Impacts and dependencies

What do we mean by corporate impacts and dependencies on nature?

If you're starting to get acquainted with the emerging set of voluntary and (soon to be regulated) nature-reporting requirements, you might have come across the terms ‘impacts’, and ‘dependencies’. They are echoed across a number of the key frameworks and standards, most notably:

COP-15’s Global Biodiversity Framework Agreement Target 15, focused on corporate action stated that, by 2030:

  • ‘all large business and financial institutions to assess and disclose their risks, impacts and dependencies on nature, through their operations, supply and value chains, and portfolios’

The Taskforce for Nature-related Financial Disclosures (TNFD) in its V0.3 release, also notes - within its ‘Strategy’ pillar that reporting companies should:

  • ‘Describe the nature-related dependencies, impacts, risks and opportunities the organisation has identified over the short, medium, and long term.’

We also see note of impacts and dependencies in the Science-based Targets Network draft guidance:

  • ‘The SBTN approach to target setting will help companies prioritise places and issue areas for action, using the best available science, so that companies can confidently address their most urgent impacts and dependencies.’

And finally, we see their inclusion in emerging reporting requirements, as laid out by the CSRD’s exposure draft on biodiversity and ecosystems:

  • ‘[Disclose] the nature, type and extent of the undertaking’s material risks and opportunities related to the undertaking’s impacts and dependencies on biodiversity and ecosystems, and how the undertaking manages them’

There is some heart to be taken from the alignment between these frameworks and standards. Where the foundation of each is a robust understanding of your impacts and dependencies on nature. But what does this actually mean in practice?

When we think about business’ relevance to nature, we are generally concerned with both:

  • Natural capital assets, i.e., the main components of nature - soils, freshwater, ecosystems, minerals, and species (to name a few); and
  • Ecosystem services or the benefits to us that are provided by these assets, that might be carbon storage, water purification, or pollination for example.

A business, by carrying out economic activities in certain locations, will have some dependency (direct or indirect on assets (e.g.  source materials) or services (e.g. pollination) as well as some impact on assets (e.g. groundwater discharge’s negative implications for freshwater). As such, it is through the lens of impacts and dependencies that we start to understand a corporate’s relationship with nature.

Let’s take a closer look with an example of both - first dependency:

Taking the example of a coffee farm, to sustainably produce outputs this farm is reliant on a number of ecosystem services:

  • Soil health
  • Water condition
  • Pollination

Importantly, understanding these dependencies provides a view on nature-related physical risk to the business. For instance,  if the ecosystem is not in sufficient health to continue to supply these services in the quantities needed for viable production.

Now let’s turn to impacts using the same example:

To operate this same coffee farm will perform a number of activities. These activities may have an impact on nature (or natural capital assets) in this location. This change in the condition of nature, might be significant for the business, this might be reputationally, or due to the knock-on implications for reduction of ecosystem service provision.

An impact pathway might look like this:

Activity: Consumption of water for coffee production → Change in asset state: increasing scarcity of groundwater → Impact: reduced water availability for coffee production in the future, and more generally within the watershed

You might now have a sense of why measuring impacts and dependencies on nature is the first step to identifying risks and opportunities, and setting appropriate targets to manage risk (or capture opportunity).

Helpfully,  there are lots of tools and guidance documents to help you get started and to read more deeply about the topic. The TNFD sets out a clear approach to assessment of impacts and dependencies within their framework. Likewise, free tools such as ENCORE or WWF’s Risk Filter will provide you with a topline view of potential impacts and dependencies.

Get in touch with us to discuss what your impacts and dependencies might mean for your business.

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