After Davos, what’s next for TNFD adoption?
EXCLUSIVE: At Davos last month, more than 320 businesses pledged to report in line with the Taskforce for Nature-Related Financial Disclosures (TNFD) recommendations. We ask the initiative’s technical director whether this lays the foundations for a step-change in corporate nature strategies in 2024.
The World Economic Forum’s annual summit held in Davos, Switzerland, each January is widely regarded as influential in shaping the tone for corporate sustainability work in the year ahead.
While tackling misinformation came top of the Forum’s short-term risk matrix, with much of the summit dedicated to rebuilding trust in an era of social fragmentation, the Forum did implore attendees to take more urgent action on longer-term risks – chief among them the twin climate and nature crises.
All of its top four risks for the coming decade relate to environmental issues. Yet it was confirmed at Davos that corporate decision-makers are likely to see these challenges as less likely and less immediate than peers in policymaking. This is concerning given the amount of evidence suggesting that nature loss has accelerated in recent years and with physical climate impacts coming sooner and more acutely than anticipated.
There is, however, a growing exception to this general trend. More than 300 firms used Davos as a platform to announce their support for TNFD-aligned reporting, with early movers hailing from more than 45 nations and dozens of different sectors. Extremely well-represented, with some 100 early adopters, was the financial sector.
In making this announcement, the businesses committed to standardize and deepen their reporting on nature-related impacts, risks and opportunities across the value chain – both at present and in a range of future scenarios. Several will report this coming financial year.
The TNFD’s technical director Emily McKenzie tells edie it was important for “a broad spectrum” of businesses to support the framework, which launched in September 2023, because most sectors are dependent on nature to some extent.
An oft-quoted PwC statistic is that 55% of the global economy depends on nature.
McKenzie says: “We’ve now shifted from our first phase of work, which revolved around developing and delivering the framework. Now, the focus is on enabling and encouraging adoption.”
Transforming, not ticking boxes
The TNFD team has looked to the Taskforce on Climate-Related Financial Disclosures (TCFD) to shape their framework, with McKenzie hoping the nature version will have just as much of a transformative impact on not only corporate reporting but also decision-making.
She explains: “Our mission and objective in developing the framework was to shift financial flows – not only away from activities that harm nature but towards those which help it thrive… conservation, restoration, sustainable use and so on.”
The UN estimates that the nature finance gap for the 2021-2050 period stands at some $4.1trn. A seismic shift is needed not only in subsidies but in private finance.
Yet there is always a risk that businesses will view new sustainability disclosure requirements as box-ticking exercises, existing to incrementally change reporting or tinker with risk management rather than to meaningfully identify and unlock opportunities.
This trap can be particularly easy to fall into, McKenzie acknowledges, when a wave of new frameworks – voluntary and mandatory – is looming on the horizon.
Yet she notes that most businesses that initially use the TNFD for risk management and/or disclosures’ sake “quickly” start using the framework to identify opportunities. She said her team will place a “constant emphasis on the opportunities side” for 2024.
The team is also taking steps to help businesses avoid disclosure overload.
McKenzie says: “A big, priority emphasis for our next phase of work is alignment and interoperability with international standards.”
To that end, the TNFD has worked with the European Financial Reporting Advisory Group (EFRAG) to map alignment between its own framework and standards including the EU Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD).
“Broadly, we’ve found a high level of consistency across concepts, definitions and the approach to materiality,” McKenzie says, confirming that more detail should be published before the end of March 2024.
Similar work is underway to assess similarities and differences with the GRI’s new biodiversity standard.
Less can be done at this stage on interoperability with the International Sustainability Standards Board (ISSB), which has not yet confirmed its pipeline of standards beyond its two initial climate-focused frameworks released last summer. Confirmation is due this summer and, should the next port of call be nature, McKenzie says the TNFD “stands ready”. It is, she says, in “regular conversation” with the ISSB.
McKenzie also notes that there is no official news yet on any country enforcing a TNFD disclosure mandate. This may well be likely towards the end of the 2020s, as nations seek to make good on their UN Biodiversity Treaty commitment to begin standardising corporate nature reporting this decade.
Peer-to-peer learning is another key focus for the TNFD in 2024, in tandem with its work on interoperability.
This is another essential element of pre-empting barriers to TNFD adoption, McKenzie says, with firms keen not to spend time reinventing the wheel in siloes but instead learning from each other and working towards similar timelines and focus areas for reporting.
The TNFD has, for years now, hosted an online Forum to enable discussion between organisations testing pilot versions of its framework, plus a broader community of supporters. These organisations have also benefitted from regular webinars and newsletters.
This will be built upon with a ‘community of practice’ soon. McKenzie describes this as “a more concerted learning platform that will connect and support members on their path to adopting TNFD recommendations”.
She explains: “We are still crystallising exactly what it will include, but the focus is on bespoke capacity building and training.
“We’ll continue to support insights from pilot testing from the first phase, and the experience of those assessing in this phase.
“We hope, also, to set up something similar to the TCFD’s preparer forums. These bring participants together to share experiences and insights in small groups and learn from each other to build towards reporting.”
So, with all of this underway, will 2024 mark a step-change in corporate nature reporting?
Besides the TNFD, another milestone last year in terms of framework development was the finalization of science-based targets for nature by the Science-Based Targets Network (SBTN). For the first time, in May 2023, businesses from different countries and industries were able to set verified targets to reduce their negative nature-related impacts across their value chains.
The TNFD points to the SBTN as a source of best practice for target setting.
McKenzie says: “One wants to be humble, but my sense, genuinely, is that TNFD and SBTN are two critical complementary frameworks.
“Yes, they are voluntary, but they are creating momentum, clarity and a robust, science-based basis to integrating nature into the core aspects of business. This includes strategy, governance, risk management and, of course, target-setting and performance measurement.
“The point we are at now from a report preparer’s perspective is one where TNFD and SBTN have set a new trajectory to increase the speed, scale and scope of what’s done.”
She is keen to note that these two frameworks are grounded in years of work from their predecessors – “You have to remember that we’re drawing on the work of others and a great many previous [projects and frameworks] like the Natural Capital Protocol from the Capitals Coalition… We are standing on the shoulders of giants.”
HEAR FROM THE TNFD AT EDIE 24
The TNFD’s technical director Emily McKenzie is speaking at edie 24 on 20 March.
She will participate in a panel discussion on how businesses can protect and restore nature, along with expert speakers from FAIRR, the Green Finance Institute, Reckit and the Earth Law Centre.
edie 24 is the brand’s largest face-to-face event of the year and will convene hundreds of sustainability and energy leaders in central London on 20-21 March 2024 for two monumental days of keynote speeches, panel debates, unparallelled networking opportunities, interactive workshops and more.
Experts speaking alongside McKenzie on this year’s packed agenda include:
- Chris Packham, renowned naturalist and presenter
- Chris Skidmore MP, author of the Net-Zero Review
- Claire O’Neill, chair of the WBCSD and former UK Minister for Business, Energy & Industrial Strategy
- Chris Stark, CEO of the Climate Change Committee
- Rachel Solomon Williams, executive director of the Aldersgate Group
- Natalie Belu, co-CEO of Belu and independent candidate for London’s Mayoral Elections
Tickets for the event are available now on an individual, group and sharing basis, with a full price list available here.
With places limited, edie users are encouraged to book edie 24 tickets now. You can secure your place here.