Introduction

The report explains that many material nature-related dependencies, impacts, risks and opportunities occur in organisations’ upstream and downstream value chains rather than in direct operations. This is particularly relevant for financial institutions and consumer goods companies, whose significant issues often arise in dispersed supply chains. The TNFD Recommendations require organisations to identify, assess and disclose these issues wherever possible, while recognising challenges such as limited data and capacity. The guidance sets out a principles-based approach to value chain assessment and notes that full traceability is an aspirational long-term goal. It also highlights emerging international initiatives to improve supply chain traceability and the TNFD’s ongoing work to address data constraints.

Value chain challenges

The report identifies structural features of value chains that complicate the assessment of nature-related issues. Large numbers of suppliers and customers create many locations to analyse. Transformation, aggregation and composite products obscure the origin and end use of materials. Long chains with multiple intermediaries increase uncertainty about where impacts occur. Organisations with many products and end uses face a wide array of potential dependencies and impacts. Suppliers and customers may operate in numerous locations, making prioritisation difficult. Behaviour-based impacts—such as consumer disposal of packaging or suppliers’ on-site management practices—are harder to observe directly.

Further complexity arises from variable value chain actors, such as changes in suppliers in commodity markets that rely on mass-balance systems. Confidentiality concerns may also prevent disclosure of production sites or customer data. These challenges affect both qualitative and quantitative analysis required under TNFD Recommendations, including identifying material issues and reporting metrics. The report provides examples such as the sustainability of fisheries for seafood retailers, water dependencies in semiconductor manufacturing, and plastic pollution arising from bottled water packaging.

How organisations can approach these challenges

The report recommends applying the TNFD LEAP approach—Locate, Evaluate, Assess and Prepare—to structure value chain analysis. Organisations should clarify analytical aims, examine the nature of value chains, prioritise issues and determine data needs. They should identify existing data and where secondary data may fill gaps temporarily.

Table 2 shows how value chain considerations map to LEAP steps. Prioritisation should use sector, geography and supply chain filters, including tools such as the SBTN High Impact Commodity List, ENCORE, Trase, EXIOBASE and the WWF Biodiversity Risk Filter. Organisations should focus on where material dependencies, impacts, risks and opportunities are most likely to arise, even when influence over suppliers is limited.

The report advises starting with a “deep and narrow” approach on highly material issues, expanding over time. Materiality assessments should consider magnitude and likelihood of impacts across short-, medium- and long-term horizons, and may require assessing sectors beyond an organisation’s direct operations. The guidance underscores that availability of data or degree of control should not be the primary factor in determining scope.

The section also explains when tracing to producer or consumer level is necessary and when regional or landscape-level information may suffice. Secondary data—such as industry averages, modelled data or proxy data—can be used when full traceability is infeasible, provided they meet SMART criteria (Specific, Measurable, Ambitious, Realistic and Time-bound). Organisations should disclose the use of secondary data, assess data quality and outline plans to improve traceability.

The report encourages leveraging existing value chain initiatives, including scope 3 greenhouse gas accounting and modern slavery due diligence, to strengthen nature-related information gathering.

Value chains in other frameworks and standards

The report summarises how major disclosure and regulatory frameworks address value chain considerations. Under ISSB Standards (IFRS S1 and S2), organisations must disclose material sustainability-related risks and opportunities across the value chain and scope 1, 2 and 3 greenhouse gas emissions, using reasonable and supportable information without undue cost. GRI Standards require identification of impacts across all activities and business relationships, including tiers beyond direct suppliers. CDP questionnaires request mapping of value chain visibility, processes for identifying dependencies and impacts, and data across climate, forests, water, plastics and biodiversity modules.

ESRS requires disclosure of material upstream and downstream impacts, risks and opportunities based on double materiality, including supply chain traceability for biodiversity-related issues. The Greenhouse Gas Protocol sets minimum boundaries for scope 3 categories to ensure cradle-to-gate and life cycle emissions are captured. PCAF provides methods for assessing financed, facilitated and insured emissions for financial institutions.

Target-setting frameworks such as SBTN require boundary setting based on materiality and location-specific data, particularly for high-impact commodities. The Accountability Framework sets principles for ethical supply chains in agriculture and forestry sectors.