Nature as a Business Risk: Why It Matters More Than Ever

23 Apr

More than half of global GDP depends on nature, yet most corporates ignore it.

Many — driven by regulatory pressure — are carbon literate and have an idea of how large their carbon emissions are. Some have even put forward plans to eliminate their carbon footprint.

But few have any sort of idea about how their business directly and indirectly impacts nature, and even fewer understand how they depend on it.

Businesses that fail to recognise nature as a core strategic risk will expose themselves to financial instability, supply chain disruption, and reputational damage.

But, what is nature?

“Nature” refers to the interconnected system of living organisms (animals, plants, fungi, and micro-organisms), their ecosystems (like forests, wetlands, oceans, and freshwater systems), and the natural processes (such as pollination, carbon cycles, water purification, and soil regeneration) that they maintain.

These processes act as the unseen infrastructure supporting every business sector, from agriculture and mining to manufacturing and finance. This makes nature the world’s most underpriced supplier, providing trillions of dollars’ worth of services, free of charge. That is, until they are disrupted or destroyed.

Impacts on nature

Broadly speaking, nature can be negatively impacted in five ways:

Climate change: Alters temperature and precipitation patterns, causes more extreme weather events, melts glaciers and polar ice, raises sea levels, and acidifies oceans, leading to widespread habitat loss and disruption of species migration and survival.
Land/Freshwater/Ocean use change: Deforestation, wetland draining, river damming, coral reef destruction, and the conversion of natural areas for agriculture or urbanisation fragment and degrade habitats, driving species extinction and reducing ecosystem diversity.
Resource use: Overharvesting of plants, animals, freshwater, and minerals depletes natural populations, exhausts ecosystems’ regenerative capacities, and causes permanent soil erosion, freshwater depletion, and biodiversity loss.
Pollution: The release of harmful chemicals, plastics, heavy metals, and nutrient runoffs into land, air, and water ecosystems contaminates habitats, kills wildlife, disrupts reproductive systems, and degrades overall ecosystem health.
Invasive alien species introduction: Non-native species outcompete, prey on, or bring diseases to native species, disrupt food chains, and alter ecosystem functions, often leading to collapses of local biodiversity and permanent changes to natural landscapes.

How does this affect businesses?

The deterioration of nature presents a systemic risk that is already reshaping the economic landscape. As ecosystems degrade and biodiversity declines, the natural services businesses rely on — from pollination and water purification to soil fertility and climate regulation — become more volatile, expensive, or unavailable.

This isn’t just an environmental issue; it’s a financial one. Supply chains are increasingly exposed to disruption from nature loss, and companies face rising regulatory, legal, and reputational risks for failing to act.

TNFD identifies five risks facing companies associated with nature’s decline:

Physical risks: A coffee company faces reduced crop yields and increased production costs due to deforestation-driven changes in local rainfall patterns and pollinator decline in key growing regions like Ethiopia or Colombia.
Transition risks: A fashion retailer may be forced to rapidly change suppliers or reformulate products due to new deforestation regulations banning materials linked to unsustainable land conversion (e.g. leather from cleared Amazon land), incurring compliance costs or market share loss.
Systemic risks: Global fisheries collapse from ocean acidification and overfishing could destabilise food systems and threaten the livelihoods of millions, impacting seafood companies, logistics providers, and financial institutions with exposure to coastal economies.
Liability risks: A mining company faces lawsuits from Indigenous communities for polluting a freshwater ecosystem, damaging local biodiversity and violating rights to a clean and healthy environment; especially as legal frameworks increasingly recognise ecocide or nature rights.
Reputational risks: A food brand sourcing unsustainably produced palm oil may be the target of global boycotts and lose retail shelf space after being linked to habitat destruction.

Practical actions for business

1. Assess Nature Impacts and Dependencies

Start by understanding where your operations and supply chains intersect with nature. Use the TNFD’s LEAP framework — Locate, Evaluate, Assess, Prepare — to map nature dependencies, identify ecosystem services your business relies on (e.g. freshwater, pollination, soil health), and assess material risks and opportunities.

Use tools like ENCORE to identify sector-specific nature risks.
Engage with suppliers to understand upstream impacts.
Focus on the five drivers of nature loss: land and sea use change, resource extraction, pollution, invasive species, and climate change.

2. Set a Nature-Positive Ambition and Targets

Define your company’s role in the global goal to halt and reverse nature loss by 2030. This means setting high-level ambitions and starting to develop science-based, location-specific targets for issues like freshwater use, deforestation, or pollution — ideally aligned with the Science Based Targets Network (SBTN) and the Global Biodiversity Framework (GBF).

Prioritise focus on ecosystems where your impact is highest.
Apply the mitigation hierarchy: avoid, reduce, restore, and regenerate.
Build targets into ESG governance and board-level oversight.

3. Act and Embed Nature in Strategy

Translate insights and targets into action — not as a compliance task, but as core strategic transformation. Businesses should update procurement policies, shift capital spending, engage with suppliers, and disclose nature-related information using TNFD-aligned metrics.

Integrate nature into risk management, capital allocation, and transition plans.
Align your disclosures with TNFD recommendations and standards like CSRD or CDP.
Collaborate with peers, regulators, and financiers to scale impact and stay ahead of regulatory shifts.