Finance & Investment
4 Keys to Accurately Accounting for Your Company’s Impacts on Nature

Integrating the value of nature into business is crucial; but it must be seen as an opportunity, not just a risk

Image credit: Adiprayogo Liemena

If we’re to truly transform our economies into nature-positive entities, it’s going to take everybody working in a business — from legal and HR to financial and environmental departments — pulling together.

After 25 years working in due diligence and supply chain governance, Ephi Banaynal dela Cruz, CEO and co-founder of the recently launched Context Nature, is well placed to lead one of the opening workshops on the subject at SB’23 San Diego. The provocative, two-hour session succeeded in stimulating new thinking and fresh ideas for how we can get company boards engaged in valuing nature — and not just for reporting and compliance purposes. Together with her fellow co-founder, Sylvia Vaquer, dela Cruz offered the audience appropriate context: The last couple of decades have been dominated by talk of carbon emissions (to the detriment of other environmental challenges and social inequities); six planetary boundaries have now been exceeded; and the World Economic Forum’s latest Global Risks Report doesn’t talk about carbon (but collapse of ecosystems and biodiversity loss).

“The risk is growing, and nature has a direct impact on the long-term viability of businesses,” dela Cruz said.

The audience agreed, with one delegate noting that not one top business in the world would be profitable if it were to properly account for nature: “The idea of putting a price on nature is a new idea for many people. Half of the world’s GDP is nature dependent. When companies realize that they will no longer be able to make their products because there is no tree left … that’s terrifying,” they said.

The risk is growing thanks to tightening regulation, the increased use of reporting frameworks, and supply chain disruption. Yes, corporates are increasingly asked to describe their nature dependencies and how they are managing their relationship with nature; but dela Cruz suggested that valuing nature should be seen through the lens of opportunity, too.

“The economic prosperity of organizations will depend on how well they manage their ecological health,” she said, before Vaquer highlighted numerous examples of brands that are starting to do exactly that — Nestlé’s newly introduced climate risk insurance for its coffee farmers, and forest-restoration projects backed by the likes of Patagonia and Mars being good cases in point.

But dela Cruz acknowledged that when it comes to accurately valuing nature, finding ways to be proactive — let alone comply with the overwhelming number of laws and reporting frameworks — is tough. Putting a value on nature is about promoting sustainable business practice, as well as protecting human rights and boosting transparency.

“Right now, it’s about reducing negative impacts,” dela Cruz said. “But reduction, or doing less harm, is short sighted.”

To support, Context Nature has devised a set of guiding principles to help reframe the commonalities of drivers for action.

“We need to take a systems approach and account for the interconnectedness of environmental and social impacts,” she told delegates before walking them through the principles:

• Measuring what matters most

• Providing opportunities for upskilling people and offering them a decent living, and

• Recognizing the knowledge of Indigenous Peoples in nature management and ensuring their equitable participation.

“Yes, companies need to comply with new legislation. But they really need to understand their relationship with nature,” dela Cruz added. This means establishing a risk-management system that assesses a company’s nature dependencies and impacts, and finds ways to remediate and mitigate impacts before tracking performance via reporting.

“Lots of people start with the idea that they need to report their impacts and start gathering info for a report. But they need to understand everything else first,” she asserted.

Pooja Sharma — a lawyer with the Earth Law Center — closed the workshop by exploring how businesses can find ways to get past merely transactional relationships in their supply chain to get to know stakeholders better, find out what is meaningful to them, and start to reframe compliance as a system of interconnected risks and opportunities.

“When it comes to corporate governance, most systems are too vague and have no teeth” to truly embed nature into business, she said. Delegates agreed, with one decrying the fact that “reporting is being used as proxy for good governance by investors.”

Sharma suggests firms develop relational contracts – based on the behavior and trust of two parties – as one of a series of legal tools that can be used to embed nature in companies. “Businesses relate through contracts, most of which are simply transactional, based on fear. But relational contracts can be supportive, with specified desired outcomes and a clear process for conflict resolution.”

The business of valuing nature is incredibly complex. But by understanding their relationship with nature — rather than simply focusing on compliance — businesses can find opportunities to build long-term resilience and success.

Tips and tricks for making good on biodiversity commitments

L-R: Al Iannuzzi, Jane Ewing, Jamie Horst and Sarah Douglis

Many companies have fallen into a carbon tunnel-vision mentality and, in doing so, haven’t yet begun to assess their impact on other aspects of nature. Brands that take nature-positive pledges are committing to avoid further destruction and biodiversity loss, as well as to protecting, restoring and regenerating nature.

Moderated by Sarah Douglis, Strategic Advisor and Founder at SolTide Consulting, a Wednesday afternoon panel featured Al Iannuzzi, VP of Sustainability at The Estée Lauder Companies; Jamie Horst, Chief Purpose Officer at Traditional Medicinals; and Jane Ewing, SVP of Sustainability at Walmart discussing lessons learned from enacting their companies’ biodiversity commitments.

No matter the size or industry, the first step for brands considering taking substantive action on biodiversity is to assess their supply chain to understand the hotspots of risk. Using a materiality view through supplier assessments, monitoring trends, and utilizing the growing suite of tools and frameworks available — such as WWF’s Biodiversity Risk tool — gives brands insight into their impact on water, local species of plants and animals, harvesting practices, and local communities.

With its incredibly wide range of suppliers, Ewing says retail giant Walmart orders risks by magnitude from simply looking at suppliers with sustainability certifications, increasing traceability, and sometimes going into a community to solve an issue.

“Pick some highly vulnerable areas that you source from and look holistically at the issue from both environmental and social,” she said. “If you are going into these communities, make sure you are leaving them in a better place than when you came in.”

Often, this work can’t be done alone. Since there is strength in numbers, collaboration is key. By working hand in hand with competitors, governments, NGOs and local communities, the process of adding biodiversity to your brand's sustainability agenda and making progress can be expedited. Makeup, skincare, haircare and fragrance giant Estée Lauder Companies has a complex supply chain that sources thousands of commodities from around the world; and has found benefit in partnering with brands and organizations to get the supplier data required to move the needle.

“The power to work together and influence the supply chain is huge,” Iannuzzi said. “We can make a big difference by banding together.”

If you find an issue in your supply chain, the instinct may be to pull your business out as quickly as possible — which can negatively impact the local communities whose livelihoods depends on it. Instead, focus on stakeholder engagement and try to solve the problem with the suppliers if possible and set expectations from the beginning. In the case of Traditional Medicinals, nurturing relationships for years to decades before sending the first purchase order has helped it gain traction.

“The more that you have a deep sense of trust and transparency between your organizations, the greater confidence you can have in the integrity of data and your supply chain,” Horst said. “Think really deeply about how you are approaching our partners.”

While focusing on biodiversity is a new sphere for many, it is now table stakes — not only for the sake of the planet but also for the sake of businesses and the communities in which they operate. By assessing your brand's footprint, utilizing the tools available and working together, we can reverse biodiversity loss and set our sights on regeneration.