Biodiversity loss is no longer an abstract environmental concern. For companies across all sectors, it presents tangible risks and strategic implications. Ecosystem degradation can disrupt supply chains, devalue assets, increase regulatory burdens, and erode public trust. As global policy and investor pressure rise, businesses are expected not only to avoid harming biodiversity—but to actively help restore it.

Managing biodiversity strategically requires clarity, data, and structure. That’s where emerging frameworks and tools come in. These systems help companies locate where they interact with nature, evaluate risks and impacts, set measurable targets, and report transparently on progress. They transform biodiversity from a vague sustainability topic into a manageable part of enterprise decision-making.

This topic intersects directly with global frameworks such as:

• The Corporate Sustainability Reporting Directive (CSRD), which mandates biodiversity disclosures (ESRS E4)

• The Kunming–Montreal Global Biodiversity Framework, which sets a global goal to halt and reverse biodiversity loss by 2030.

By reading this article, you will learn:
✅ How four key biodiversity tools (TNFD, SBTN, ENCORE, IBAT) help companies operationalize nature goals
✅ Which sectors use each tool and why
✅ The practical challenges and limitations to expect
✅ Additional tools that fill niche roles in a biodiversity strategy

This article will help you understand how to incorporate biodiversity tools into your company’s sustainability journey, regardless of your industry or current level of maturity.

2. What biodiversity tools are designed to do

Biodiversity tools can be grouped into three practical categories. This makes it easier to understand how they work together.

1. Risk and impact identification tools

These tools help you locate where your business interacts with nature, through operations, supply chains, or financing. They highlight where you depend on ecosystem services (like water and soil) and where your activities may put pressure on ecosystems.

2. Target-setting tools

These translate important pressures and dependencies into measurable, science-aligned goals.

3. Disclosure and governance frameworks

These guide how companies report nature-related risks, opportunities, and governance to investors and regulators.

The four most widely used tools — TNFD, SBTN, ENCORE, and IBAT — span these categories. In practice, companies often use them together. Let’s explore each one.

3. TNFD: framing biodiversity as financial risk

Purpose

The Taskforce on Nature-related Financial Disclosures (TNFD) helps companies and financial institutions identify, assess, manage, and disclose nature-related risks and opportunities. It aims to bring biodiversity into core business and financial decision-making.

Structure

TNFD uses four pillars that mirror the well-known TCFD climate framework*:

1. Governance

2. Strategy

3. Risk and impact management

4. Metrics and targets

This makes TNFD familiar territory for teams already working on climate disclosures.

*Read about the TCFD here:

The LEAP process

TNFD is operationalised through the LEAP approach, a four-step sequence:

1. Locate where your company interacts with nature (sites, sourcing regions, portfolio exposure).

2. Evaluate your dependencies and impacts at those locations.

3. Assess which issues create material risks or opportunities.

4. Prepare by integrating findings into governance, strategy, processes, and disclosures.

Typical use cases

• Manufacturers and extractive companies use TNFD to map where their operations touch high-risk nature areas.

• Banks and investors apply LEAP across portfolios to spot nature-related financial risk.

• Companies use TNFD to turn fragmented data into a consistent governance and reporting structure.

Challenges

• Requires detailed spatial and supply chain information.

• Boundaries for biodiversity assessments are more complex than for greenhouse gas emissions.

• TNFD is a framework — not a dataset — so companies must combine it with other tools.

Check it out here: The Taskforce on Nature-related Financial Disclosures

4. SBTN: turning ambition into science-based targets for nature

Purpose

The Science Based Targets Network (SBTN) helps companies set measurable, science-aligned targets for nature. It extends the idea of science-based targets from climate into broader environmental domains.

Focus areas

SBTN covers several realms, with land and freshwater being the most advanced:

• Freshwater

• Land and ecosystem conversion

• Pollution

• Climate (through SBTi)

• Biodiversity and ocean (guidance expanding in phases)

The target-setting process

SBTN follows a clear, stepwise method:

1. Assess—map pressures and dependencies across your value chain.

2. Interpret and prioritise—identify where the most significant issues lie.

3. Measure, set, and disclose—create baselines and define science-aligned targets.

4. Act—implement actions across operations and suppliers.

5. Track—monitor progress and adjust when needed.

Typical use cases

• Food and beverage companies use SBTN to set no-conversion and regenerative sourcing commitments.

• Consumer goods companies apply SBTN guidance to manage freshwater risks in high-stress basins.

• Companies integrate SBTN targets into procurement policies and supplier requirements.

Challenges

• Biodiversity-specific methods are still expanding.

• Requires strong internal data on sourcing locations.

• Needs alignment with other commitments (e.g. deforestation, climate, water stewardship).

Check it out here: Step Up For Nature – Science Based Targets Network

5. ENCORE: understanding nature dependencies across sectors

Purpose

ENCORE (Exploring Natural Capital Opportunities, Risks and Exposure) helps organisations understand how economic activities depend on and impact ecosystem services.

What ENCORE provides

• A sector-to-ecosystem-service matrix that shows which ecosystem services are most critical to each activity.

• Materiality ratings (e.g., high, medium, low) indicating dependency strength.

• Insights into how degradation of ecosystem services could disrupt activities.

Typical outputs

ENCORE produces clear visual results, such as:

• A matrix showing how an industry depends on pollination, soil formation, water flow, or other ecosystem functions.

• Portfolio-level overviews for financial institutions, showing which sectors carry the highest nature-exposure risk.

Use cases

• Banks use ENCORE to screen portfolios for sectors with high nature exposure.

• Corporate sustainability teams use it as a first step in double materiality assessments.

• Companies use ENCORE to prioritise where deeper analysis is needed.

Challenges

• ENCORE provides sector-level insights, not site-specific data.

• It highlights dependencies strongly; understanding full impacts usually requires additional tools.

• It identifies risk, but does not quantify financial outcomes.

Check it out here: ENCORE

6. IBAT: mapping biodiversity risk on the ground

Purpose

The Integrated Biodiversity Assessment Tool (IBAT) provides detailed, site-level information about biodiversity sensitivity.

Key data layers

IBAT combines several globally recognised datasets:

• Protected areas (WDPA)

• Key Biodiversity Areas (KBAs)

• IUCN Red List species ranges

• Ecosystem types

What IBAT produces

• Site screening reports showing overlaps with protected areas, threatened species ranges, and high-value ecosystems.

• Maps and summaries useful in due diligence, land-use planning, and sourcing decisions.

Use cases

• Mining, energy, and infrastructure companies use IBAT to screen potential project sites.

• Procurement teams use IBAT to avoid sourcing from high-biodiversity-sensitivity areas.

• Companies use IBAT to focus environmental assessments where the risks are highest.

Challenges

• Data coverage varies across regions.

• IBAT identifies sensitivity, not full ecosystem service loss.

• Additional assessments are usually required for detailed planning.

Check it out here: IBAT | Services

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7. How these tools work together: a typical biodiversity workflow

Companies that work seriously with biodiversity rarely use these tools alone. A practical sequence looks like this:

8. Other useful tools that support biodiversity integration

Beyond the main four tools, several additional resources play complementary roles:

WWF Biodiversity Risk Filter (BRF)

Type: Global risk-screening platform
Best for: Early-stage biodiversity and nature risk assessments across operations and supply chains

BRF is a map-based dashboard that screens locations around the world for biodiversity-related risks. It evaluates both ecosystem condition and human pressures, making it useful for companies seeking a quick understanding of nature-related exposure.

When to use it

• When you need a first screening to see which regions carry high nature-related risks

• When you do not yet have detailed site-level data

• When evaluating many supplier locations at once

WWF Biodiversity Risk Filter, for the maps see this page: WWF Biodiversity Risk Filter - Explore Maps

Global Biodiversity Score (GBS)

Type: Corporate biodiversity footprint method
Best for: Measuring total biodiversity pressure across a company’s value chain

GBS provides a single numerical score representing a company’s biodiversity pressure. It converts complex environmental impacts into a common biodiversity metric, helping companies compare business units, sourcing regions, or scenarios.

When to use it

• When preparing for science-based target validation

• When reporting company-wide impacts

• When needing to compare biodiversity pressure between different product categories or geographies

Global Biodiversity Score (GBS) | Measure & Act on your Biodiversity Footprint

GLOBIO

Type: Global biodiversity scenario modelling framework
Best for: Strategic foresight, long-term risk assessment, and scenario analysis

GLOBIO is a modelling system that shows how biodiversity intactness may change over time under different development pathways. It is used by governments, NGOs, and companies to understand long-term biodiversity trajectories.

