WHY COMPANIES NEED TO START COMBINING CLIMATE AND NATURE RELATED DISCLOSURES

The COP27 summit may have generated lots of headlines, but the reality is that meeting the global 1.5 °C warming target is as far away as ever. Indeed, the recent UNEP Emissions Gap Report1, having analysed the updated national pledges since COP26, has concluded that there is currently no credible route to get to the target set by the Paris Agreement.

The analysis shows that policies currently in place around the globe will lead to a 2.8 °C temperature rise by the end of the century and that even if all current pledges are implemented, this will be limited to a 2.4-2.6 °C temperature rise. The report concludes that urgent system-wide transformation is required to reduce greenhouse gases by 45% by 2030 to give us any chance to reach the 1.5 °C target.

At the same time, human activity is also eroding the world’s ecological foundations. The unprecedented growth in economic output, life expectancy and reduction in poverty over the last 50 years is mirrored by the unprecedented decline in the natural systems that underpin life on Earth. Human activities have already severely altered 75% of land and 66% of marine environments.2 Approximately 25% of plant and animal species are threatened by human activity, with a million species facing extinction, many within decades, and ecosystems have declined in size and condition by 47% globally compared to estimated baselines.2

A recent study by Swiss Re3 estimates that the world economy is set to lose up to 18% of GDP from climate change by 2050 if no action is taken. Economies in Asia would be the hardest hit, with Singapore at risk of losing 46% of GDP in a severe scenario and China 24%, with the world’s biggest economy, the US, predicted to lose 10% and Europe 11%. Meanwhile, research by the World Economic Forum4 estimates that $44 trillion of economic value generation – more than half of the world’s GDP – is moderately or highly dependent on nature and its services and is therefore exposed to nature loss.

COP15 – BIODIVERSITY’S PARIS MOMENT?

While COP15 didn’t generate as many headlines as COP27, the delayed summit went ahead in Montreal before Christmas where delegates from around the world met to agree a new Global Biodiversity Framework.

Twenty-three new targets were agreed, the most notable of which was target 3, which commits all signatories to protect 30% of all land and sea by 2030, known as 30x30. Alongside this, target 2 seeks to ensure that at least 30% of all degraded terrestrial, inland water and coastal and marine ecosystems have been brought under effective restoration by 2030. Taken together, targets 2 and 3 will, if fully imple- mented, provide a sound basis for halting the destruction of the natural world and set us on the right path for reversing the damage that has been caused to global biodiversity to date.

The Global Biodiversity Framework has also set targets for reducing the impacts of pollution on biodiversity. Target 7, which considers pollution from nutrients, pesticides and plastics, does not set absolute targets but specifies that by 2030 signatories will reduce pollution risks and negative impacts of pollution from all sources to levels that are not harmful to biodiversity and ecosystem functions and services, and consider the cumulative effects of all pollution sources. This includes reducing excess nutrients lost to the environment, reducing the risk from pesticides and hazardous chemicals to biodiversity, and preventing, reducing and working towards eliminating plastic pollution.

Target 10 of the GBF commits countries to ensure that areas under agriculture, aquaculture, fisheries and forestry are managed sustainably through a substantial increase in the application of biodiversity friendly practices. Target 18 also identifies harmful subsidies as an area for improvement, stating that by 2025 signatories should identify and eliminate/phase out incentives and subsidies harmful for biodiversity, reducing them by US$500 billion per year by 2030. A recent study by the B Team and Business for Nature estimates that globally at least US$1.8 trillion, equivalent to 2% of global GDP, is spent on subsidies that are driving the destruction of ecosystems and species extinction. The majority of these subsidies are given to the fossil fuel, agriculture and water industries, but forestry, construction, transport and marine fisheries industries also receive substantial subsidies each year.

Targets 4, 5 and 6 deal with species protection, wildlife trade and invasive species. Target 4 commits signatories to urgent management actions to halt human-induced extinctions and to significantly reduce extinction risk. Target 5 commits nations to ensure the use, harvesting and trade of wild species is sustainable, to prevent overexploitation, minimise impacts on non-target species and ecosystems and to reduce the risk of pathogen spill-over. Target 6 commits nations to prevent the introduction of priority invasive species and to reduce the rate of introduction and establishment of other known or potential invasive species by at least 50% by 2030.

Other notable commitments made by the GBF include calls for nations to update their biodiversity strategies and action plans, and for greater integration of biodiversity across policy areas and business, as well as commitments on financing and consumption.

