All businesses directly or indirectly depend on biodiversity and ecosystems for their success. Companies rely on nature for resources, or on business-enabling ecosystem services like pollination, and soil fertility. Biodiversity loss can expose companies to resource scarcity, value chain disruptions, or increased operational costs. The impacts of biodiversity collapse on business' supply chains will be much more severe than that of any pandemic or recession due to their inseparable reliance on our planet's natural resources. Human and economic activities have caused severe loss of biodiversity, resulting in a decline of the world's ecosystems in size and condition by 47%1 compared to estimated baselines.

Stakeholders are increasingly concerned about managing the impact of companies on nature. Adhering to Environmental Reporting Standards is vital for transparent and accountable business operations. Employees, customers, shareholders, regulators, local communities, and others are conveying to companies that impacts on nature matter to them. Implementing effective strategies for Business Sustainability is crucial for long-term success. Thus, both positive and negative impacts on nature can have serious reputational consequences for companies and can ultimately affect brand value and market share.

Importance of the relation between biodiversity and sustainable development

Sustainable development ensures the present and future needs, so biodiversity loss can have a huge impact on sustainable development. Biodiversity conservation and sustainable development focuses on social progress, economic growth and environmental protection on one side, and ecosystem conservation on the other. Promoting Sustainable Development and Biodiversity supports the health of ecosystems and business growth. The relationship between biodiversity and sustainability is direct.

Importance of this relationship can be understood by some examples:

  • Agricultural methods that promote organic fertilizers and pesticides, improve soil health and biodiversity are sustainable. This type of agriculture can help to promote biodiversity conservation and reduce the negative impacts of agriculture on ecosystems.
  • Key biodiversity areas, such as national parks and wildlife reserves, are crucial for conservation and protection of biodiversity and ecosystems. These areas provide essential ecosystem services, such as water filtration and carbon sequestration.

Role of CSRD in aligning business with biodiversity goals

CSRD is committed to respecting internationally recognized biodiversity targets, measuring impact, and monitoring progress through biodiversity and ecosystem change-related metrics. Staying compliant with CSRD Regulations ensures your business meets critical environmental standards. The standards also encourage companies to start quantifying the potential financial effects of biodiversity and ecosystem-related risks and opportunities.

CSRD standards encompass 12 key standards categorized into general, environmental, social, and governance reporting. ESRS E4, focusses only on biodiversity and ecosystems.

The disclosure requirements are designed to help companies understand their impacts on biodiversity and thereby align their business model and operations with biodiversity protection. In line with the goal of full restoration of all global ecosystems by 2050 as proposed by The Nature Restoration Law by the European Commission in 2022, companies must provide plans to ensure that its business model and strategy are compatible with the transition to achieve no net loss by 2030 and net gain by 2050. Measurable biodiversity and ecosystem targets, biodiversity action plans and potential financial implications of biodiversity-related impacts, risks and opportunities must also be disclosed.

ESRS E4 requirements in detail

In the latest report on the implementation of the European Non-Financial Reporting Directive (NFRD), Climate Disclosure Standards Board (CDSB) analyzed the biodiversity-related information provided by European companies as part of their mainstream disclosures2.

The report found that 1 out of 10 companies reported some biodiversity metrics, while an overwhelming majority only provided generic management approaches and high-level commitments showing a lack of maturity of biodiversity-related disclosures.

ESRS E4 standards have solved this issue largely by paving the way for biodiversity disclosure by mentioning the exact material topics that organizations should assess their standpoint on the impact on biodiversity and ecosystem. Understanding ESRS E4 Requirements is essential for aligning your business with biodiversity goals.

The objectives of ESRS E4 standards are to prompt companies to understand and communicate

  • Impact on biodiversity and ecosystems due to business operation, in terms of real and potential material positive and negative impacts.
  • The result of the actions to prevent or mitigate significant negative impacts, potential or real, and to protect and restore biodiversity and ecosystems.
  • Plans and capability to adapt their business models and strategies based on planetary boundaries.
  • The type and extent of risks and opportunities and its management related to their impacts and dependencies on biodiversity and ecosystems.
  • The short-, medium-, and long-term financial effects associated with risks and opportunities.