When to use it

• When developing long-term nature strategies

• When performing scenario analysis for TNFD or CSRD

• When assessing exposure to future land-use or climate risks

What is GLOBIO? | GLOBIO - Global biodiversity model for policy support - homepage

BFFI (Biodiversity Footprint for Financial Institutions)

Type: Footprint model for financial portfolios
Best for: Banks, asset managers, insurers, and any organisation with investments

BFFI helps financial institutions estimate biodiversity impacts across their entire investment portfolio, from equity to loans and bonds.

When to use it

• When preparing TNFD-aligned portfolio reporting

• When identifying high-impact companies in lending or investing

• When setting portfolio-wide biodiversity strategies

Biodiversity Footprinting for Financials - Biodiversity Metrics

LandScope (regional platforms)

Type: Regional spatial planning and conservation mapping tools
Best for: Real estate, infrastructure developers, land-intensive industries

LandScope tools (e.g., LandScope America and other regional variants) integrate local biodiversity data, land-use maps, and conservation priorities. They help decision-makers quickly evaluate the ecological importance of land parcels.

When to use it

• When evaluating new project sites

• When making real estate or land acquisition decisions

• When needing high-resolution local data that ENCORE/IBAT cannot provide

LandScope | Professional Terrain Analysis. No Barriers.

9. Takeaway

Companies have a toolbox for biodiversity at their disposal consisting of:

• TNFD structures risk and disclosure

• SBTN provides science-based nature targets

• ENCORE identifies key dependencies and exposures

• IBAT screens site-level biodiversity sensitivity

• Tools like BRF, GBS, GLOBIO, and BFFI add depth where needed

Relevant Sources

The Taskforce on Nature-related Financial Disclosures

Step Up For Nature – Science Based Targets Network

ENCORE

IBAT | Services

WWF Biodiversity Risk Filter

WWF Biodiversity Risk Filter - Explore Maps

Global Biodiversity Score (GBS) | Measure & Act on your Biodiversity Footprint

What is GLOBIO? | GLOBIO - Global biodiversity model for policy support - homepage

Biodiversity Footprinting for Financials - Biodiversity Metrics

LandScope | Professional Terrain Analysis. No Barriers.

Relevant Standards

ESRS E4 July 2025

Biodiversity loss is often framed as an environmental issue, but is also a profound economic and business risk. Nature provides essential material, regulating, and non-material contributions that underpin global well-being and economic activity. Yet 14 of the 18 categories of nature’s contributions to people are declining, especially those that regulate climate, water, and ecological stability. As these systems deteriorate, companies face rising operational, financial, and strategic exposure.

Biodiversity is not a distant concept: it affects supply chains, infrastructure, raw materials, workforce stability, insurance, finance, and social license to operate. And companies, in turn, play a direct role in driving biodiversity loss through land conversion, overexploitation, pollution, climate emissions, and global transport networks that spread invasive species — all recognized by IPBES as the five direct drivers.

Understanding this two-way relationship is increasingly important for regulations such as the Corporate Sustainability Reporting Directive (CSRD) and emerging disclosure frameworks like TNFD, which expect companies to understand and report their dependencies and impacts on nature.

By reading this article, you will learn:
✅ How companies drive biodiversity loss across the five IPBES direct drivers
✅ How indirect economic drivers (subsidies, consumption, trade) amplify those pressures
✅ How biodiversity decline translates into operational, market, financial, regulatory, and reputational risks
✅ Real-world sector examples from agriculture, fisheries, forestry, construction, and mining
✅ Why feedback loops between business and ecosystems create long-term vulnerabilities

By the end, you will understand why nature is a core business issue — and why proactive companies are moving from awareness to action.

2. The business–biodiversity connection explained

Biodiversity underpins economic activity across sectors. Over half of global GDP—about $44 trillion—is moderately or highly dependent on nature (Biodiversity | OECD). Agriculture, fisheries, forestry, water-intensive manufacturing, and tourism are obvious examples. But even financial services and consumer goods are exposed through their value chains.

According to the IPBES Global Assessment (2019), nature supports human life and economies by providing:

• Material contributions, such as food, raw materials, and energy.

• Regulating contributions, such as pollination, water purification, coastal protection, and climate regulation.

• Non-material contributions, such as cultural, recreational, and spiritual benefits.

IPBES reports that most of these contributions are declining, particularly the regulating ones. These declines weaken the ecological infrastructure on which companies depend — from healthy soils and stable climates to predictable water flows and resilient coastlines.

This sets the stage for a double challenge:

1. Companies affect biodiversity, and

2. Biodiversity loss affects companies.

Key takeaway: Biodiversity loss affects every business sector—directly through resource dependency, and indirectly through disrupted supply chains, stakeholder pressure, and systemic risk. Companies that understand and manage these dependencies are better positioned for long-term success.

3. How companies drive biodiversity loss

IPBES identifies five direct drivers of biodiversity loss — all linked to human economic activity. Each one connects directly to corporate value chains.

1. Land-use change and habitat conversion

Transforming natural land and sea areas for human use is the largest driver of biodiversity loss. Companies influence this through agriculture, construction, mining, transport infrastructure, and real estate development.

Key findings from the assessment show the scale of this change:

• Over one-third of Earth’s land surface is now used for crops or livestock.

• 32 million hectares of primary or recovering tropical forests were lost between 2010 and 2015.

• Urban areas doubled in size since 1992.

• Although mining occupies <1% of global land area, it has “significant negative impacts on biodiversity” due to land clearance and toxic pollution.

Corporate sectors implicated include:

• Agriculture and livestock

• Real estate and urban development

• Road builders, ports, pipelines, railways

• Extractives and mining

The result: fragmented habitats, disappearing wetlands, and shrinking forests.

2. Overexploitation of natural resources

Extracting biological resources faster than ecosystems can regenerate them is the second-largest driver on land and freshwater, and the dominant driver in marine ecosystems.

Key findings include:

• ~33% of marine fish stocks are overfished; another ~60% are at maximum sustainable levels.

• Industrial fishing now spans at least 55% of the ocean.

• 290 million hectares of native forests were cut down between 1990 and 2015.

Companies in seafood, timber, fashion, agriculture, cosmetics, paper, and water-intensive industries contribute to this pressure.

3. Pollution

Waste and chemical pollution remain major threats to biodiversity — on land, in freshwater, and across oceans.

• Over 80% of global wastewater is discharged untreated.

• 300–400 million tons of industrial waste enter waterways annually.

• Fertilizer runoff has created 400+ coastal dead zones, totaling over 245,000 km².

• Marine plastic pollution has increased tenfold since 1980.

• At least 267 species — including turtles, seabirds, and marine mammals — are harmed by plastic ingestion or entanglement.

Pollution originates from many corporate activities: manufacturing, agriculture, waste handling, chemical production, mining operations, and consumer goods supply chains. Its impacts accumulate across ecosystems and often travel far from their source.

4. Climate change

Climate change is rapidly increasing its pressure on biodiversity and may soon exceed all other drivers.

Key findings:

• Global mean temperatures have already risen 0.7°C since 1980.

• Climate change is affecting species from genes to ecosystems.

• Coral bleaching, melting ice habitats, and extreme weather events signal rapid ecosystem disruption.

Corporate emissions from energy use, transportation, industrial processes, and land-use change are the primary sources feeding into this driver. As climate impacts intensify, biodiversity loss accelerates.

If you want to do something about climate change, I advise you to read this guide:

5. Invasive alien species

Global movement of goods and people — including a 3× increase in air travel — have dramatically increased the spread of invasive species.

These can:

• Prey on native species

• Spread disease

• Out-compete local flora and fauna

• Transform ecosystems permanently

Many industries contribute inadvertently through globalized supply chains, shipping, horticulture, and tourism.

The indirect drivers: economics, policy, and consumption

Behind the direct pressures are deeper structural forces that shape how societies use nature:

• World population doubled from 3.7 to 7.6 billion (1970–2018).

• Per capita consumption has risen sharply, with large inequalities.

• OECD countries subsidize ~$100 billion per year in environmentally harmful agriculture subsidies.
  (OECD countrie are members of the Organization for Economic Co-operation and Development (OECD), a group of 38 countries committed to democracy and market economies that collaborate on economic and social policy)

• Fossil fuel subsidies (~$345 billion per year) generate trillions in environmental externalities.

These indirect drivers create economic incentives that accelerate the direct drivers.

4. How biodiversity loss affects companies

Healthy ecosystems support business operations in countless ways — from soil fertility and water supply to stable coastlines, predictable weather, and reliable raw materials. When these systems decline, companies face real and growing risks across their value chains. The following sections summarize the main business risks linked to biodiversity loss, based on findings from the 2019 Global Assessment.