While this didn’t turn out to be the ‘Paris moment’ that everyone had hoped for, the commitments made at COP15 have still been broadly welcomed as a moment of historic importance for nature. However, the enormity of this task should not be underestimated given that we have a little under 8 years to meet these targets, and this will require urgent and coordinated action from governments, businesses, NGOs and other stakeholders to halt and reverse global biodiversity decline.

WHAT MEANINGFUL ACTIONS CAN BUSINESSES TAKE?

In response to the climate crisis, and partly driven by legislation, many companies have begun to address their impacts on climate by measuring their carbon footprint, setting science-based targets to get to net zero carbon and disclosing the financial risks that climate change poses to their companies using tools such as the Taskforce on Climate-Related Financial Disclosures (TCFD) framework. Having formulated their decarbonisation plans, it’s now time for companies to turn their attention to biodiversity and begin to develop strategies and plans that consider not only direct impacts and dependencies within their financial or operational control, but also their indirect impacts and dependencies (i.e., those that sit within their value chain).

Many companies rely on complex supply chains (and less complex distribution chains) to generate profit, and, more so than ever, these supply chains are often global. Raw materials often extracted in biodiversity hotspots across the world are processed and turned into products that are then shipped around globally to generate profit elsewhere. While carbon emissions, due to their release into the atmosphere, have a global impact, the destruction or loss of biodiversity results in local impacts, albeit with global repercussions.

A number of companies are beginning to understand this and are therefore starting to give biodiversity the same attention that they have been doing for GHG emissions. Fortunately, our understanding of how to assess and evaluate a company’s global biodiversity footprint has come on a long way in recent years and it is now, like carbon, possible to set science-based targets for nature (SBTN) and to disclose the financial risks that biodiversity loss poses to companies by following the Taskforce on Nature-Related Financial Disclosures (TNFD) framework.

Because companies have already begun their journey to net zero and are only starting on their journey to become nature positive, they have already grasped the nettle of preparing their TCFD disclosures but few as yet have begun to think about TNFD disclosures. By tackling these tasks separately, companies run the risk of overlooking the synergies between carbon and biodiversity, both from an assessment perspective but also from an action perspective. The work required to set science based targets for carbon requires an in depth analysis of not only a company’s direct operations, but also an analysis of that company’s value chain.

This often involves trying to map Tier 1 and Tier 2+ suppliers to understand their activities, energy use and carbon emissions. Similar information is required when setting science based targets for nature, and because climate change has an impact on nature, GHG emissions are required as input data for both climate-related and nature-related disclosures. In addition, once companies have taken all the action they can to reduce their GHG emissions, they will, inevitably, have to offset their residual emissions to achieve net zero. In most cases this will involve planting trees or other habitats equal in value to the carbon emissions. Tackling carbon and biodiversity together makes sense, whether setting science based targets or disclosing the financial risks that either of them pose. By taking a more holistic and less siloed view, companies will be able to take advantage of the synergies that exist between nature and carbon, and the assessment needs of both. This will result in a more integrated strategy which will be easier to embed in existing business strategies and processes, is likely to reduce reporting and assessment time and costs, and will require less governance than if dealt with separately. c

Dr Rossa Donovan is Technical Director of Nature Positive

1. United Nations Environment Programme (2022). Emissions Gap Report 2022: The Closing Window – Climate crisis calls for rapid transformation of societies. Nairobi. https://www.unep.org/emissions-gap-report-2022

2. IPBES (2019). Summary for Policymakers of the global assessment report on biodiversity and ecosystem services of the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services.

3. Swiss Re Institute (2021). The economics of climate change: no action is not an option swiss-re-institute-expertise-publication-economics-of-climate-change.pdf (swissre.com)

4. World Economic Forum (2020). Nature Risk Rising: What the Crisis Engulfing Nature Matters for Business and the Economy. WEF_New_Nature_Economy_Report_2020.pdf (weforum.org)

Famed for his role as the former Chairman of the White House Climate Change task force, Roger Ballentine made great strides for climate sustainability while serving President Bill Clinton. He is currently the President of Green Strategies Inc, a consulting firm dedicated to helping corporate clients reduce their environmental impact. In the world of sustainability, Roger is leading the charge for our planet, by educating and empowering businesses to be more sustainable.

In this exciting interview courtesy of The Sustainability Speakers Agency, Roger discusses the economic power of sustainability, the role that capitalism has played in climate change and how sustainable values can lead to corporate success.

What did you learn from your role as the former Chairman of the White House Climate Change task force?

“Oh, I learned so much! It was an absolute trial by fire in needing to learn the substance, learn the science, learn the economics, learn the technologies. I learned so much, but [that’s] what I love about my job, I will say, is learning new things every single day.

