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Why more firms think mandatory biodiversity risk reporting is needed

Results of CDP's latest climate questionnaire reveal growing concern about nature risks is not yet translating into real-world actions from businesses.

reports on table with biodiversity

GreenBiz collage. Reports image via Shutterstock/Tetiana Yurchenko and biodiversity icon via Shutterstock/bsd studio.

As governments prepare to weigh proposals for mandatory corporate nature disclosure rules at the COP15 Biodiversity Summit next week, the latest data from environmental disclosure platform CDP has highlighted the shortfalls of the currently purely voluntary approach.

Unveiling the results of its first collection of corporate biodiversity data, CDP on Nov. 30 warned that widespread concern about nature among companies is not being matched by real-world actions that could slow the rate of biodiversity loss and better protect the crucial ecosystem services that underpin the global economy.

CDP's 2022 climate change questionnaire saw a total of 7,760 of companies respond to a new set of biodiversity-related questions, amounting to an 87 percent hit rate, it said. It revealed that more than 30 percent of responding firms had made a public commitment or endorsed biodiversity-related initiatives, with 25 percent planning to do so within the next two years.

But despite growing engagement with biodiversity risks, less than half of companies who completed the survey reported that they had taken action to analyze or reduce their impacts on biodiversity over the last 12 months, CDP said.

More than 30% of responding firms had made a public commitment or endorsed biodiversity-related initiatives.

Some 70 percent of companies that filled in the questionnaire revealed they had not assessed the impact of their value chain on biodiversity, and more than 55 percent said they had not taken action to progress their nature-related commitments over the last year. These figures were more stark when it came to sectors known for having significant nature impacts, such as the manufacturing and fashion industries.

Corporate nature disclosures remain in their infancy, trailing the more popular — and increasingly mandated — world of climate-related risk reporting. As such, there remains a lack of standardization of reporting frameworks and methodologies, with a number of groups in the process of drawing up approaches for how non-state entities can measure their exposure to climate risk, including the Taskforce on Nature-related Financial Disclosures (TNFD), the Science Based Targets Network (SBTN), and the World Business Council for Sustainable Development (WBCSD).

However, there are high hopes any headline global nature agreement to emerge from the COP15 Biodiversity Summit could include a new requirement for all large businesses and financial institutions to better disclose biodiversity risks and their dependencies on nature. Proponents have argued the introduction of mandatory nature-risk reporting would inspire more environmentally responsible business decisions and give investors a more granular understanding of the biodiversity-related risks in their portfolios. Taken together, this could lead to a fundamental reevaluation of the importance of protecting nature and reversing species decline.

Mandatory nature disclosures have garnered significant support from companies and financiers ahead of the Montreal Summit, with 330 businesses with more than $1.5 trillion in combined revenues last month calling on countries to ensure nature risk reporting makes it into any final deal. Aviva Investors, GSK, H&M Group, Holcim, IKEA, Sainsbury's, Tata Steel and Unilever were among the firms to urge heads of states to move beyond the current voluntary approach to the issue.

There are high hopes any headline global nature agreement to emerge from the COP15 Biodiversity Summit could include a new requirement for all large businesses and financial institutions to better disclose biodiversity risks.

CDP said the findings of the disclosure exercise further underscored the case for nature-related disclosures being mandatory, adding that it stood ready to put any measures included in any final agreement into practice using its disclosure platform.

"CDP's new data shows that the voluntary progress already made should be all policymakers need to finally make biodiversity disclosure mandatory," said Sue Armstrong Brown, global director for environmental standards at CDP. "Governments must seize this chance and create the enabling environment companies need to drive forward their commitments by agreeing to a clear and ambitious Global Biodiversity Framework."

Armstrong Brown observed that corporates' willingness to disclosure biodiversity information was in line with growing corporate interest in nature, noting that forest and water-related disclosures through CDP's platform had increased in 2022.

But she noted that significant work needed to be done to ensure reporting translated into measures that could reduce the private sector's impacts on nature. "Even when some companies are ahead of the curve and recognizing [biodiversity] risks, commitments are not turning into action at the pace we need to boost resilience, and to halt and reverse biodiversity loss," she said. "COP15 must close the loop and turn interest into action."

Even when some companies are ahead of the curve and recognizing [biodiversity] risks, commitments are not turning into action at the pace we need.

Eve Zabey, executive director of Business for Nature group behind the business call for mandatory nature disclosures, said CDP's findings provided further evidence of the need for "bold political leadership" at the U.N. summit.

"As part of an ambitious Global Biodiversity Framework, negotiators in Montreal must make it mandatory and require companies to assess and disclose their impacts and dependencies on nature," she said. "More than 330 business and financial institutions — including more than 100 multi-billion-dollar revenue companies — support this ask. This alone will go a huge way in transforming our economies and repairing our broken relationship with nature."

COP15 could be the moment where nature reporting catches up with, or even leapfrogs ahead of, climate reporting and becomes a mainstay of big business activity around the world. And it could be argued that among many proposals in country negotiating teams' intrays in Montreal, the introduction of private sector nature reporting is not only one of the most effective, but also one of lowest cost and least politically charged items on the agenda.

However, the proposals can still expect pushback from those governments and business groups that frequently characterize environmental reporting requirements as unnecessary "red tape," despite ample evidence that businesses that disclose risks effectively tend to be both better managed and more effective at delivering on environmental and financial goals. It remains to be seen how the issue will play out in practice as battlelines emerge in negotiating rooms and countries fight to defend their own interests. But what is clear is that a growing band of high-profile businesses want to see mandatory biodiversity risk reporting rules, and if possible they would like to see them enacted as soon as possible.

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