- More than half the world’s total GDP is moderately or highly dependent on nature, according to the World Economic Forum.
- The Taskforce on Nature-related Financial Disclosures is developing a framework for organisations to report and act on nature-related risks to business.
- The aim is to support a shift in global financial flows away from nature-negative outcomes.
More than a century ago, conservationist John Muir wrote: “When one tugs at a single thing in nature, he finds it attached to the rest of the world.” It’s a lesson we are still learning today. The loss of one species, for example, could trigger a series of other losses, or maybe an explosion of pest species.
There are strong attachments, too, between biodiversity loss and climate change. Drought and wildfires can destroy ecosystems and wildlife, leading to further heating, drought and deaths.
The World Economic Forum has long ranked climate breakdown, biodiversity loss and ecosystem collapse in the top five threats to humanity. Already, humans have annihilated 83% of wild mammals and half of all plants, and another million species are at risk. Last year, the G7 climate and environment ministers reported that “the unprecedented and interdependent crises of climate change and biodiversity loss pose an existential threat to nature, people, prosperity and security”.
Importantly, a solution to one of these problems might help address the other. Restoration of wetlands or other ecosystems, for example, could store carbon, reduce erosion, restore biodiversity, protect human health and enhance adaptation to climate change. The interconnections mean that win-win outcomes are possible.
Economies depend on biodiversity
Loss of biodiversity affects us all, including accountants and businesses. All businesses have impacts and dependencies on nature through their actions, their purchasing decisions and investments. Business leaders and advisers need to know and understand these impacts and will be judged on how they manage them.
A chemical company near my town discharged waste to the air and waterways for years, poisoning fish and wildlife. It finally lost its social licence to operate and closed abruptly, abandoning its highly toxic site. Incredibly, it had recorded profits right up to its closure, with no provision for remediation.
Because its impacts had never been disclosed, the business had developed on a totally unsustainable model. Better reporting, together with non-financial information, would have resulted in far better outcomes here, for both the business and for nature.
But in a nearby wilderness area, a group of tourism operators I worked with are paying a voluntary levy to help protect and restore biodiversity. Their collaboration required sound judgment and a longer view into the future, to boost the viability of tourism and wildlife here. The birdsong is back and vibrant again, and business owners, staff and visitors are delighted.
Globally, this issue is huge. Boston Consulting Group found that by providing services such as storing carbon and cleaning water and air, the world’s forests are worth US$150 trillion a year – double the value of global share markets. The World Economic Forum reports that US$44 trillion of economic value generation – more than half the world’s total GDP – is moderately or highly dependent on nature. A UK government report, the Dasgupta Review, confirms that our economic system is highly dependent on biodiversity – unpaid, underappreciated and greatly overused.
Accountants are needed here for our skills in reporting, verification, judgment and advice. We also have a duty to act in the public interest. Climate and biodiversity – crucial to human health, prosperity and survival – need help. There could be no clearer need for this public interest.
What we need to do now
Understand the connections: We should assess how nature affects the businesses we work with and how these businesses affect nature.
The risk of pollination collapse is one example of nature-dependency. One-third of our food is reliant on pollination by bees but their populations are dropping rapidly worldwide.
In industries such as construction, farming or food and beverages, the impacts might be large and obvious. In areas such as fashion or finance, they may be less visible.
And there can be unanticipated impacts from commercial activities. A study into fishing practices, published in Nature in 2021, found that bottom-trawling releases greenhouse gas emissions equivalent to those produced by the global aviation industry.
Failure to address these sorts of impacts will carry a steep price for businesses and the planet. But companies that move to support biodiversity can develop new, more sustainable offerings.
Discover nature-based solutions: Nature-based solutions (NbS) are initiatives that harness the power of nature to protect, restore and sustainably manage land and ocean ecosystems. Restoring forests and soil health could provide one-third of the reductions in greenhouse gas emissions in coming decades.
The potential for NbS is massive. Nature4Climate, an alliance of leading conservation and business agencies, estimates that such projects could lift a billion people out of poverty, create 80 million jobs, boost economic growth and prevent trillions of dollars in climate change damage. It says these solutions are ready to deploy today, and are scalable. At COP26 in Glasgow, more than 90% of the Nationally Determined Contributions (national plans highlighting climate actions) submitted there included NbS.
Check for risks: There could be physical risks for a business from disruptions to supplies and ecological services, or reputational or legal risks from being linked to environmental damage. Check supply chains and investments for possible tainting from links to deforestation, ecosystem change or threats to vulnerable species.
Increasingly, banking, finance and advisory businesses are choosing to avoid such involvements. And as with climate issues, many bright young people will not invest in or work for businesses involved in damaging activities.
Consider becoming ‘nature positive’: Some companies seek to ensure that their negative impacts are more than offset by conservation measures. To achieve this status, develop an approach to managing impacts and set attainable, science-based goals. Support for conservation and at-risk species could be a part of the plan.
Report on risks and outcomes: Only 23% of companies whose activities are at risk from biodiversity loss are reporting that risk, KPMG International's Survey of Sustainability Reporting 2020 found. But with our planet losing species at a rate 1000 times greater than at any other time in recorded human history, the need for action is urgent. As with climate reporting in recent years, a sharp upward trajectory in nature disclosures is expected.
Help is on the way. The Taskforce on Nature-related Financial Disclosures (TNFD) was launched last year with strong support from financial institutions and corporates and an endorsement from G7 finance ministers. It builds on the success of the Task Force on Climate-related Financial Disclosures (TCFD); the two will be comprehensive and complementary.
Ultimately, TNFD has the potential to divert flows of capital away from activities that destroy nature to others providing positive outcomes.
Picture: One example of nature dependency is pollination. One-third of our food crops must be pollinated by bees and, worldwide, bee populations are dropping rapidly..
There are major challenges for businesses in becoming carbon neutral and nature positive, but both are crucial for human health and wellbeing. The journey is a vital one, and accountants’ skills in guiding and reporting, in identifying risks and opportunities, are needed.
Nature is close to our hearts and our sense of identity. Many of our favourite species – koalas, kiwis, corals – and others we might not know and might never see, are worth working and fighting for. They, too, support and enrich us. For them and for ourselves, for young people and future generations, it’s a matter of survival.
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