“But it was real trial by fire. It was also, you know, a tremendous privilege and honour and responsibility to be in charge of this issue across the federal Government. At times, it was very frustrating and part of it was, you know this is 1998, 1999, 2000, there wasn’t a lot of consensus.

“I should go back to the inspiration and give some credit where credit is due and that’s to President Bill Clinton, who himself passionately believed that dealing with climate change was a nearly unprecedented economic opportunity - if we seized it and did it right. I said to him when I was leaving the White House; ‘your vision there... is going to be my career’.”

What is the economic benefit of sustainability in business?

“Well, I give hour-long talks on this, so I’ll try to put this in a really simple way!

“Sustainability when done right starts with a company looking at itself through a different lens. I like to talk about how it’s like putting on a pair of night vision goggles and suddenly you see things you didn’t see before; it may be some waste, stuff that you’re throwing out.

“Now, some companies are still discovering this but the leading companies, they’ve done all been doing this. You start

Roger Ballentine

looking at things in different ways, tracking different metrics, like waste - there’s a metric. Energy use, there’s a metric. And you start looking at them in slightly different ways and one thing you find, is opportunities to save money.

“So, if we actually increase the energy efficiency of this device, this process, this building, what does that lead to? It lowers our energy costs. What does it also lead to? It reduces emissions. You may start by looking at it from an emissions perspective but what you find, at the end of that journey, are monetary savings.”

“That’s one clear benefit, but it’s more than that. I don’t want to imply that this is superficial, but reputation matters and there’s a direct correlation - millions of studies have shown this - between having a positive reputation and your bottom line. Brand value, it matters and today - this was the case when I started, but today – it is absolutely the case that more and more of your customers, your employees, your potential employees care about this stuff.

“They want to see that a company is taking positions and taking actions on issues like climate change... or they may shop somewhere else, they may use somebody else’s services, they may work somewhere else. You can’t compete and succeed as a company without talent, and obviously, without customers.

“Now, it was in the beginning that this was primarily understood by consumer-facing brands. Competitive brands, Coke or Pepsi, you know, are in such competition that they think, ‘maybe if we at Coke do a little more on climate sustainability, then consumers may grab a Coke instead of a Pepsi.’ Things like that, pretty straightforward. But today, it’s much more than that.

“I’m working for a business-to-business electronics company, who came to me because they’re like, ‘we’re actually losing jobs because the businesses we’re selling to - these are not consumers - they’re asking us about sustainability, and they don’t think our answer is good enough. They’re going to our competitor.’

“Wow... so, that’s business value. Having a sustainability program will almost always make you a more efficient, aware, innovative and competitive company.

What is the role of capitalism in climate change

“I think it’s fair to say that historically capitalism was a major, if not the greatest cause, of man-made climate change to begin with. This is, you know, simple economic principles that historically, fossil fuels were cheaper than alternatives, fossil fuels enabled the modern economy.

“I’m not criticizing this; this is obviously all the things that we’ve done as a society. So much of it was built on a fossil fuel economy of inexpensive and accessible energy, the flaw was that the cost, the price of that energy, didn’t reflect all its cost, like carbon emissions. Capitalism was consuming resources, in this case the atmosphere, for which it did not pay, so it sent a distorted market signal about how inexpensive these fossil fuels actually were.

“Capitalism was very, very effective at privatising gain and socializing cost, so the profit motive - which is one of the great drivers of human behaviour, again not criticizing that - is very effective and impactful. In many parts of the world, it has created tremendous wealth, putting aside how that wealth is distributed, the marketplace, profit motive and capitalism can be ruthlessly efficient. If there’s a market flaw in there, the result may not yield appropriate social gain and outcome.

“My starting proposition is, ‘well, capitalism was so good and so effective at getting us into this problem, what if we turned those efficiencies, those natural human forces, the powers of the market, around to actually help solve the problem.

“That’s what I think is beginning to happen. Capitalism is only going to behave this way if it is creating profit, and I firmly believe that going forward, the greatest pathway to value creation and profit is going to be through a climate change mitigation aligned pathway.

“It’s not just climate, it has to do with natural resources and water and land and, you know, all of that! It’s all really the same principle.

“I also think it is necessary because I don’t believe we’re going to just regulate our way out of this problem - certainly that’s the case in the United States. I’m not saying capitalism is going to solve this problem and we don’t need policy; I’m absolutely not saying that. What I’m saying is, we need both - that’s the size of the problem.” c

This interview with Roger Ballentine was conducted by Jack Hayes. Roger is regularly booked to discuss the power of including sustainability in your corporate mission and is available to hire through The Sustainability Speakers Agency.