, are they really serious about driving action on these vital topics?
A second priority for action is to ensure that nature and biodiversity factors are discussed and represented at the board level, and that directors have the experience and competency to understand and factor sustainability issues into the company’s policies and long-term strategy.
We believe that raising sustainability issues and the responsibility for acting on them to the executive and board level is a fundamental and necessary step to taking action on nature and biodiversity. That’s because, unless these issues are being discussed at the highest levels, it is less likely that action will be taken.
One specific and practical way for achieving this is to link boardroom and executive compensation to sustainability goals, including on nature and biodiversity. In our study, 74% have no link between executive remuneration and corporate sustainability strategy, so there is significant room for improvement. Unless companies follow these steps, we believe they are likely to fall far short of their stated goals on carbon reduction while leaving themselves exposed to financial and reputational risk. We need to get companies to move from a “doing less bad” to a “doing good” approach, and that requires a real shift in their mindset and in their relationship with nature.