1. Operational and supply chain risks

The decline of key ecosystem services creates immediate challenges for companies that depend on natural inputs or stable production conditions. For example:

• Pollinator decline puts $235–577 billion in annual crop output at risk.

• Land degradation has reduced agricultural productivity on 23% of global land.

• Overfished oceans increase supply volatility and raise operational costs.

• Soil degradation forces farmers and suppliers to use more fertilizers and irrigation.

• Water scarcity grows when upstream forests and wetlands are damaged.

The result is increased volatility in commodities such as food ingredients, timber, fishmeal, natural fibers, and botanical materials — all of which many industries rely on.

2. Physical risks to assets and infrastructure

Ecosystems provide natural protection against storms, flooding, landslides, and extreme heat. When these systems deteriorate, physical risks rise:

• The loss of coastal habitats increases storm and flood risk for 100–300 million people and the infrastructure in those areas.

• More than 85% of wetlands have been lost, weakening natural flood control.

• Deforestation increases landslide danger and makes wildfires more severe.

• Loss of forest cover worsens droughts and heatwaves.

Businesses in vulnerable regions may face rising insurance premiums, higher repair costs, and more frequent operational disruptions.

3. Market and resource availability risks

As wild species and ecosystems decline, the availability of key natural resources becomes less predictable:

• Fish stocks shrink and risk collapse.

• Timber supply tightens as forests are cleared or degraded.

• Crop yields become more erratic as pollination and soil health decline.

• Genetic diversity in crops and livestock continues to fall — 559 domesticated mammal breeds have already gone extinct — reducing resilience to pests, diseases, and climate stress.

These changes affect commodity pricing, supply stability, and long-term business planning.

4. Financial risks

Ecosystem decline also affects financial performance and asset values. Examples include:

• Higher insurance payouts after ecosystem-related disasters.

• Lower asset values when natural buffers such as mangroves or reefs disappear.

• “Stranded asset” risk in sectors tied to destructive practices, where regulations or ecosystem collapse make operations unviable.

• Increased economic exposure when carbon sinks like forests and peatlands are lost.

One estimate referenced in the assessment shows how large the financial implications can be: fossil fuel subsidies of $345 billion per year have been linked to $5 trillion in global environmental costs.

5. Regulatory and compliance risks

Governments are responding to biodiversity decline by tightening policy and disclosure demands. This includes:

• New reporting rules such as CSRD and the TNFD framework.

• Due diligence requirements on deforestation and nature-related impacts.

• Rising permit and compliance costs in land-use–intensive sectors.

• Expansion of protected areas, limiting where companies can operate.

Companies that do not adapt may face penalties, import restrictions, or legal challenges.

6. Reputation and social license risks

As awareness grows, companies linked to ecological harm face increasing scrutiny. Social conflict is a major concern:

• There are more than 2,500 conflicts over fossil fuels, water, food, and land.

• Over 1,000 environmental defenders were killed between 2002 and 2013.

NGOs, communities, investors, and consumers now expect companies to demonstrate responsible stewardship of land, water, forests, and wildlife. Failing to do so can lead to project delays, loss of trust, and brand damage.

Key takeaway: Biodiversity risk cuts across operational, financial, legal, and strategic domains. Companies that fail to act face compounding liabilities; those that lead can access new markets and capital.

5. Feedback loops: how impacts become risks

When companies degrade ecosystems, they often undermine the very conditions that support long-term operations. Several reinforcing loops are already visible:

Many of nature’s contributions — such as pollination, pest control, and water regulation — cannot be replaced once lost. This means biodiversity decline can lock companies into long-term vulnerability unless underlying pressures change.

6. Takeaway

The assessment makes clear: biodiversity loss is s a systemic business risk. It touches every part of corporate activity, from raw materials and operations to finance, compliance, and community relations.

Forward-looking companies are responding by:

• Eliminating deforestation and other destructive practices from supply chains

• Investing in ecosystem restoration and nature-based solutions

• Integrating biodiversity considerations into risk management and governance

• Preparing for CSRD, TNFD, and other emerging regulations

• Supporting policy reforms that align economic incentives with healthy ecosystems

Biodiversity is the foundation of long-term business resilience. Companies that act now will be better positioned to navigate a future shaped by ecological limits — and to help build an economy that works with nature, not against it.

Relevant Sources

Our global food system is the primary driver of biodiversity loss

Corporate giants fall short on forest protection commitments, report

Biodiversity | OECD

Deforestation and Forest Loss - Our World in Data

Deforestation and Forest Degradation | World Wildlife Fund

Six charts that show the state of global biodiversity loss | World Economic Forum

The Biodiversity Crisis Is a Business Crisis

IPBES global assessment report summary for policymakers

Relevant Standards

ESRS E4 July 2025

Biodiversity-sensitive areas are places that hold particular importance for ecosystems and species. They are either legally protected by governments or scientifically recognized as vital for biodiversity. For corporate leaders, understanding where operations intersect with these areas is critical to avoiding regulatory risks, reputational damage, and supply chain disruption.

This issue is now embedded in policy frameworks such as the EU’s Corporate Sustainability Reporting Directive (CSRD) and European Sustainability Reporting Standards (ESRS), which explicitly require disclosure of company sites in or near biodiversity-sensitive areas.

By reading this article, you will learn:
✅ The definition of biodiversity-sensitive areas according to the CSRD
✅ Why biodiversity-sensitive areas matter for business
✅ Tools and data sources that help companies comply

2. The definition of biodiversity-sensitive areas according to the CSRD

Biodiversity-sensitive areas are broadly defined under two categories in ESRS E4:

1. Legally protected areas:
   These include:

   • Natura 2000 sites in the EU

   • UNESCO World Heritage natural sites

   • Ramsar wetlands (wetlands of international importance)

   • Other areas protected under national or regional legislation

   These are formally designated areas subject to legal restrictions, where corporate activity may be prohibited or tightly controlled.

2. Scientifically recognized areas of high biodiversity importance:
   These include:

   • Key Biodiversity Areas (KBAs)

   • Ecologically or Biologically Significant Marine Areas (EBSAs)

   • Ecosystems classified as threatened on the IUCN Red List of Ecosystems

   • Habitats of species listed on the IUCN Red List of Threatened Species

   These designations highlight places essential for the persistence of biodiversity, even if not formally protected by law.

Together, these categories ensure companies must consider both legally restricted zones and ecologically critical habitats when assessing impacts and disclosures.

3. Why biodiversity-sensitive areas matter for business

Biodiversity loss has become one of the most urgent global risks facing society and business. The World Economic Forum ranks biodiversity loss and ecosystem collapse among the top three most severe risks humanity will face in the next decade, with over half of global GDP (about $44 trillion) dependent on nature and its services. For companies, this means that protecting ecosystems is a core aspect of risk management and long-term value creation.

Companies face multiple types of exposure:

• Regulatory and legal risk: Many sensitive areas are protected by law, restricting industrial or commercial activity. For example, EU law requires any project near a Natura 2000 site to undergo an Appropriate Assessment, with potential blocking of projects if impacts cannot be mitigated .

• Reputation risk: Operations near iconic biodiversity sites (such as World Heritage Sites) can trigger significant public backlash and stakeholder opposition, harming brand value.

• Operational and supply chain risk: Ecosystem degradation can disrupt natural services such as water availability, soil fertility, or fisheries productivity. Companies operating near sensitive ecosystems may also face operational restrictions or costly compliance requirements.

• Financial and investor risk: Under the EU Sustainable Finance Disclosure Regulation (SFDR), investors must report on portfolio exposure to operations affecting biodiversity-sensitive areas . Companies with unmanaged impacts may face reduced access to capital or investor exclusion.

• Dependency risk: Many sectors depend directly on ecosystem services safeguarded by sensitive areas, such as clean water, pollination, or genetic resources for pharmaceuticals.

4. Tools and data sources that help companies comply

Complying with these requirements requires reliable geospatial analysis. Several global tools and databases support companies in identifying biodiversity-sensitive areas:

• Integrated Biodiversity Assessment Tool (IBAT): Provides authoritative data on protected areas (WDPA), KBAs, and IUCN Red List species. It can generate Disclosure Preparation Reports highlighting which company sites overlap or are near sensitive areas, and includes STAR metrics on species risk.

• World Database on Protected Areas (WDPA): The official global dataset of legally protected areas, accessible through Protected Planet.

• Key Biodiversity Areas database: Maintains global information on KBAs and the species or ecosystems that justify their designation.

• EBSA repository: Hosted by the Convention on Biological Diversity, with maps of significant marine areas.
  IUCN Red Lists: Cover both threatened species and ecosystems, highlighting sensitive habitats.

You can also draw on national databases or specialized consultancy services for local context.

