Biodiversity and business: context and management

Àngel Castiñeira Fernández
Marc Castellón Durán

The Anthropocene is now an undeniable reality. Humans have colonized most of the world's ecosystems and thus changed the face of our planet. The changes made on the planet's surface have brought with them an unwanted travelling companion, a climate change that could be devastating for many species – including humans. Major international summits have focused on the consequences of rising temperatures and how we can avoid them. But biodiversity is the next major issue. Biodiversity is about all the varieties of life on Earth and the habitats in which they live. This network of living things forms the ecosystems that sustain all economies and societies. Our economy depends on biodiversity. Swiss Re's latest findings (2020) indicate that 55% of global GDP is directly dependent on biodiversity.

How can we tackle this problem? How can we reverse the decline that we have produced? What can be done by organizations in general and by companies in particular? The first step is to analyze the impacts of our activity on the biosphere. There is no scientific consensus on how to go about this task. However, the model most used for this purpose was proposed by Rockstrom et al. at the Stockholm Resilience Centre: the nine planetary boundaries. This framework is a compass with sections that capture key variables for understanding human impact on the Earth. The model was updated in 2015 and identified two variables where the planet was already out of balance: the cycling of biochemical nitrogen/phosphorus fluxes and species extinction. However, these variables have since been increased to four with the addition of climate change and land use change (deforestation).

Source: Planetary boundaries (Stockholm Resilience Centre). Available for consultation here.

The global loss of biodiversity is one of the first negative consequences of the Anthropocene, a geological period suggested in 2000 by Nobel Prize winner Paul Crutzen to describe the considerable influence of human behavior on the Earth over the last 70 years. We are in a situation of unprecedented ecological precariousness.

The UN has recognized this situation and announced the UN Decade of Ecosystem Restoration (2021-2030). The agenda for this decade includes official events, international meetings, information campaigns, and implementation guidelines. However, it will not be enough for the world's governments to commit to leading change. Many businesses are also challenged by this great project and are contributing according to their capabilities.

The global loss of biodiversity is one of the first negative consequences of the Anthropocene. We are in a situation of unprecedented ecological precariousness

To be part of the solution, companies must develop a baseline understanding of the state of global biodiversity. One of the key documents for understanding the degradation of the biosphere in recent decades is The IPBES Global Assessment Report on Biodiversity and Ecosystem Services 2019, which is published by an international research agency with 130 governmental partners around the world. Its latest report, dated 2019, points to five critical factors for biodiversity: land and sea use change; unsustainable economic development; climate change; increased pollution; and the spread of invasive species. This is in addition to human population growth and increased pressure on Indigenous peoples. The organization also reported that 75 per cent of the Earth’s land surface has already suffered significant changes to its landscape, while 66 per cent of the ocean surface is affected by human activity and climate change. Based on the data collected, the authors extrapolate that one-quarter of global species are threatened with extinction. We must link the climate emergency and the environmental emergency (biodiversity) to bring together strategies against the climate emergency (mitigation, adaptation, and resilience) and strategies against environmental emergency (protection, conservation, and restoration). The notion of global health is advocated given the widespread idea that we can only maintain a healthy society in healthy ecosystems (Brotons et al. 2021).

Source: authors

One of the best examples for understanding the global loss of biodiversity is that of the coral reefs. The UN estimates that in the next three decades most coral reefs in protected areas will die because of rising sea temperatures. The loss of these reefs will mean the disappearance of an entire family of animals, and the extinction of millions of other species for which reefs are a unique and irreplaceable habitat. This cascading loss of biodiversity will have detrimental consequences for humans – such as a major decrease in local fish catches and a global increase in extreme weather events.

These effects will also be devastating for companies. The new wealth of companies is based on a fragile balance between five types of capital. The first is manufactured capital and includes all the material goods produced by humans: such as machinery or buildings. The second is human capital, which includes people, their skills, and knowledge. The third type of capital is social capital, which includes the trust of citizens in their community, as well as the strength and stability of its laws and institutions. Financial capital permeates these three capitals and is a method of exchange. Finally, we have natural capital – so far forgotten by most businesses – which is the foundation of the others and includes biodiversity and the ecosystem. The other forms of capital cannot exist without natural capital. The components of natural capital (such as air, water, soil, and biodiversity) are the most likely and impactful risks to our economy and society. Consequently, the loss of entire ecosystems, such as coral reefs, has a serious impact on businesses and their ability to generate economic, social, and environmental value.

The loss of entire ecosystems, such as coral reefs, has a serious impact on businesses and their ability to generate economic, social, and environmental value

Source: The Five Capitals - a framework for sustainability (Forum for the Future). Available here.

Global context: initiatives

The degradation of the biosphere is occurring in a parallel and interconnected manner all over the world. For this reason, the world's governments agreed at the UN to create a supranational body for the study of biodiversity. The Convention on Biological Diversity (CBD) is a UN secretariat dedicated to organizing conferences and conventions on the environment and encouraging joint action by governments. It is an advisory organization without legislative powers. Its ability to influence governments is the result of creating and communicating environmental knowledge.

