What nature means to business

The loss of biodiversity is a key threat to the economy and businesses. Nature sustains the conditions for life through ecosystem services – without which the economy and businesses would not function. Ecosystem services include, for example, materials and energy from nature (production services), potable groundwater and the sequestration of air pollution by plants (regulating services), and non-material services, such as scenery that refreshes the mind (cultural services). The World Economic Forum estimated (2020a) that more than half of global GDP is moderately or highly dependent on natural ecosystem services.

Biodiversity loss is currently accelerating, leading to a decline in ecosystem services. A key reason for this is that those who exploit natural assets do not have to pay the full price of the externalities of their actions. There is already an established market for some of the material services provided by nature, such as biomass and food production. However, for many intangi ble services, such as erosion regulation, maintaining biodiversity or carbon sequestration, there is no established market. The Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) has outlined key direct drivers for biodiversity loss: 1) changes in land and sea use, 2) direct exploitation of species 3) climate change, 4) pollution, and 5) invasive species. The effects of these drivers on nature can also be observed in Finland, where biodiversity loss is also taking place.

Biodiversity loss entails risks for businesses, as practically all business is either directly or indirectly dependent on nature. Business risks can materialise directly, for example through fluctuations in the availability and price of raw materials. But also, indirectly due to weakened regulating services. Climate change, can alter weather patterns or soil and sea ecosystems, where the raw material is sourced. IPBES has estimated the global monetary value of food production directly dependent on pollinators at $235–577 billion.

All companies are connected to a wide range of ecosystem services through their value chains. In addition to their direct dependencies, every company should consider how their operations are indirectly dependent on ecosystem services, in order to manage the business risks associated with them. Potential business risks relate to the physical conditions for business continuity, changes in legislation, access to and the conditions of financing, reputation, branding, and generally to how well companies can adapt to the demands of the operating environment (transition risk).

In addition to being dependent on ecosystem services, companies’ activities also impact nature. Negative impacts include the fragmentation of ecosystems due to land and water area use, water use, greenhouse gas emissions, soil and water pollution, waste, and the spread of invasive species. It is estimated that most of the human-induced pressure on biodiversity is due to the use and processing of raw materials in four value chains: 1) food 2) infrastructure, such as buildings, IT-infrastructure, and transport infrastructure, 3) fashion and 4) energy (Kurth et al. 2021). Companies could also have a positive impact on nature. Examples include regenera tive farming methods in food and textile production, and sustainable forest management. Companies could also directly restore natural areas.

The business environment is currently undergoing many changes. The financial sector has started to analyse the nature-related dependencies and impacts of companies. At EU level, new measures are being prepared to address the effects and dependencies from nature. In addition, consumer pressure and demand for more sustainable products and services is on the rise. Meeting external expectations is important to ensure the future viability and sustainability of a business. The EU’s Transparent and ALIGN projects are developing methodologies and measurements for examining and modelling business operations’ dependencies and impacts on ecosystem services.

There are significant costs associated with biodiversity loss, but also business opportunities with halting it. The World Economic Forum (2020b) estimated that a nature-positive transition could generate over 10 trillion dollars in annual business benefits and create nearly 400 million new jobs by 2030. The risks associated with biodiversity loss could be turned into opportunities through product design and development, by developing new business and production models (such as through circular economy), certifying products and services, and by taking concrete action to improve the state of nature locally. The benefits from these can be divided into material and non-material benefits. Non-material benefits include a social license to operate, improved brand image, reputation, and attractiveness, as well as business resilience. Material benefits could include a more predictable supply of raw materials, more efficient operations, cheaper funding, new products and markets.

A changing business environment can open up opportunities for entirely new ways of doing business. For example, as biodiversity offsetting becomes more established, there may be a demand and supply around it in the form of expert services, brokerages, verification parties, landowners, and restoration or other project implementation partners. In addition, an increasing demand for nature-based solutions particularly within the built environment or regenerative agriculture could create new business opportunities. Circular economy business models could boost competitiveness by creating new sources of income – while reducing the pressure on nature from raw material extraction and production. Forward-thinking organisa tions are likely to be able to manage these risks, find new business opportunities and benefit from them.

It is important that companies consider biodiversity strategically. This will enable the company to evaluate what actions it could take to support nature, and what benefits it could derive from this. It is essential to first define the relationship of the company’s own activities vis-à-vis biodiversity in the company’s strategy in terms of risks and opportunities. For exam ple, forward-thinking companies, could set a Net Positive Impact (NPI) target, as some companies have already done. NPI refers to a situation where the company’s own activities are improving biodiversity in such a way that positive impacts exceed any damage caused to nature. It is also important to draw up a plan of measures to achieve the NPI target, ensure transparency, and create reliable and independent verification procedures.

Various tools and frameworks exist to support the identification of dependencies and impacts, such as the Science-Based Targets for Nature (SBTN) framework, due to be launched in 2022, and the framework developed as a part of this report “12 nature steps for companies – strengthen your business with nature action”. Companies’ biodiversity work could be kicked off with simple steps, and steadily taken further as knowledge and understanding grow. A key step with assessing the relationship of a company’s operations to biodiversity is to take a holistic look at the value chains. Although it is the easiest to start with the company’s own operations, the most significant challenges and risks are often found in the parts of the value chain over which the company has less influence.

It is useful to assess companies’ sustainability work holistically. Synergies with other sustainability initiatives, such as emission reductions or recycling of materials, should be lever aged when tackling biodiversity loss. By reducing emissions, for example, a company can reduce its impact on climate change, which is concurrently one of the drivers of biodiversity loss. It is also important to recognise possible conflicting effects, such as land use changes in biofuel production. Circular economy solutions could be used to extend the life of existing products and materials for as long as possible, reducing the need for natural resources and new land and generating less waste. This results in less pressure on nature. Companies could bene fit from increased collaboration with partners, for example, in developing practical approaches, industry-specific tools, and standards. Collaboration could also help identify new businesses opportunities and spread best practices.

KUVA

This study produces a framework that describes the process of evaluating biodiversity in business. By understanding, analysing, and putting into practice the actions described in this framework, companies could get off to a good start in identifying and mitigating nature dependencies and impacts, managing risks and identifying new opportunities.

Companies of all kinds could use the framework by applying it to suit their specific needs: either as a light exercise focused on specific tasks or as a more in-depth process. You can also work through the nature steps repeatedly. The use of the framework can be deepened and expanded, and previous phases revisited as necessary. The framework can also be utilised regardless of whether a company has an environmental management programme. For more advanced users, the framework includes links to more tools and further reading.

We conducted a thorough literature review when writing this report, and interviewed representatives from companies and organisations, in addition to two workshops that we held in autumn 2021. In addition to writing the report and developing the framework, we collected 12 biodiversity case examples from companies of different sizes, which also work in different industries. These examples are presented in Appendix 2. The list is not exhaustive and does not include many good examples of integrating business and nature.