Disclosure topics

ESRS E4 specifically addresses biodiversity and ecosystems and the related disclosure requirements, and is divided into six parts:

General disclosure:

  • ESRS E4-1: Transition plan on biodiversity and ecosystems:
    • Organizations must reveal a plan for transition, aligning their strategy and business model with preserving planetary boundaries, biosphere integrity, and land-system changes.
    • The business development plan should adhere to and corelate with the targets set in the EU Biodiversity Strategy 2030.
    • The strategy and business development plan should be approved by administrative, management, and supervisory bodies.

Impact, risk and opportunity management:

  • ESRS E4-2: Policies related to biodiversity and ecosystems
    • Companies outline strategies to handle effects, risks, and opportunities related to biodiversity and ecosystems.
    • This includes how strategies address dependencies, risks, and opportunities during transitions, and their connection to activities for preserving or improving biodiversity conditions.
  • ESRS E4-3: Actions and resources related to biodiversity and ecosystems
    • Companies provide details on efforts concerning biodiversity and ecosystems, along with dedicated resources.
    • Clarification includes integration of biodiversity measures into planned or executed initiatives and whether they are singular or part of an ongoing practice.

Metrics and targets:

  • ESRS E4-4: Targets related to biodiversity and ecosystems
    • Companies outline objectives related to biodiversity and ecosystems, including progress and effectiveness assessment.
    • Reporting includes establishment of timelines, milestones, and consideration of ecological thresholds and allocations.
  • ESRS E4-5: Impact metrics related to biodiversity and ecosystems change
    • Enterprises disclose significant influences leading to changes in biodiversity and ecosystems.
    • Reporting includes indicators measuring alterations in species numbers or impacts on protected areas.
  • ESRS E4-6: Potential financial effects from biodiversity and ecosystem-related impacts, risks and opportunities
    • Companies disclose prospective financial consequences of risks and opportunities associated with biodiversity and ecosystems.
    • Quantification of financial impacts on financial standing and performance is required, aligning with qualitative characteristics outlined in ESRS 1.

Implementing a Biodiversity Framework: Key Actions for Organizations

  • Assess and disclose: Businesses need robust biodiversity performance indicators and should integrate them into existing governance mechanisms, so they receive the same attention as financial targets. The guidance for ESRS under CSRD regulation outlines the tools and frameworks for businesses to assess and measure, commit and set targets, take actions and publicly disclose progress.
  • Reduce the bad: Companies should avoid degrading nature or significantly reduce their negative impact. Businesses can address their dependency on natural resources by investing in environmentally friendly technologies and practices. Closed-loop recycling and cradle-to-cradle approaches, for example, can vastly reduce the need to extract natural resources and cut end-of-life waste, thereby decreasing their impact on biodiversity.
  • Increase the good: Organizations can adopt sustainable procurement policies for mismanaged commodities that have a lasting impact on nature – e.g. wood, palm oil, soy and beef – by imposing strict sustainability criteria on suppliers. They can push their suppliers to use third-party certification schemes, such as the Forest Stewardship Council, Global Food Safety Initiative, etc.
  • Foster Inclusiveness: Organizations need to consult stakeholders and engage communities to benefit from their knowledge. They will also mitigate their impact on local communities by ensuring respect for their rights and livelihoods. This approach is especially necessary for businesses in the consumer goods, food, agriculture, forestry, fisheries, extractive industries, infrastructure and water utilities sectors.
  1. UN Environment Programme, UNEP Finance Initiative and Global Canopy (2020). Beyond ‘Business as Usual’: Biodiversity targets and finance. Managing biodiversity risks across business sectors. UNEP-WCMC, Cambridge, UK. Available from: Beyond 'Business as Usual': Biodiversity Targets and Finance
  2. For more information, please refer to CDSB's specific biodiversity-related specific briefing, available from:https://www.cdsb.net/sites/default/files/nfrd2020_briefing_biodiversity_v2.pdf

For businesses looking to align their operations with international biodiversity standards and embrace sustainable development, ecoPRISM offers comprehensive guides and actionable insights. Our expert advice helps you stay ahead in your industry by integrating sustainable practices and meeting regulatory requirements. Setting and achieving Corporate Biodiversity Goals can enhance your company's reputation and environmental impact.

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