Relevant Sources

Biodiversity loss poses a fundamental risk to the global economy | World Economic Forum

The Natura 2000 protected areas network — European Environment Agency

Mapping the planet’s critical areas for biodiversity and nature’s contributions to people | Nature Communications

Identify priority protected areas for biodiversity conservation adapting to future climate and land cover changes - ScienceDirect

Biodiversity measurement approaches_A-practitioners-guide-for-financial-institutions

Relevant Standards

ESRS E4 July 2025

ACRONYMS AND GLOSSARY OF TERM July 2025

Biodiversity loss is moving quickly, undermining food security and supply-chain resilience.

The Kunming-Montreal Global Biodiversity Framework (GBF), adopted at CBD-COP 15 in December 2022, is the new global roadmap to halt and reverse nature loss through 2050.

The EU’s Corporate Sustainability Reporting Directive (CSRD) embeds the GBF in its biodiversity standard (ESRS E4), requiring firms to show how their strategies “align with the vision of the Kunming-Montreal Global Biodiversity Framework and its relevant goals and targets”.

Reading preview, you will learn:
✅ The GBF’s 2050 vision and 2030 mission
✅ The four long-term “Kunming-Montreal Global Goals”
✅ The structure of the 23 targets, including the flagship 30 × 30 commitment
✅ How ESRS E4 links corporate transition plans to the GBF
✅ Practical benefits and hurdles for companies as they operationalise the Framework

By the end, you will know why and how the GBF has become a reference point for ESG reporting and what your company can do with this framework.

2. Kunming-Montreal in a nutshell

2050 vision & 2030 mission
The Framework’s vision is “a world living in harmony with nature where by 2050 biodiversity is valued, conserved, restored and wisely used”. Its mission to 2030 is to “take urgent action to halt and reverse biodiversity loss to put nature on a path to recovery”.

Four global goals for 2050:

Twenty-three action targets for 2030
The Kunming-Montreal Global Biodiversity Framework includes 23 urgent targets that must be started now and finished by 2030 to help reach long-term biodiversity goals by 2050. These actions should align with global agreements and be adapted to each country’s needs and situation. The targets fall under three thematic pillars:

1. Reducing threats to biodiversity (Targets 1-8) – including Target 3 to conserve at least 30 % of land, inland waters and seas by 2030 (“30 × 30”).

2. Meeting people’s needs through sustainable use & benefit-sharing (Targets 9-13) – e.g., sustainable agriculture & forestry (Target 10).

3. Tools & solutions for implementation & mainstreaming (Targets 14-23) – notably Target 15 on mandatory biodiversity disclosure for large companies and financial institutions, and Target 18 to redirect US $500 bn per year in harmful subsidies.

For all 23 targets check out section H of the Kunming-Montreal Global Biodiversity Framework

3. What the GBF means for corporate sustainability reporting

Read more

In today’s world, businesses are increasingly required to consider their impact on the environment, particularly on biodiversity and ecosystems. Companies must not only identify these impacts but also anticipate how they might affect their financial health. This includes understanding the financial risks and opportunities that arise from their interactions with the natural world. In this article, we'll break down what anticipated financial effects related to biodiversity and ecosystems need to be disclosed.

How companies can effectively disclose this information will be covered in another article.

2. Anticipated Financial Effects from Material Biodiversity and Ecosystem-Related Risks and Opportunities

Companies are required to disclose how risks and opportunities related to biodiversity and ecosystems might impact their finances. This means they need to explain:

• Financial risks: Companies must assess how risks, like the depletion of natural resources or changes in ecosystem services, could financially impact them. For instance, if a company relies on water from a river that is drying up, this could affect its production costs or operations.

• Financial opportunities: Companies also need to identify opportunities that might arise from protecting or restoring biodiversity. For example, investing in sustainable practices might open up new markets or reduce long-term costs.

• Quantifying effects: Where possible, companies should provide monetary estimates of these anticipated financial effects. If exact numbers aren’t available, they should offer qualitative descriptions instead.

• Time horizons and uncertainties: It’s crucial for companies to indicate when these financial effects are likely to occur—whether in the short, medium, or long term. They should also explain the assumptions and uncertainties involved in their estimates.

Companies must estimate and disclose how risks and opportunities related to water and marine resources could impact their future financial performance. This includes providing financial projections, describing potential impacts, and outlining the assumptions and uncertainties involved.

3. Conclusion

Understanding and disclosing the anticipated financial impacts of biodiversity and ecosystem-related risks and opportunities is vital for businesses. It not only helps them prepare for future challenges but also demonstrates transparency and responsibility to their stakeholders. By being proactive in this area, companies can better manage risks and capitalize on opportunities that contribute to their long-term sustainability and financial success.

In an upcoming article, we will explore how companies can report on these disclosures. Subscribe to stay updated.

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Relevant Standards

ESRS E4

Disclosure Requirement E4-6 – Anticipated financial effects from material biodiversity and ecosystem-related risks and opportunities

42. The undertaking shall disclose its anticipated financial effects of material biodiversity-and ecosystem-related risks and opportunities.

43. The information required by paragraph 42 is in addition to the information on current financial effects on the entity’s financial position, financial performance and cash flows for the reporting period required under ESRS 2 SBM-3 para 48 (d).

44. The objective of this Disclosure Requirement is to provide an understanding of:
(a) anticipated financial effects due to material risks arising from biodiversity- and ecosystem-related impacts and dependencies and how these risks have (or could reasonably be expected to have) a material influence on the undertaking’s financial position, financial performance and cash flows over the short-, medium- and long-term; and
(b) anticipated financial effects due to material opportunities related to biodiversity- and ecosystem.

45. The disclosure shall include:
(a) a quantification of the anticipated financial effects in monetary terms before considering biodiversity and ecosystems-related actions or where not possible without undue cost or effort, qualitative information. For financial effects arising from material opportunities, a quantification is not required if it would result in disclosure that does not meet the qualitative characteristics of information (see ESRS 1 Appendix B Qualitative characteristics of information). The quantification of the anticipated financial effects in monetary terms may be a single amount or a range;
(b) a description of the effects considered, the impacts and dependencies to which they relate and the time horizons in which they are likely to materialise; and
(c) the critical assumptions used to quantify the anticipated financial effects as well as the sources and the levelof uncertainty of those assumptions.

Understanding and managing the impact of business activities on biodiversity and ecosystems is becoming increasingly important. Companies are now required to report specific metrics that show how their operations affect these natural environments. This helps stakeholders evaluate the company's performance in preserving biodiversity and minimizing negative impacts on ecosystems.

How companies can effectively disclose this information will be covered in another article.

2. Impact Metrics Related to Biodiversity and Ecosystems Change

To provide a clear picture of their environmental impact, companies must report various metrics related to biodiversity and ecosystem changes. These metrics include:

• Biodiversity-sensitive areas: Companies must disclose the number and area of their sites located in or near protected or key biodiversity areas if they are negatively impacting these regions.

• Land-use change: If a company contributes to changes in land, freshwater, or sea use, it may report on metrics like deforestation rates, changes in ecosystem management, and the fragmentation of habitats.

• Invasive species: Companies should report on how they manage the introduction and spread of invasive species, which can harm local ecosystems.

• Species health: Companies can disclose metrics related to the health of species populations, including their size, extinction risk, and changes in habitat quality.

• Ecosystem extent and condition: Metrics may include the area coverage of specific ecosystems, the quality of these ecosystems, and how well-connected different habitats are.

Companies must report metrics that show how their activities impact biodiversity and ecosystems, including areas like land-use change, species health, and the presence of invasive species. These disclosures help assess the company’s environmental performance and its efforts to minimize negative impacts on natural habitats.

3. Conclusion

By reporting these impact metrics, companies can demonstrate their commitment to protecting biodiversity and ecosystems. This transparency is essential for building trust with stakeholders and for ensuring that business practices align with global environmental goals.

In an upcoming article, we will explore how companies can report on these disclosures. Subscribe to stay updated.

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Relevant Standards

ESRS E4

Disclosure Requirement E4-5 – Impact metrics related to biodiversity and ecosystems change

33. The undertaking shall report metrics related to its material impacts on biodiversity and ecosystems.

34. The objective of this Disclosure Requirement is to enable an understanding of the performance of the undertaking against impacts identified as material in the materiality assessment on biodiversity and ecosystems change.

35. If the undertaking identified sites located in or near biodiversity-sensitive areas that it is negatively affecting (see paragraph 19(a)), the undertaking shall disclose the number and area (in hectares) of sites owned, leased or managed in or near these protected areas or key biodiversity areas.

36. If the undertaking has identified material impacts with regards to land-use change, or impacts on the extent and condition of ecosystems, it may also disclose their land-use based on a Life Cycle Assessment.

