Is your business considering nature?
Nature is in decline. Katie Leach, Head of Nature, Lloyds Bank and Jennifer Burrett, Director, Sustainability & ESG Finance, Lloyds Bank, explore the importance for businesses to embed nature considerations into the work that they do and to assess their nature related risks and opportunities in their operations and in their supply chains.
Just three in every 100 UK businesses currently monitor nature risks, yet more than half of global GDP – $58trn of value generation – is moderately or highly dependent on nature and its services. In a UK context, an assessment has shown that 13 of the 18 sectors in the FTSE 100 have production processes that have high, or very high, material dependence on nature.
We know that businesses, or indeed any of us, couldn’t operate without nature and the ecosystem services it provides, such as natural raw resources, pollination, flood prevention, water quality and disease control. However, nature is in decline.
Wildlife populations have fallen by an average of 69% since 1970 and some species have suffered declines of as much as 95%. A quarter of our assessed plant and animal species are threatened by human actions, a million species face extinction and we are cutting down 2,400 trees a minute. The UK is one of the most nature-depleted countries in the world, ranked in the bottom 10%.
As countries, individuals and businesses, we need to act. We must not only halt the decline of nature, but reverse it. Businesses face nature-related risks and these have to be addressed and managed, with vigour and at pace. Businesses need to not only understand how they impact on nature, but how they depend on nature too.
The specific locations of businesses’ operations and supply chains are important when considering these impacts and dependencies; they differ enormously from place to place. Businesses need their nature strategies to be grounded in location-based plans.
Opportunities amid the challenges
While the outlook is certainly concerning, it presents the business world with many opportunities. These include investing in nature-based solutions (such as tree planting for flood management and seagrass meadows as coastal defences) and nature tech (for example eDNA and satellite monitoring).
Some corporates are leading the way and embedding nature into their strategy and priorities. They recognise that addressing the decline is not only the right thing to do, but something they must do. It is an opportunity.
More business leaders are increasingly recognising the need to act for nature. Paul Polman, Business Leader, Campaigner and Former CEO, Unilever, interviewed as part of the Save Our Wild Isles Business films (created by RSPB, WWF and National Trust), comments that “increasingly we’re starting to understand that this is probably one of the biggest opportunities that we’re sitting on this century. The costs that we are incurring as a result of destruction of biodiversity is significantly higher than what it would cost us to prevent the issues in the first place and that makes it such an attractive business opportunity for all of us.”
Also discussed in the Save Our Wild Isles Business films is the John Lewis Partnership nature strategy, and how important science-based targets for nature are. “Unless we set credible, ambitious targets that we can be judged against, we won’t make fast enough progress,” says Sharon White, the Partnership’s Chairman. “So we’ve set some incredibly ambitious targets for how we as a retailer, both encourage greater biodiversity but also be really thoughtful about how we protect nature in our supply chains.”
Some companies have also begun to embed their nature strategies into sustainable finance. For example, The Hill Group has a biodiversity net gain (BNG) target in its loan facility. Its BNG performance, among other targets, will result in an adjustment to the margin depending on performance against the targets set.
Importantly, nature can also deliver positive outcomes for climate change strategies. Climate change and nature are different sides of the same coin and are intrinsically linked, meaning we can’t solve one of them without the other. As nature is destroyed, the carbon it was storing is released into the atmosphere, contributing to climate change. When nature is protected and restored, carbon is captured within the ecosystem, taking greenhouse gases directly out of the air. So, businesses must not neglect their climate strategies when designing and implementing nature strategies; the two should be addressed together.
What can businesses do now?
Businesses must incorporate nature into their business plans and climate strategies, and set science-based targets for nature.
- Businesses can start assessing their relationship with nature by mapping the location of their business activities both in their direct operations and supply chains. They need to assess their nature-related impacts and dependencies at these different locations, and therefore consequently determine their nature-related risks and opportunities. The Taskforce for Nature-related Financial Disclosures (TNFD), very similar to the Taskforce on Climate-related Financial Disclosures (TCFD) but focused on nature rather than climate, published its final framework recently in September 2023. This framework supports businesses to manage, measure and disclosure their nature related risks and opportunities.
- Once businesses have completed a nature assessment, they can design a transition plan for how to manage their impacts and dependencies on nature, and how to measure and monitor their progress. Setting nature targets is an important part of this exercise, and ensuring these targets are science-based, ambitious and time-bound is essential. The Science Based Targets Network (SBTN) is a helpful resource to support businesses with setting science-based targets for nature. It is similar to the Science Based Targets initiative (SBTi) but focused on nature rather than climate. It has released guidance earlier this year on parts of its framework and is currently undertaking a pilot of its nature target validation process.
Lloyds Bank’s Sustainability and ESG Financing team
Lloyds Bank’s Sustainability and ESG Financing team is dedicated to supporting clients with their sustainability strategies, including access to finance and structuring sustainable finance solutions. Our team of more than 30 professionals can help to build understanding of the importance of addressing nature in both direct operations and supply chains. The team can share insights and education on upcoming nature policies and frameworks such as the TNFD and SBTN, evolving regulation and stakeholder expectations, and support the embedding of nature targets into finance. The team would be delighted to discuss this crucial topic with you. If you are a Lloyds Bank client, please get in touch with your relationship manager; if not, please contact Jennifer Burrett via LinkedIn.
Additionally you can learn about biodiversity and natural capital – what it is and why it’s important to understand the implications on your business – on our website.
You can also watch the first Save Our Wild Isles Business film (created by RSPB, WWF and National Trust) here which brings the topic to life highlighting the relationship between businesses and nature, exploring business impacts, the importance of financial sector action, and nature relationships in the food, farming and marine sectors.
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