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COP15 Business Statement for Mandatory Assessment and Disclosure - FAQ

What is nature positive?  

‘Nature positive’ is a global goal that means halting and reversing nature loss by 2030 measured from a baseline of 2020, through increasing the health, abundance, diversity and resilience of species, populations and ecosystems so that by 2030 there is more nature than there was in 2020. Learn more about the “nature-positive” movement.  

When would mandatory requirements be implemented?  

All targets on the Convention on Biological Diversity (CBD) Post-2020 Global Biodiversity Framework are 2030 targets. This means that mandatory requirements to assess and disclose will need to be implemented by countries by 2030. However, some countries could decide to implement it earlier, but this will be decided at national level by individual governments.  

How would the adoption of mandatory assessment and disclosure in Target 15 be implemented?  

This global target will be implemented at national level. This means that each country will have to decide how best to implement these requirements based on existing regulations and national context. One framework that countries could use is the Taskforce on Nature-related Financial Disclosures (TNFD) Framework, but they can also decide to use different frameworks. TNFD provides governments with a clear framework for business and financial institutions to asses, manage and disclose nature-related risks. TNFD is not creating a new disclosure standard but aggregates the best standards, data and tools for business and finance to use. It builds on the Natural Capital Protocol and the framework of the Taskforce on Climate-related Disclosures (TCFD). A second iteration of the framework was released in June 2022 and the full framework will be available in 2023. 

What is the definition for “large and transnational business and financial institutions”? 

The definition will be adopted at national level by each country as this will largely depend on national contexts. Many countries already have adopted definitions. For instance, the UK Companies Act on climate disclosure understands large companies as companies with more than 500 employees and are either: Listed on the main market of the LSE; Traded on AIM; Banks or insurers; or have more than £500m turnover. The EU  and the OECD consider large enterprises as those that employ 250 people or more and have an annual turnover of more than €50 million. In Brazil, the National Development Bank defines large companies as ones with a gross income larger than R$ 300 million (roughly USD 60 million) or more than 250 employees. Japan has a legal definition for Small and Medium-sized Enterprise adopted in the SMEs Basic Act and any company not under this definition is regarded as a large business. In China, the National Bureau of Statistics issued a regulation to classify large, medium, small and micro enterprises by sectors with classification made by revenue, number of employees and total assets.  

Why is assessing and disclosing impacts and dependencies on biodiversity good for business?

It's a fundamental risk to business, and society in general, for companies and financial institutions not to be aware of their impacts and dependencies on biodiversity, and nature more broadly. If businesses do not understand their impacts and dependencies, they won’t be able to manage them. If they do not disclose, their progress cannot be tracked. Assessing and then disclosing these impacts and dependencies is an essential first step to help business understand the ecosystem services that support their activities and why they need to act to protect, restore and sustainably use nature. It will also help them prioritize relevant actions based on the most material issues in their operations and value chains. This applies to all businesses regardless of their size, sector or geography.  Disclosure also brings the following advantages:  

Market access. Disclosure is a key element in maintaining the competitiveness of companies within global markets. Several markets, such as the EU and the UK are in the process of adopting and implementing regulations requiring due diligence on the imports of forest risk commodities, which will require companies to be able to identify and manage environmental impacts and dependencies,  if they want to operate within those markets. Exporters will face higher expectations for environmental disclosure from customers and authorities in these and other  markets.  Mandatory disclosure will help identify companies currently showing leadership and stimulate companies to begin the transition toward nature positive business models.

Better access to capital. As the number of investors committing to nature positive assets grows, companies that do not report nature- and biodiversity-related data will face constraints on access to capital. Companies that report TCFD-aligned data through CDP already have 19% greater access to capital compared to non-reporting firms. This advantage is likely to grow as nature and biodiversity metrics feature more in investment decisions.

Superior performance. As well as securing access to key markets and sources of capital,  best practice in sustainability and reporting benefits companies through improved risk management, better financial performance, and greater engagement with employees and customers.  These companies generally post higher returns, and enjoy better performance overall. For example, data from STOXX indicates that companies on CDP’s A List  have outperformed competitors by 5.3% over a seven-year period.

What are the benefits of mandatory disclosure for companies? 

Adopting mandatory assessment and disclosure requirements are needed to accelerate action and improve international competitiveness. There are further benefits, for example:

·         Better understand business risks and opportunities related to nature loss

·         Level the global playing field and ensure fair competition

·         Ensure large-scale action and collaboration

·         Accelerate standardization

·         Improve expectations, allowing companies to plan and integrate considerations more easily as they have a clear set of expectations around reporting.

·         Increase accountability and transparency leading to improved business governance

·         Involve and activate SMEs through their value chains

·         Facilitate access to data

What are the benefits of mandatory disclosure for society? 

As is the case on climate change, mandatory requirements to assess and disclose impacts and dependencies on nature are needed to:

·         Accelerate action and strengthen the business case to invest in nature

·         Engage investors

·         Empower consumers

·         Ensure the rights of Indigenous Peoples and Local Communities

What is the experience from climate disclosure?

While some jurisdictions are already requiring certain companies to disclose information on the way they operate and manage social and environmental issues, most have encouraged rather than mandated business to disclose biodiversity information. This lack of a mandatory requirement leads to highly variable disclosure, both in terms of quantity and quality of information.

Experience from the climate agenda tells us that voluntary action is not enough. This is why countries are starting to adopt mandatory requirements for companies to disclose climate-related financial information based on the guidelines from the Task Force on Climate-related Financial Disclosures (TCFD). Countries such as the UK, Canada and New Zealand are introducing new legislation and setting out a roadmap requiring firms to report climate impacts and investment decisions. This initiative follows the agreements made by G7 finance ministers in June 2021 to make TCFD mandatory and the US Securities and Exchange Commission proposed rules to require public companies to disclose extensive climate-related information[4].

