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Table 5: Illustrating aggregation method “Percentile”
Step 2B: Calculating site-level risk
In a biodiversity risk analysis, a large number of biodiversity indicators are required to capture the system’s complexity. However, using many indicators poses problems for aggregating risk over a single company site, as outliers and indicators of minor business importance can influence the final aggregation and lead to under- or overstatement of risk. It is therefore important to employ a risk hierarchy that groups indicators in in thematically relevant risk categories and risk types and an aggregation scheme that will highlight aspects of biodiversity risk that are business important without being diluted by outliers or indicators of minor business importance.
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The current WWF BRF tool employs a risk hierarchy that groups indicators (LEVEL 3) in thematically relevant risk categories (LEVEL 2), and only then to risk type (LEVEL 1) (see Figure 4). This has a number of advantages. First, when using a large number of different indicators to assess biodiversity risk, the influence of each single indicator is reduced. That means that if all indicators were aggregated into one single number, a few high-risk indicators could be averaged out with a large number of low-risk indicators. Grouping the indicators into thematically relevant categories reduces this averaging risk, because even one high-risk indicator within a risk category will influence and therefore be visible in the risk category score. Secondly, thematically relevant risk scores and risk types can give users a better overview of why a site might experience high risk, without having to understand the risk assessment at the indicator level. Third, such grouping is aligned with other reporting standards (e.g., TNFD), which do not require reporting at the indicator level, but only, for example, for physical risk.
The 75th percentile method is used both in the aggregation of indicators to risk categories and from risk categories to risk types. Percentiles as a measure takes the value of the nth percentage number in the distribution.29
Using the 75th percentile emphasises high-risk scores. As shown in Table 5, this method emphasises the right tail of risk distributions (higher risks). Although the mean (average) of indicators for Company A is lower than that of Company B (a mean of 2.2 compared to a mean of 3), the high scape risk of Indicator 4 and Indicator 5 are emphasised. This method helps to inform companies that certain sites might be highly exposed to biodiversity-related risks that could be integral to business operations. This is important, because even a single high-risk issue could result in considerable damage to a business or its supply chain. The omission of a high-risk score should therefore be avoided. For example, a water utilities site might be below average risk for most indicators, such as soil condition and invasive species, but their core business relies on indicators such as water availability and water condition. Though the calculation of scape risk takes this importance into account, these extremely relevant risks would be lost in mean aggregation. Using the 75th percentile method helps to emphasise the important exposures, such as water availability and water condition in the case of a water utility site location.
Once the risk assessment has been conducted, a company can identify the areas of operations and geographical areas in which it has the highest risk. Those operational and geographic areas should then be subject to ‘deep dives’ to understand the specific local context better and identify response actions to reduce those risks (e.g., by conserving and/or restoring biodiversity in those specific geographies).
Table 5: Illustrating aggregation method “Percentile”
Aggregated scape risk per indicator in risk category
Indicator 1 Indicator 2 Indicator 3 Indicator 4 Indicator 5
75th
Percentile Mean
Company A 1
Company B 3 1 1 4 5 4.5 2.2
4 2 3 3 3.5 3