37. For datapoints specified in paragraphs 38 to 41, the undertaking shall consider its own operations.

38. If the undertaking has concluded that it directly contributes to the impact drivers of land-use change, freshwater-use change and/or sea-use change, it shall report relevant metrics. The undertaking may disclose metrics that measure:
(a) the conversion over time (e.g. 1 or 5 years) of land cover (e.g. deforestation or mining);
(b) changes over time (e.g. 1 or 5 years) in the management of the ecosystem (e.g., through the intensification of agricultural management, or the application of better management practices or forestry harvesting);
(c) changes in the spatial configuration of the landscape (e.g. fragmentation of habitats, changes in ecosystem connectivity);
(d) changes in ecosystem structural connectivity (e.g. habitat permeability based on physical features and arrangements of habitat patches); and
(e) the functional connectivity (e.g. how well genes or individuals move through land, freshwater and seascape).

39. If the undertaking concluded that it directly contributes to the accidental or voluntary introduction of invasive alien species, the undertaking may disclose the metrics it uses to manage pathways of introduction and spread of invasive alien species and the risks posed by invasive alien species.

40. If the undertaking identified material impacts related to the state of species, the undertaking may report metrics it considers relevant. The undertaking may:
(a) refer to relevant disclosure requirements in ESRS E1, ESRS E2, ESRS E3, and ESRS E5;
(b) consider population size, range within specific ecosystems as well as extinction risk. These aspects provide insight on the health of a single species’ population and its relative resilience to human induced and naturally occurring change;
(c) disclose metrics that measure changes in the number of individuals of a species within a specific area;
(d) disclose metrics on species at extinction risk that measure: i. the threat status of species and how activities/pressures may affect the threat status; or ii. changes in the relevant habitat for a threatened species as a proxy for the undertaking’s impact on the local population’s extinction risk.

41. If the undertaking identified material impacts related to ecosystems, it may disclose:
(a) with regard to ecosystems extent, metrics that measure area coverage of a particular ecosystem without necessarily considering the quality of the area being assessed, such as habitat cover. For example, forest cover is a measure of the extent of a particular ecosystem type, without factoring in the condition of the ecosystem (e.g., provides the area without describing the species diversity within the forest).
(b) with regard to ecosystems condition: i. metrics that measure the quality of ecosystems relative to a pre-determined reference state; ii. metrics that measure multiple species within an ecosystem rather than the number of individuals within a single species within an ecosystem (for example: scientifically established species richness and abundance indicators that measure the development of (native) species composition within an ecosystem against the reference state at the beginning of the first reportingperiod as well as the targeted state outlined in the Kunming-Montreal Global Biodiversity Framework, or an aggregation of species’ conservation statusif relevant); or iii. metrics that reflect structural components of condition such as habitat connectivity (i.e., how linked habitats are to eachother).

In today's business landscape, companies are increasingly expected to play a role in preserving biodiversity and ecosystems. This means setting clear, actionable targets that not only align with their environmental policies but also address their impacts, dependencies, risks, and opportunities related to biodiversity. In this article, we’ll break down what companies need to disclose about their biodiversity-related targets.

How companies can effectively disclose this information will be covered in another article.

2. Targets

Targets are specific goals or objectives that an organization sets to achieve within a certain timeframe. These targets help guide the organization’s efforts and measure its progress. For example, a company might set a target to reduce its impact on land degradation by 30% over the next couple of years.

Companies must disclose the specific targets they have set for biodiversity and ecosystem conservation. These targets should reflect the company’s commitment to protecting nature and be aligned with broader environmental frameworks like the Kunming-Montreal Global Biodiversity Framework and the EU Biodiversity Strategy for 2030.

When companies set these targets, they need to consider various factors:

• Ecological thresholds: Companies must explain if they have used ecological limits or thresholds when setting their targets, including how these thresholds were determined and allocated within the company.

• Alignment with policies: Targets should align with international, national, and company-specific biodiversity policies.

• Relevance to operations: Targets must be connected to the specific biodiversity impacts, risks, and opportunities related to the company’s operations, including its supply chain.

• Geographical scope: Companies should disclose the geographic areas covered by these targets, particularly if they operate in or near biodiversity-sensitive regions.

• Use of offsets: If the company uses biodiversity offsets to meet its targets, this must be disclosed, along with how these offsets fit within the broader strategy of avoiding, minimizing, restoring, or compensating for environmental impacts.

Companies must set and disclose specific targets related to biodiversity and ecosystem conservation, ensuring these targets align with global and national environmental frameworks. These targets should address the company’s ecological impacts, risks, and dependencies, and may involve considerations like ecological thresholds, geographic scope, and the use of biodiversity offsets.

3. Conclusion

Clear and transparent disclosure of biodiversity and ecosystem-related targets is vital for companies aiming to demonstrate their commitment to environmental sustainability. By setting and sharing these targets, companies not only show how they plan to manage their ecological impact but also how they contribute to global efforts in preserving nature.

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Relevant Standards

ESRS E2

Disclosure Requirement E4-4 – Targets related to biodiversity and ecosystems

29. The undertaking shall disclose the biodiversity and ecosystem-related targets it has set.

30. The objective of this Disclosure Requirement is to allow an understanding of the targets the undertaking has adopted to support its biodiversity and ecosystems policies and address its material related impacts, dependencies, risks and opportunities.

31. The description of the targets shall follow the mandatory content defined in ESRS 2 MDR-T Tracking effectiveness of policies and actions through targets.

32. The disclosure required by paragraph 29 shall include the following information: (a) whether ecological thresholds and allocations of impacts to the undertaking were applied when setting targets. If so, the undertaking shall specify: i. the ecological thresholds identified and the methodology used to identify such thresholds; ii. whether or not the thresholds are entity-specific and if so, how they were determined; and iii. how responsibility for respecting identified ecological thresholds is allocated in the undertaking;
(b) whether the targets are informed by, and/or aligned with the Kunming-Montreal Global Biodiversity Framework, relevant aspects of the EU Biodiversity Strategy for 2030 and other biodiversity and ecosystem-related national policies and legislation;
(c) how the targets relate to the biodiversity and ecosystem impacts, dependencies, risks and opportunities identified by the undertaking in relation to its own operations and its upstream and downstream value chain; (d) the geographical scope of the targets, if relevant;
(e) whether or not the undertaking used biodiversity offsets in setting its targets; and (f) to which of the layers of the mitigation hierarchy the target can be allocated (i.e., avoidance, minimisation, restoration and rehabilitation, compensation or offsets).

As businesses face increasing pressure to address environmental concerns, transparency about how they manage biodiversity and ecosystem-related impacts, risks, and opportunities is becoming essential. Companies must now share detailed information on the processes, policies, actions, and resources they use to protect biodiversity and ecosystems. In this article, we'll break down these requirements.

How companies can effectively disclose this information will be covered in another article.

2. Impact, Risk, and Opportunity Management

Impact, Risk, and Opportunity (IRO) are important elements in the ESRS:

• Impact: This refers to the effects that a company's actions have on the environment, society, and the economy. Impacts can be positive (beneficial) or negative (harmful).

• Risk: Risks are potential events or conditions that could cause harm or loss to a company. These can stem from various sources, including financial, operational, environmental, or social factors.

• Opportunity: Opportunities are potential favorable circumstances or conditions that a company can exploit to its advantage. They can lead to growth, innovation, and a competitive edge.

Identifying and Assessing Biodiversity-Related Impacts, Risks, and Opportunities

Companies must describe how they identify and assess biodiversity and ecosystem-related impacts, risks, dependencies, and opportunities. This involves:

• Impacts on biodiversity and ecosystems: Identifying how a company’s operations, both on-site and across the supply chain, impact local and global biodiversity, including any potential harm to sensitive species and habitats.

• Dependencies on ecosystem services: Assessing how the business relies on ecosystem services (e.g., water supply, pollination) and the risks posed by their disruption.

• Physical and transition risks: Evaluating risks from environmental changes (e.g., habitat loss, regulatory shifts) and how these could impact the business.

• Community involvement: Engaging with affected communities to assess the social impacts of business activities on shared resources, and incorporating their input into the company’s sustainability strategy.

Companies should also consider using biodiversity scenario analysis to inform their assessments over the short, medium, and long term, providing insights into potential future risks and opportunities.

Biodiversity and Ecosystem Policies

Companies need to describe their policies for managing biodiversity and ecosystem-related impacts, risks, and opportunities. This includes:

• Protection policies: Implementing policies to protect biodiversity-sensitive areas near operational sites.

• Sustainable practices: Adopting sustainable land, agriculture, and ocean management practices to minimize negative impacts on ecosystems.