Its work is largely complemented by that of another body: the International Union for Conservation of Nature (IUCN), a non-profit organization based in Switzerland. Its key contribution to biodiversity research is the creation and updating of the Red List of endangered species. This biodiversity framework (or thermometer) is used by many governments, companies, and civil society actors to manage the preservation of endemic species throughout the world. The Sustainable Development Report 2021, produced by the Sustainable Development Solutions Network (SDSN) and the Bertelsmann Stiftung foundation, warns that the only goal in which Spain is regressing is SDG 15 (terrestrial ecosystems). Among the insistent challenges of this goal are the protection of aquatic and terrestrial areas with high levels of biodiversity and the survival of species included in the Red List of endangered species.

The third of the three key organizations in global biodiversity research is the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES). This organization includes most of the world's nations (including Spain) as members or observers and builds bridges between public administrations and the scientific community to establish effective biodiversity protection policies.

The last of the four organizations with a major impact on global biodiversity policy is the United Nations Framework Convention on Climate Change (UNFCCC), a UN secretariat that is better known as UN Climate Change. This organization is the main promoter of the Conference of the Parties (COP), which meets annually to reach agreements to halt the degradation of ecosystems and climate change. In November 2021, COP-26 was held in Glasgow, with the main goals of ensuring global net zero by mid-century, speeding climate adaptation to protect communities and natural habitats, mobilizing financing to facilitate the energy transition in developing countries, and encouraging the collaborative work of alliances.

Although progress can be glimpsed in these four goals, COP-26 ended with the approval of a text that failed to: meet the expectations of some countries and civil society organizations regarding the end of fossil fuel subsidies; commit all nations to net zero; or limit the increase in the average global temperature to 1.5ºC by 2050. The conference also ended without major advances on the conservation and protection of biodiversity. The only noteworthy development in this area was the signing by 134 countries of a letter committing to curb deforestation by 2030; and in parallel, 30 financial institutions announced the elimination of investments in deforestation. This pledge is reminiscent of the promise made by global leaders in the 2014 New York Declaration, which ended up not being fulfilled; and moreover, the funding allocated only $10.3 billion in public money and $6.2 billion in private funds. A modest sum indeed.

COP-26 ended, moreover, without much progress on the conservation and protection of biodiversity

The next key event for biodiversity conservation policy development will be COP-15, organized by the CBD (the Conference of the Parties to the Convention on Biological Diversity) rather than the UNFCCC. Its first part, in an online format, took place between 11 and 24 October 2021 and had limited impact. The main event will take place from 25 April to 8 May 2022 in the Chinese city of Kunming and will focus on the development of global agreements for the protection of ecosystems and biomes. It is crucial to reach significant agreements and pave the way for a COP-27 that is more ambitious than COP-26.

European context

Biodiversity is protected in the European Union by the Birds Directive and Habitats Directive. These two instruments form the basis of the Natura 2000 Network, which coordinates all member states in the designation of conservation areas on land and sea. The Ministry for Ecological Transition and the Demographic Challenge manages the network in Spain. This administration recently created the Fundación Biodiversidad and tasked it with increasing the involvement of business in the management of natural capital.

The creation of this foundation takes place as the European Union is developing new instruments to complement the two previously mentioned directives for managing the recovery of continental ecosystems. The EU-27 have agreed on a biodiversity strategy to be deployed between 2021 and 2030 to protect people from the impacts of climate change, prevent forest fires, secure the food supply chain, and prevent new pandemics. To meet these objectives, the strategy envisages the expansion of the area occupied by Natura 2000, the establishment of binding ecosystem recovery targets for member states, and the financing and monitoring of the project. The European Commission has already agreed on the main objectives of the plan: carbon capture and storage; prevention and mitigation of natural disasters; and an improved understanding and monitoring of ecosystems. However, the specific national biodiversity targets have not yet been agreed.

Source: authors

In parallel with the biodiversity strategy and to ensure that the necessary investments are made for the objectives in the European Green Deal, the European Commission implemented in July 2020 a classification or taxonomy to help investors recognize which business and/or civil projects can be considered sustainable. The classification focuses on the proportion of turnover aligned with six major tenets and the investments and overheads aligned with them. The EU has made a tool available to companies and investors to assess the classification provisions of the taxonomy that apply to each economic sector.

The European Commission has implemented since July 2020 a classification or taxonomy for investors to discern which business and/or civil projects can be considered sustainable

Of the six major tenets considered in the European taxonomy, one is the protection and restoration of biodiversity and ecosystems. The European Commission recently refined the headings relating to this provision in a review of technical screening criteria that was carried out between 3 August and 28 September 2021. The results of the review, which have not yet been published, are expected to tighten the conditions for a project to be considered 'sustainable' based on its ability to reduce a company's negative impact on ecosystems or increase its positive impact on the environment. Some organizations, such as the World Wildlife Fund (WWF), have already claimed that such partial reviews may be insufficient to ensure a net positive environmental impact for companies. The WWF specifically argues that burning trees for bioenergy cannot be considered a sustainable activity. Future revisions of the taxonomy may exclude this pretext (and others) as an activity unaligned with the tenet of protecting biodiversity.

