Hidden Risks: Why Biodiversity Matters to Every Business
Biodiversity may be more material to your company's risk management than you think. Many businesses assume that if their products don't directly rely on species or ecosystems, biodiversity isn't a critical concern. However, this view overlooks the broader implications of impact materiality and double materiality assessments.
Biodiversity assessments differ from most risk assessments as they are dependent on location. There is a clear link between biodiversity loss and land-based industries such as agriculture. However, in impact materiality or double materiality assessments, business locations can be deemed material even if the physical items used within a company’s product or value chain are not. This is true even if the impacts to biodiversity occur outside the boundaries of a company’s site, as is the case with the construction of new wellpads for oil extraction being too close to a crucial wetland in Uganda. This level of consideration of a company’s impacts to the local ecological—as well as local human communities—represents a new degree of scrutiny that has grown significantly in recent years. And this focus on biodiversity and nature is being demanded of the global corporate community to mitigate the triple crises of nature loss, social inequity, and climate change.
In impact materiality or double materiality assessments, business locations can be deemed material even if the physical items used within a company’s product or value chain are not.
Consider a company’s biodiversity risk assessment for their operational sites. Aligning with TNFD guidance or CSRD regulation requires companies to assess the proximity of their direct operations (and value chain) to areas that are biologically or ecologically sensitive. While there is not yet agreement on the exact definition of “proximity”, and this is often industry- and activity-dependent, companies’ operational sites may unknowingly be in close proximity to existing and future areas of biodiversity importance. The TNFD mentions specific datasets that can help corporations identify bio-sensitive locations. One applicable dataset is “Key Biodiversity Areas”, or KBAs. Locations across the globe qualify as a KBA if they meet criteria such as hosting threatened biodiversity, include geographically restricted biodiversity, or are so unique on Earth that they are irreplaceable. While the picture of conservation often focuses on tropical areas, North America, for example, houses over 1,000 KBAs. In fact, 300 KBAs are at least 50% urbanized, which can seem counterintuitive to many.
But why would it matter whether a company that is not utilizing products directly from species has an office location in proximity of one of these important biodiversity sites? The International Union for Conservation of Nature (IUCN) explains that while certain companies may not exert pressure on threatened species, the majority of companies will have some aspect of their corporate scope of biodiversity influence within the proximity of threatened species. For example, a company’s choices of landscaping, pesticides, water use, reflectivity of building materials, light and sound are all examples of factors within a company’s control that can affect or alter the health and survival of species within these proximal areas of biodiversity importance. Paying attention to our impacts while in the vicinity of these ecosystems can yield a positive (or negative) result on the success and continuation of the species and ecosystems that have been selected for protection. And of course, species don’t recognize human-created boundaries such as Key Biodiversity Areas or protected areas.
Locations across the globe qualify as a Key Biodiversity Area (KBA) if they meet criteria such as hosting threatened biodiversity, include geographically restricted biodiversity, or are so unique on Earth that they are irreplaceable.
Additionally, much research describes how essential ecosystem connectivity is for species, creating corridors that enable plants and animals to take advantage of a greater range of habitat suitability and thrive. In our current world with substantial and increasing landscape fragmentation, the successfulness of connectivity starts at the edges of these sites already designated as important for biodiversity.
KBAs and protected areas represent just one feature of a location that can designate an area as sensitive to biodiversity. The TNFD includes other aspects such as areas currently under legal protection, areas of either high ecosystem integrity or rapid decline in ecosystem integrity, areas of importance to Indigenous Peoples, Local Communities, and other stakeholders, and areas of high water risk.
However, companies are not expected to figure out a comprehensive solution right away. At this moment in time, that would likely be impossible. The goal right now is to simply get started. The first step is determining proximity to these locations—something easily accomplished with Dunya Analytics’ science-based risk analytics platform. This first step can help a company determine whether biodiversity is in fact material, even if initially it was not considered to be so.