• Traceability and monitoring: Ensuring traceability of products and materials that affect biodiversity, along with regular monitoring and reporting on ecosystem health.

These policies should be aligned with the company’s broader sustainability objectives and be part of an integrated approach to environmental stewardship.

Actions and Resources for Biodiversity Policies

Companies must disclose the actions they are taking and the resources they are allocating to protect biodiversity and ecosystems. Key points include:

• Key actions: Listing significant actions, such as restoration projects, conservation efforts, and the use of biodiversity offsets to mitigate unavoidable impacts.

• Outcome of actions: Providing details on the effectiveness of these actions, including any measurable improvements in ecosystem health or biodiversity.

• Financial commitment: Relating significant expenditures for biodiversity-related projects to financial statements and key performance indicators.

This disclosure helps stakeholders understand the company’s commitment to biodiversity conservation and the tangible steps it is taking to achieve these goals.

Companies must identify and assess how their operations impact biodiversity and ecosystems, including potential risks and dependencies. This process involves evaluating physical and transition risks, consulting with affected communities, and considering future scenarios to better manage these environmental challenges.

3. Conclusion

Clear and comprehensive disclosure of biodiversity-related processes, policies, actions, and resources is crucial for companies aiming to demonstrate their commitment to sustainability. By detailing their approach to managing biodiversity impacts, risks, and opportunities, companies can show that they are not only aware of environmental challenges but are actively working to address them.

In an upcoming article, we will explore how companies can report on these disclosures. Subscribe to stay updated.

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Relevant Standards

ESRS E4

Disclosure Requirement related to ESRS 2 IRO-1 Description of processes to identify and assess material biodiversity and ecosystem-related impacts, risks, dependencies and opportunities

17. The undertaking shall describe its process to identify material impacts, risks, dependencies and opportunities. The description of the process shall include whether and how the undertaking:
(a) identified and assessed actual and potential impacts on biodiversity and ecosystems at own site locations and in the upstream and downstream value chain, including assessment criteria applied;
(b) identified and assessed dependencies on biodiversity and ecosystems and their services at own site locations and in the upstream and downstream value chain, including assessment criteria applied, and, if this assessment includes ecosystem services that are disrupted orlikely to be;
(c) identified and assessed transition and physical risks and opportunities related to biodiversity and ecosystems, including assessment criteria applied based on its impacts and dependencies;
(d) considered systemic risks;
(e) conducted consultations with affected communities on sustainability assessmentsof shared biological resources and ecosystems and, in particular: i. when a site, a raw material production or sourcing is likely to negatively impact biodiversity and ecosystems, the identification of the specific sites, raw materials production or sourcing with negative or potentially negative impacts on affected communities; ii. when affected communities are likely to be impacted, the undertaking, shall disclose how these communities were involved in the materiality assessment; and iii. with respect to impacts on ecosystem services of relevance to affected communities in its own operations, the undertaking shall indicate how negative impacts may be avoided. If these impacts are unavoidable, the undertaking may indicate its plans to minimise them and implement mitigation measures that aim to maintain the value and functionality of priority services.

18. The undertaking may disclose whether and how it has used biodiversity and ecosystems scenario analysis to inform the identification and assessment of material risks and opportunities over short-, medium- and long-term time horizons. If the undertaking has used such scenario analysis, it may disclose the following information:
(a) why the considered scenarios were selected;
(b) how the considered scenarios are updated according to evolving conditions and emerging trends; and
(c) whether the scenarios are informed by expectations published by authoritative intergovernmental bodies, such as the Convention for Biological Diversity and, where relevant, by scientific consensus, such as that expressed by the Intergovernmental Science-policy Platform on Biodiversity and Ecosystem Services (IPBES).

19. The undertaking shall specifically disclose:
(a) whether or not it has sites located in or near biodiversity-sensitive areas and whether activities related to these sites negatively affect these areas by leading to the deterioration of natural habitats and the habitats of species and to the disturbance of the species for which a protected area has been designated; and
(b) whether it has been concluded that it is necessary to implement biodiversity mitigation measures, such as those identified in: Directive 2009/147/EC of the European Parliament and of the Council on the conservation of wild birds; Council Directive 92/43/EEC on the conservation of natural habitats and of wild fauna and flora; an Environmental Impact Assessment (EIA) as defined in Article 1(2), point (g), of Directive 2011/92/EU of the European Parliament and of the Council83 on the assessment of the effects of certain public and private projects on the environment; and for activities located in third countries, in accordance with equivalent national provisions or international standards, such as the International Finance Corporation (IFC) Performance Standard 6: Biodiversity Conservation and Sustainable Management of Living Natural Resources.

Disclosure Requirement E4-2 – Policies related to biodiversity and ecosystems

20. The undertaking shall describe its adopted policies to manage its material impacts, risks, dependencies, and opportunities related to biodiversity and ecosystems.

21. The objective of this Disclosure Requirement is to enable an understanding of the extent to which the undertaking has policies that address the identification, assessment, management and/or remediation of its material biodiversity and ecosystem- related impacts, dependencies, risks and opportunities.

22. The disclosure required by paragraph 20 shall contain the information on the policies the undertaking has in place to manage its material impacts, risks, dependencies and opportunities related to biodiversity and ecosystems in accordance with ESRS 2 MDR-P Policies adopted to manage material sustainability matters).

23. In addition to the provisions of ESRS 2 MDR-P the undertaking shall describe whether and how its biodiversity and ecosystems-related policies:
(a) relate to the matters specified in ESRS E4 AR 4;
(b) relate to its material biodiversity and ecosystems-related impacts;
(c) relate to material dependencies and material physical and transition risks and opportunities;
(d) support traceability of products, components and raw materials with material actual or potential impacts on biodiversity and ecosystems along the value chain;
(e) address production, sourcing or consumption from ecosystems that are managed to maintain or enhance conditions for biodiversity, as demonstrated by regular monitoring and reporting of biodiversity status and gains or losses; and
(f) address social consequences of biodiversity and ecosystems-related impacts.

24. The undertaking shall specifically disclose whether it has adopted:
(a) biodiversity and ecosystem protection policy covering operational sites owned, leased, or managed in or near a biodiversity sensitive area;
(b) sustainable land / agriculture practices or policies;
(c) sustainable oceans / seas practices or policies; and
(d) policies to address deforestation.

Disclosure Requirement E4-3 – Actions and resources related to biodiversity and ecosystems

25. The undertaking shall disclose its biodiversity and ecosystems-related actions andthe resources allocated to their implementation.

26. The objective of this Disclosure Requirement is to enable an understanding of the key actions taken and planned that significantly contribute to the achievement of biodiversity and ecosystems-related policy objectives and targets.

27. The description of key actions and resources shall follow the mandatory content defined in ESRS 2 MDR-A Actions and resources in relation to material sustainability matters.

28. In addition, the undertaking :
(a) may disclose how it has applied the mitigation hierarchy with regard to its actions (avoidance, minimisation, restoration/rehabilitation, and compensation or offsets);
(b) shall disclose whether it used biodiversity offsets in its action plans. If the actions contain biodiversity offsets, the undertaking shall include the following information: i. the aim of the offset and key performance indicators used; ii. the financing effects (direct and indirect costs) of biodiversity offsets in monetary terms; and; iii. a description of offsets including area, type, the quality criteria applied and the standards that the biodiversity offsets comply with;
(c) shall describe whether and how it has incorporated local and indigenous knowledge and nature-based solutions into biodiversity and ecosystems-related actions.

ESRS 2

Disclosure Requirement related to ESRS 2 IRO-1 – Description of the processes to identifyand assess material impacts, risks and opportunities

6. When describing the process to identify material impacts, risks and opportunities in relation to business conduct matters, the undertaking shall disclose all relevant criteria used in the process, including location,activity, sector and the structure of the transaction.

In today’s rapidly changing world, businesses are increasingly held accountable for their impact on the environment. Awareness of the importance of biodiversity and ecosystems is growing. Requirements are introduced that require companies to consider their environmental impact, also in relation to biodiversity and ecosystems. Let’s break down these requirements.

How you can disclose this information will be covered in another article.

2. Strategy

Simply said, strategy is a plan of action designed to achieve long-term or overall goals. It's about making decisions and allocating resources to reach desired outcomes, often considering various internal and external factors that might affect success. In the context of the ESRS, strategy involves how companies integrate sustainability into their business models and operations.

Transition Plan for Biodiversity

Companies must disclose their transition plans concerning biodiversity and ecosystem protection. This means they need to explain their past, present, and future efforts to mitigate their impacts on biodiversity and ecosystems, aligning with global and regional environmental goals like the Kunming-Montreal Global Biodiversity Framework and the EU Biodiversity Strategy for 2030. Key elements of this disclosure include:

1. Biodiversity impact targets: Companies must explain how their biodiversity protection goals align with broader environmental targets, such as maintaining biosphere integrity and preventing land-system change.

