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Why there can be no net-zero without protecting nature

Magazine

Why there can be no net-zero without protecting nature

Published 12 October 2022 in Magazine • 6 min read

With many companies still getting to grips with acknowledging the importance of combating nature loss, Andy Beanland of the World Business Council for Sustainable Development argues for a fundamental shift in attitude that recognizes nature and biodiversity as material to business

For years, some of the world’s biggest and most influential companies have been setting ambitious plans to cut their carbon emissions as part of humanity’s biggest challenge in the 21st century: to reduce global warming. More than 3,000 such companies have now signed up to the Science-Based Targets Initiative, a global partnership that includes the United Nations Global Compact and World Wildlife Fund (WWF), to reduce their emissions in line with climate science.  

But while every day brings new corporate pledges on cutting carbon emissions, how are companies doing when it comes to combating nature-loss and protecting and promoting biodiversity?  

According to a study led by the World Business Council for Sustainable Development (WBCSD), a CEO-led community of over 200 of the world’s leading sustainable businesses, the answer is: there is much more to be done.   

Our study, which was conducted over two years, focuses on some of the world’s biggest food retailers, which represent a litmus test for other industries given the direct and significant impact that their long supply chains have on forests and oceans, both of which are critical to protecting nature and biodiversity.  

We found that while eight out of 10 companies did acknowledge nature- and biodiversity-related topics, such as sustainable sourcing or responsible supply chains as material issues affecting their business, there is much less granular information on the tangible actions they are taking to address these issues. This means that there is no information about how they are acting on these sustainability topics. 

Why there can be no net-zero without protecting natureRed alert: the large blue (Phengaris arion) is one of several butterflies on the endangered list due to loss of habitat

Of the companies that did acknowledge natural resource issues such as deforestation and overfishing as material issues affecting their business, only 13% have SMART (specific, measurable, achievable, realistic, timely) targets, define the baseline against which the target has been measured, and considered the impacts of that target on their value chain. Compared with our 2021 analysis, half of the companies appear to have taken the first steps towards setting the targets and commitments required.  

Our analysis also highlights the gulf in practice between a small cohort of leading companies – Carrefour, Sainsbury’s and Metro, along with WBCSD members Unilever, Nestlé and Sodexo – which are ahead of the pack, but far from perfect in disclosing how they are managing those topics. For the rest, it’s unclear what they’re currently doing, and suggests that nature loss and biodiversity are not being taken as seriously as they could be. It also means that there are some fundamental components of business practice that need to shift.  

Moreover, the glaring shortfall between corporate commitments on climate change and explicit plans to act on critical areas of nature such as deforestation and degradation of oceans has profound implications, both for the planet as well as for the businesses themselves.  

According to a 2020 report by the World Economic Forum, an estimated $44 trillion of economic value generation – over half the world’s total GDP – is either moderately or highly dependent on nature and, therefore, exposed to risks from nature loss. “Businesses are more dependent on nature than previously thought,” the report concluded.

Many companies have set targets to get to net-zero greenhouse gas emissions by 2050, but the reality is that they will not get there unless they commit to taking action on nature as well

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 companys 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. 

Authors

Andy Beanland

Andy Beanland

Director with the Redefining Value team at the World Business Council for Sustainable Development

Director with the Redefining Value team at the World Business Council for Sustainable Development, based in Geneva. He leads the Redefining Value project on Embedding ESG in decision making, which currently focuses on supporting food retail companies in embedding ESG into risk management, corporate governance, performance management, and internal controls.

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