The report explores how companies can address the financial risks and opportunities arising from nature-related issues such as biodiversity loss and ecosystem degradation. It provides insights into how company boards can integrate nature-related considerations into corporate governance to meet their legal duties and promote long-term success. The analysis is based on six of the World Benchmarking Alliance’s (WBA) Nature Benchmark indicators.

Biodiversity loss and ecosystem breakdown

Biodiversity loss presents foreseeable risks to companies, impacting their long-term success. Directors are legally required to account for these risks in their strategic planning rather than merely treating them as compliance issues. The report highlights that directors can benefit from aligning corporate strategies with frameworks like the Nature Benchmark to mitigate risks and seize opportunities.

Five takeaways for board directors

Sustainability strategy: While most companies have integrated sustainability into their corporate strategy, only 65% have embedded sustainability objectives that address their impact on nature. Just 4% cover significant environmental and social impacts holistically, highlighting gaps in sustainability risk management.

Accountability for sustainability strategy: Although 68% of companies assign responsibility for sustainability strategies to governance bodies, only 7% link senior executive incentives to nature-related targets. This shows a shortfall in integrating sustainability into leadership and decision-making.

Stakeholder engagement: Over half of the companies engage stakeholders on sustainability issues, yet only 7% integrate stakeholder feedback into their sustainability strategy, indicating the need for stronger alignment between stakeholder input and corporate actions.

Impact and dependency assessment: Only 5% of companies assess their impacts on nature, and less than 1% do so for their upstream and downstream value chains. This suggests that companies are not adequately managing risks related to their dependencies on ecosystems.

Ecosystem conversion: Around 11% of companies provide qualitative evidence of efforts to minimise their ecological footprint, but only 0.4% have achieved 100% conversion-free supply chains for high-risk commodities, signalling the early stages of corporate engagement on this issue.

As climate and nature-related crises become more intertwined, businesses are urged to take proactive steps in understanding their dependencies on nature. Directors are encouraged to consider nature-related risks in the same way they address climate risks, as these issues can significantly impact financial stability and market competitiveness. The report notes that the financial consequences of biodiversity loss are materialising faster than climate-related risks, making it imperative for directors to act swiftly.

Nature benchmark indicators and directors’ duties

The Nature Benchmark assesses company practices through 43 indicators, focusing on sustainability strategies, accountability, and stakeholder engagement. The report centres on six of these indicators, underscoring that companies with strong governance systems are better equipped to manage nature-related risks and avoid potential litigation or financial losses.

Recommendations for board directors

To effectively address nature-related risks and opportunities, the report recommends that directors:

• Use structured methodologies, such as the TNFD’s LEAP approach, to assess and manage nature-related issues.
• Review current corporate practices to evaluate impacts and dependencies on biodiversity.
• Engage with sustainability frameworks like the WBA’s Nature Benchmark and the Science-Based Targets for Nature.

Conclusion

The report concludes that integrating nature-related considerations into governance structures will help companies future-proof their operations. By strengthening corporate strategies and adopting agile approaches, companies can mitigate financial risks, comply with emerging regulatory frameworks, and enhance their reputations. Directors are encouraged to lead this transition by embedding sustainability into their risk management and decision-making processes.