2. Actions for ecosystem protection: They should detail the key actions they plan to take to reduce their impact on ecosystems, including changes in their operations, product and service offerings, and the adoption of nature-positive practices.

3. Investment and funding: Companies need to provide information on their investments and funding that support their biodiversity and ecosystem protection plans, including key performance indicators related to sustainable practices.

4. Impact on sensitive areas: A qualitative assessment of potential impacts on biodiversity-sensitive areas, including the location of key sites, activities affecting these areas, and the ecological status of these locations.

5. Alignment with environmental regulations: For activities covered by local, national, or global biodiversity and ecosystem regulations, companies must explain their plans to align with these criteria.

6. Capital expenditures: Disclosure of significant investments in activities that could negatively affect biodiversity, such as land use changes or resource extraction.

7. Overall business strategy: How the transition plan fits within the company's broader business strategy and financial planning.

8. Approval and progress: Whether the transition plan is approved by the company’s top management and the progress made in implementing it.

If a company does not have a transition plan for biodiversity and ecosystems, it must indicate if and when it plans to adopt one.

Material Impacts, Risks, and Opportunities

Companies must also explain how biodiversity and ecosystem-related risks and opportunities affect their strategy and business model. This involves:

1. Biodiversity-related risks: Identifying whether risks are physical (like habitat destruction), transitional (like new environmental regulations), or systemic (like the loss of ecosystem services).

2. Resilience of strategy: Describing how the company's strategy and business model can withstand changes related to biodiversity and ecosystems, including the use of scenario analyses.

3. Material impacts: Disclosing the significant effects of biodiversity and ecosystem-related risks and opportunities on their business model, value chain, and decision-making processes. This includes financial effects and the time horizons for these impacts.

4. Response plans: Outlining the company's plans to manage these risks and opportunities, including any strategic changes necessary to mitigate negative impacts or capitalize on opportunities.

5. Resilience analysis: Providing a qualitative and, where applicable, quantitative analysis of the company's resilience to biodiversity and ecosystem impacts.

Companies should keep stakeholders informed about changes to their material impacts, risks, and opportunities compared to the previous reporting period.

Companies must disclose their plans and actions to protect biodiversity and ecosystems, aligning with global environmental goals and assessing the impact on their business strategies. They should also outline how biodiversity-related risks and opportunities affect their operations, including resilience and financial implications.

3. Conclusion

By requiring businesses to disclose how they adapt their strategies to environmental risks and opportunities, the standards aim to create a more sustainable future. Companies that successfully integrate these considerations into their business models not only contribute to environmental protection but also enhance their own resilience and long-term success.

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Relevant Standards

ESRS E4

Disclosure Requirement E4-1 – Transition plan and consideration of biodiversity and ecosystems in strategy and business model

11. The undertaking shall disclose how its biodiversity and ecosystem impacts, dependencies, risks and opportunities originate from and trigger adaptation of its strategy and business model.

12. The objective of this Disclosure Requirement is to enable an understanding of the resilience of the undertaking’s strategy and business model in relation to biodiversity and ecosystems, and of the compatibility of the undertaking’s strategy and business model with regard to relevant local, national and global public policy targets related to biodiversity and ecosystems.

13. The undertaking shall describe the resilience of its strategy and business model in relation to biodiversity and ecosystems. The description shall include:
(a) an assessment of the resilience of the current business model and strategy to biodiversity and ecosystems-related physical, transition and systemic risks;
(b) the scope of the resilience analysis in relation to the undertaking’s own operations and its upstream and downstream value chain and in relation to the risks considered in that analysis;
(c) the key assumptions made;
(d) the time horizons used;
(e) the results of the resilience analysis; and (f) the involvement of stakeholders, including, where appropriate, holders of indigenous and local knowledge.

14. If information specified in this disclosure requirement is disclosed by the undertaking as part of the information required under ESRS 2 SBM-3, the undertaking may refer to the information it has disclosed under ESRS 2 SBM-3.

15. The undertaking may disclose its transition plan to improve and, ultimately, achieve alignment of its business model and strategy with the vision of the Kunming-Montreal Global Biodiversity Framework and its relevant goals and targets, the EU Biodiversity Strategy for 2030, and with respecting planetary boundaries related to biosphere integrity and land-system change.

Disclosure Requirement SBM 3 – Material impacts, risks and opportunities and their interaction with strategy and business model

16. The undertaking shall disclose:
(a) a list of material sites in its own operations, including sites under its operational control, based on the results of paragraph 17(a). The undertaking shall disclose these locations by: i. specifying the activities negatively affecting biodiversity sensitive areas; ii. providing a breakdown of sites according to the impacts and dependencies identified, and to the ecological status of the areas (with reference to the specific ecosystem baseline level) where they are located; and iii. specifying the biodiversity-sensitive areas impacted, for users to be able to determine the location and the responsible competent authority with regards to the activities specified in paragraph 16(a) i.
(b) whether it has identified material negative impacts with regards to land degradation, desertification or soil sealing; and
(c) whether it has operations that affect threatened species.

ESRS 2

Disclosure Requirement SBM-3 - Material impacts, risks and opportunities and their interaction with strategy and business model

46. The undertaking shall disclose its material impacts, risks and opportunities and how they interact with its strategy and business model.

47. The objective of this Disclosure Requirement is to provide an understanding of the material impacts, risks and opportunities as they result from the undertaking’s materiality assessment and how they originate from and trigger adaptation of the undertaking’s strategy and business model including its resources allocation. The information to be disclosed about the management of the undertaking’s material impacts, risks and opportunities is prescribed in topical ESRS and in sector-specific standards, which shall be applied in conjunction with the Minimum Disclosure Requirements on policies, actions and targets established in this Standard.

48. The undertaking shall disclose:
(a) a brief description of its material impacts, risks and opportunities resulting from its materiality assessment (see Disclosure Requirement IRO-1 of this standard), including a description of where in its business model, its own operations and its upstream and downstream value chain these material impacts, risks and opportunities are concentrated;
(b) the current and anticipated effects of its material impacts, risks and opportunities on its business model, value chain, strategy and decision-making, and how it has responded or plans to respond to these effects, including any changes it has made or plans to make to its strategy or business model as part of its actions to address particular material impacts or risks, or to pursue particular material opportunities;
(c) with reference to the undertaking’s material impacts: i. how the undertaking’s material negative and positive impacts affect (or, in the case of potential impacts, are likely to affect) people or the environment; ii. whether and how the impacts originate from or are connected to the undertaking's strategy and business model; iii. the reasonably expected time horizons of the impacts; and iv. whether the undertaking is involved with the material impacts through its activities or because of its business relationships, describing the nature of the activities or business relationships concerned;
(d) the current financial effects of the undertaking’s material risks and opportunities on its financial position, financial performance and cash flows and the material risks and opportunities for which there is a significant risk of a material adjustment within the next annual reporting period to the carrying amounts of assets and liabilities reported in the related financial statements;
(e) the anticipated financial effects of the undertaking’s material risks and opportunities on its financial position, financial performance and cash flows over the short-, medium- and long-term, including the reasonably expected time horizons for those effects. This shall include how the undertaking expects its financial position, financial performance and cash flows to change over the short, medium- and long-term, given its strategy to manage risks and opportunities, taking into consideration: i. its investment and disposal plans (for example, capital expenditure, major 47 acquisitions and divestments, joint ventures, business transformation, innovation, new business areas and asset retirements), including plans the undertaking is not contractually committed to; and ii. its planned sources of funding to implement its strategy.
(f) information about the resilience of the undertaking's strategy and business model regarding its capacity to address its material impacts and risks and to take advantage of its material opportunities. The undertaking shall disclose a qualitative and, when applicable, a quantitative analysis of the resilience, including how the analysis was conducted and the time horizons that were applied as defined in ESRS 1 (see ESRS 1 chapter 6 Time horizons). When providing quantitative information, the undertaking may disclose single amounts or ranges;
(g) changes to the material impacts, risks and opportunities compared to the previous reporting period; and
(h) a specification of those impacts, risks and opportunities that are covered by ESRS Disclosure Requirements as opposed to those covered by the undertaking using additional entity-specific disclosures.

49. The undertaking may disclose the descriptive information required in paragraph alongside the disclosures provided under the corresponding topical ESRS, in which case it shall still present a statement of its material impacts, risks and opportunities alongside its disclosures prepared under this chapter of ESRS 2.