It is worth mentioning a step that reflects a greater commitment to protect European ecosystems taken by the European Parliament in April 2021, when a cross-group majority of more than 515 MEPs formally called for the conversion of the EU Biodiversity Strategy into a binding EU directive. Calls are also being made for European biodiversity legislation similar to the EU Climate Act – which would establish a governance framework until 2050 to protect biodiversity (with binding targets for 2030). There is broad consensus on legislating for the protection and sustainable use of soils, as well as for a plan to jointly address the climate and biodiversity crisis. These initiatives need to be translated into directives or other legal instruments by 2022.

Given the rapidly changing European policy environment, companies should be aware that following the tenets of the current taxonomy is a necessary – but not sufficient condition – for a net positive impact on the preservation of biodiversity. EU legislation may soon become more restrictive. Companies must be ready for this change and aware of where they stand today.

Given the rapidly changing European policy environment, companies should bear in mind that following the tenets of the current taxonomy is a necessary – but not sufficient – condition for a net positive impact on biodiversity conservation

Mainstreaming biodiversity in corporate governance processes

Beyond protection policies, it is essential that governments and other bodies develop tools so that companies can contribute to the UN Decade on Ecosystem Restoration and comply with the new European legislative framework. In 2021, the Global Reporting Initiative (GRI) announced that it is working on the development of a new non-financial reporting standard for business management of biodiversity. Numerous organizations, consultancies, and auditing firms expressed support for this initiative. For example, KPMG considers this initiative key to ensuring that companies report on all ESG issues relevant to stakeholders. The Biodiversity Standard (GRI 304) is used annually by at least 2,000 organizations out of the more than 10,000 companies that report using GRI Standards. As mentioned above, the revision of GRI 304: Biodiversity Standard (2016) is a priority in the GRI work plan for 2020-2022.

While the development of this new standard will contribute to improved reporting on the business impact that companies have on ecosystems, there is also a need for a model for incorporating biodiversity into business management systems. At present, such a framework does not currently exist and the Organization for Standardization (ISO), the world's leading developer of management tools, has not reported that it is working in this direction.

Several organizations have developed guidelines that bridge the gap between existing management systems and biodiversity. One such document is the Corporate Biodiversity Management Handbook, produced by the German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety. The publication systematically identifies business opportunities and motivations for a positive impact on biodiversity. Using a method that makes a brief relevance analysis of various potential actions, the document enables selecting content of strategic interest to a company. It also mentions a set of tools to sustainably manage ecosystems based on decisions taken by governance bodies. The list includes biodiversity audits, checklists, corporate volunteering, sustainable accounting, eco-labelling, environmental impact studies, supplier certification systems, and dialogue with external stakeholders.

Another key document has been published by the experts of the European Union's Business and Biodiversity Campaign. This guide is designed as a bridge between sustainability management standards and biodiversity conservation. In one of its main chapters, the document links different ISO certifications with ecosystem protection to facilitate the use of existing management systems for protecting biodiversity. The guide includes the processes needed to make this transition as frictionless as possible. Adapting existing frameworks offers the advantage of low resource investment and a quick transition period.

Key performance indicators can be created to make this process even smoother and measure the effectiveness of changes in the corporate governance model. In this regard, the guide ‘The Development and Use of Biodiversity Indicators in Business: An Overview’ published by the IUCN in 2018 is useful. This document is complementary to the other two guides and enables companies to explore how their decision-making processes have changed with the incorporation of biodiversity issues and how this change has positively affected ecosystems on land owned by a company or next to its operations.

In summary, companies should ask themselves the following questions: which international biodiversity conservation frameworks affect us? What are the best practices in our sector? How can we adapt to current legislation? How can we anticipate future legislation? Which spaces can we identify to pioneer biodiversity conservation? The answers to these questions will vary for each firm. Companies have the tools presented here to integrate biodiversity as a strategic concern. Action derived from information and sustainable leadership is the best lever for the private sector to help conserve and restore our ecosystems, thus protecting the natural capital that supports the creation of value for Spanish and European businesses.

Action derived from information and sustainable leadership is the best lever for the private sector to help conserve and restore our ecosystems

Key ideas

  1. The future of the Anthropocene will be decided by adherence to the nine planetary boundaries – one of which is biodiversity.
  2. There is a direct connection (of dependence and disruption) between business and biodiversity.
  3. There is an intrinsic link between the climate crisis and the biodiversity crisis and a need for a common and efficient response to both challenges (global health).
  4. From a business perspective, it can be useful to link biodiversity with the notion of natural capital.
  5. Natural capital management enables companies to understand, assess, and report on the biodiversity risks, impacts, and opportunities of their actions.
  6. COP-26 did not give the expected impetus to international efforts to curb climate change.
  7. The forthcoming COP-15 CBD in China should conclude with the signing of ambitious agreements on global biodiversity conservation and be a prelude to COP-27 in Egypt.
  8. EU companies should be guided by the European taxonomy for implementing high impact socio-environmental projects and for obtaining subsidies.
  9. Tools are already available for this work, which must be approached from the reality of each sector and the size of the company.
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