In 2016, France was one of the first countries in the world to pass legislation to require some financial institutions to report each year on their exposure to the risks posed by climate change and what they planned to do about it. Five years on, there is tangible evidence of this ground-breaking law’s impact. Banque de France reported that holdings of fossil fuel stocks plummeted by 40% among French institutional investors compared to those which weren’t subject to the new rules. This is proof  that mandatory disclosure works and can have immediate results.

Where can I find more information?  

For more information on why mandatory disclosure is good for business and our economies, take a look at our latest policy position on Target 15 of the Global Biodiversity Framework. Mandatory requirements need to be supported by robust and scientifically based indicators for companies to use and the SBTN and TNFD frameworks will offer just that. 

You can also look at CDP’s policy brief  on the importance of mandatory disclosure, highlighting five main elements of high-quality mandatory disclosure that policymakers must consider.  CDP also recently produced  a policy brief on mandatory water disclosure.

How can companies and financial institutions already assess their impacts and dependencies?  

To measure, value and prioritize impacts and dependencies on nature and ensure actions on the most material ones, companies and financial institutions can:  

  1. Conduct an initial materiality assessment to prioritize efforts: Work on the most material impacts and dependencies on nature by performing materiality assessments across the production and consumption value chains - from extraction of raw materials to post-consumer waste. Using guidance from SBTN, companies can also identify and manage priority environmental impacts, dependencies, and locations. For example, they may realize that the biggest impact their company has is indirectly through freshwater use from suppliers and/or consumers. 

  2. Measure and value impacts and dependencies on nature. Build on the initial materiality assessment and conduct their own natural capital assessment by following the Natural Capital Protocol. Find the right tool to assess impacts and dependencies through the Natural Capital Toolkit and where relevant, apply supplementary guidance on finance, biodiversity and food systems. Get in touch with We Value Nature to build skills and capacity along their natural capital journey.  

  3. Evaluate business risks and opportunities from understanding their impacts and dependencies on nature, identify and assess the company’s nature-related risk. Use the guidance provided by the Taskforce on Nature-related Financial Disclosures (TNFD) to show how the organization evaluates and manages nature-related risks. Identify priority locations for target setting and action using tools like the Integrated Biodiversity Assessment Tool (IBAT) for Business and dig deeper into particular risks and opportunities identified, for example by using the WWF Water Risk Filter. 

  4. Expand assessments to include nature, climate, and people: Where possible, conduct an integrated assessment, including natural, social, and human and produced capital. Measure, manage and report on climate impacts through the GHG Protocol. Perform assessments of impacts and dependencies to capture the implications for indigenous people to ensure the protection of their rights.  

How can companies and financial institutions already disclose their impacts and dependencies?  

Companies and financial institutions should track performance and prepare to publicly report material nature-related information:  

  1. Monitor progress regularly with the frequency appropriate for their nature commitments. E.g. quarterly monitoring may be appropriate for some targets such as water use or pollution discharge while 3 to 5-year monitoring may be appropriate for other targets such as species abundance. 

  2. Report progress made towards nature positive goals and communicate findings with key stakeholders throughout the process. Taskforce on Nature-related Financial Disclosures (TNFD) recommend business leaders communicate:  

    • Governance: the ways in which the organization’s oversight and decision-making functions take nature-related risk and opportunities into account. 

    • Strategy: the integration of actual and potential effects of nature-related risks and opportunities on the organization’s business model, strategy, and financial planning. 

    • Risk management: how the organization integrates nature-related risks into its overall risk management approach. 

    • Metrics and targets: quantitative and qualitative performance indicators and aims related to nature-related risk and opportunities, based on nature dependencies and impacts. 

  3. Disclose annually through CDP: companies should disclose annually through CDP’s climate change, forests and water security questionnaires, which cover a wide range of nature-related metrics. As the largest independent global environmental disclosure system, CDP’s questionnaires are aligned with the highest quality frameworks and standards, including the TCFD, GHG protocol and CEO Water Mandate. CDP’s disclosure platform may provide a mechanism in future to translate the TNFD recommendations into actual disclosure questions and a standardized annual format, providing investors and disclosers with a unique platform where the TNFD Framework can be brought into real-world practice and companies can prepare for any future regulatory requirements.   

  4. Seek out independent validation of processes and verification to enhance credibility of actions. Seek independent validation and verification to assure the company’s processes used for value chain mapping, materiality assessments, prioritizing locations for action, gathering baseline data and setting targets.  

  5. Align reporting with major reporting standards. As much as possible, ensure alignment with existing reporting standards, such as GRI, SASB, IFC, and the EU Non-Financial Reporting Directive . 

How can companies commit to avoiding and reducing negative impacts?  

Companies and financial institutions can set transparent, time-bound, specific, science-based targets to put them on the right track towards operating within the Earth’s limits. For more information take a look at the ‘commit’ section of these High-Level Business Actions on Nature.  

In particular, they can take inspiration from the Science-Based Targets for Nature (SBTN) initial guidance and their suggested interim targets, and can prepare to set targets in line with the final guidance to be released in 2023. 

How can companies transform their business strategies to restore and regenerate nature?  

Companies and financial institutions can avoid and reduce negative impacts, restore and regenerate, collaborate across land and seascapes, shift business strategy and models, and advocate for policy ambition. For more information take a look at the ‘transform’ section of these High-Level Business Actions on Nature.