Biodiversity is important because it ensures a variety of plants, animals, and ecosystems, which together create a balanced and healthy environment that supports life, including us. In this Substack post, we'll explore ESRS E4 and how it could affect companies.

ESRS E4 guides companies to report their biodiversity impact, mitigation efforts, and strategies for a sustainable future. Whether you're a sustainability enthusiast or a business leader, this article provides essential insights.

The article is structured as follows:

1. Introduction

2. What are Biodiversity and Ecosystems?

3. Table of Definitions and Acronyms

4. Objective of ESRS E4

5. Governance

6. Strategy

7. Impact, Risk, and Opportunity Management

8. Metrics and Targets

9. Conclusion

After reading this article you will have a better understanding of ESRS E4 and how it affects companies.

2. What are Biodiversity and Ecosystems?

Biodiversity refers to the variety of life on Earth, including plants and animals. An ecosystem is a specific geographic region where various elements like plants, animals, weather, and landscapes interact with each other.

Biodiversity and ecosystems play a vital role in maintaining a balanced and healthy planet. They provide essential services like clean air, water, and food. Additionally, diverse ecosystems are more resilient to environmental changes such as climate change.

Since 1955, the changes in biodiversity caused by human activities have been more significant than ever before. This is mainly because of factors like losing natural habitats for farming and building, using resources too much, pollution, invasive species, and changes in the climate1.

Because, biodiversity and ecosystems are so important and under stress, these are included in the CSRD as ESRS E4.

3. Table of Definitions and Acronyms

When talking about ESRS E4, biodiversity, and ecosystems you will encounter multiple definitions and acronyms. Below is a table that presents these definitions and acronyms.

4. Objective of ESRS E4

So, what is the ESRS E4 about? Let’s begin by deciphering its objectives. We'll break down its objectives into five key components:

1. Impact on Biodiversity and Ecosystems: Describe how the organization influences biodiversity and ecosystems, both positively and negatively, considering actual and potential impacts and its contribution to the drivers of biodiversity loss and degradation.

2. Actions Taken: Outline the actions the organization has undertaken to prevent or mitigate negative impacts on biodiversity and ecosystems, including results achieved, and efforts to protect and restore these elements while addressing associated risks and opportunities.

3. Adaptation Strategies: Discuss the organization's plans and capacity to align its strategy and business model with planetary boundaries, the Kunming-Montreal Global Biodiversity Framework, EU Biodiversity Strategy for 2030, EU Birds and Habitats Directives, and the Marine Strategy Framework Directive.

4. Material Risks and Opportunities: Present the nature, type, and extent of the organization's significant risks, dependencies, and opportunities related to biodiversity and ecosystems, clarifying how the organization manages them.

5. Financial Impacts: Explore the financial effects on the organization over short, medium, and long-term horizons resulting from material risks and opportunities arising from its impacts and dependencies on biodiversity and ecosystems.

Based on these objectives a company might need to disclose several pieces of information, depending on whether they are material to the company. This information can be related to governance, strategy, impacts, risks, opportunities, metrics, and targets. More on this in the next sections.

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5. Governance

Even though ESRS E4 doesn't have detailed disclosure requirements (DRs) for governance, companies might still need to provide information about how they handle impacts, risks, and opportunities (IRO) if they are deemed material.

6. Strategy

For ESRS E4, there are two main DRs. The first is a transition plan and the consideration of biodiversity and ecosystems in the strategy and business model of the company. This disclosure aims to provide insights into the resilience of the current business model and strategy concerning physical, transition, and systemic risks related to biodiversity and ecosystems. The company may also disclose its transition plan to align with global biodiversity goals and targets.

The second is IRO related to biodiversity and ecosystems and their interaction with strategy and the business model. This DR requires companies to disclose a list of material sites in their operations, specifying activities negatively affecting biodiversity-sensitive areas. They should provide a breakdown of sites based on impacts, dependencies, and ecological status, allowing users to understand the location and responsible authorities. The disclosure also addresses whether the company has identified material negative impacts related to land degradation, desertification, soil sealing, and operations affecting threatened species.

ESRS E4 introduces two key strategy DRs. The first focuses on a transition plan and the company's business model and strategy in context of biodiversity and ecosystems. The second is about material IRO related to biodiversity and ecosystems and their interaction with strategy and the business model.

7. Impact, Risk and Opportunity Management

This section is about the impacts, risks, and opportunities related to biodiversity and ecosystems and is subdivided into three sections.

7.1. Identifying and Assessing Biodiversity and Ecosystems-Related IRO

Understanding how companies manage the IRO associated with biodiversity and ecosystems is an important component of ESRS E4. Companies are required to describe their process for identifying and assessing IRO. This includes a comprehensive analysis of:

• Identification Process:

  • Describe how the company identifies and assesses actual and potential impacts on biodiversity and ecosystems at its sites and in the value chain.

  • Explain the assessment of dependencies on biodiversity, ecosystems, and their services, including disruption criteria and considerations of ecosystem services.

• Risk and Opportunity Assessment:

  • Detail the evaluation of transition and physical risks and opportunities related to biodiversity and ecosystems, specifying assessment criteria based on impacts and dependencies.

  • Highlight whether the company considered systemic risks in its assessment.

• Community Consultations:

  • Discuss the company's consultations with affected communities on sustainability assessments, addressing negative impacts on biodiversity and ecosystems.

  • If negative impacts are unavoidable, disclose plans to minimize and implement mitigation measures, involving affected communities.

• Scenario Analysis:

  • Reveal whether the company used biodiversity and ecosystems scenario analysis to identify material risks and opportunities.

  • If used, provide insights into scenario selection, updates, and alignment with authoritative intergovernmental bodies' expectations.

7.2. Policies for Managing Material IRO

Companies must reveal their adopted policies to manage material IRO related to biodiversity and ecosystems. The goal is to understand the extent to which these policies address the identification, assessment, and management of biodiversity-related matters. For example a company might need to adopt a biodiversity and ecosystem protection policy for operational sites within or near biodiversity-sensitive areas.

7.3. Biodiversity and Ecosystems Actions and Resources

This section is about disclosing actions and resources related to biodiversity and ecosystems. The goal is to provide insight into the key measures taken or planned by the company that significantly contribute to achieving policy objectives and targets related to biodiversity and ecosystems. The company should outline its actions and the resources allocated to implement these measures.

Moreover, the company may disclose how it applies the mitigation hierarchy, including actions like avoidance, minimization, restoration, and compensation or offsets.

Lastly, the disclosure addresses the incorporation of local and indigenous knowledge and nature-based solutions into biodiversity and ecosystems-related actions. This approach ensures a comprehensive understanding of the company's commitment to sustainable practices and environmental conservation.

This part of ESRS 4 focuses on how companies identify, assess, and manage IRO. The company might need to disclose information about community consultations, scenario analysis, and the mitigation hierarchy for sustainable practices and conservation.

8. Metrics and Targets

8.1. Biodiversity and Ecosystem Targets

Companies must disclose biodiversity and ecosystem-related targets. The disclosure should cover ecological thresholds, alignment with global and national strategies, relation to identified impacts, geographical scope, use of biodiversity offsets, and allocation within the mitigation hierarchy.

8.2. Impact Metrics on Biodiversity and Ecosystem Change

This section focuses on reporting metrics related to material impacts on biodiversity and ecosystems. Companies should disclose the number and area of sites affecting biodiversity-sensitive areas, along with metrics related to land-use change and impacts on ecosystems based on Life Cycle Assessment. Additional impact metrics include population size, range, extinction risk, and changes in relevant habitats for threatened species. For ecosystems, metrics cover area coverage and conditions, including quality relative to a reference state, species diversity, and structural components like habitat connectivity.

8.3. Anticipated Financial Effects

Companies need to disclose the anticipated financial effects resulting from material risks and opportunities linked to biodiversity and ecosystems-related impacts. This includes quantifying anticipated financial effects, providing descriptions of considered effects, related impacts, and likely time horizons. Critical assumptions used in estimates should be clarified and the sources and levels of uncertainty associated with these assumptions should be addressed.

Companies must disclose biodiversity and ecosystem targets. Impact metrics include site details and broader ecosystem assessments. Anticipated financial effects from biodiversity risks and opportunities require quantification and clear assumptions.

9. Conclusion

ESRS E4 is important for addressing the impact of human activities on biodiversity and ecosystems. It guides companies to report their impact, mitigation efforts, and strategies. It includes components like governance, strategy, impact, risk, opportunity management, metrics, and targets. These disclosures help stakeholders understand a company's impact and financial resilience in the context of biodiversity and ecosystems. We need healthy ecosystems and biodiversity for services like clean air, water, and food. ESRS E4 plays a crucial role in preserving these resources.

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