There is a growing understanding of the fact that several human economic activities such as agriculture, urban development, etc, drive biodiversity loss. On the other hand, many have a very limited understanding of the impact that biodiversity loss has on our economic activities/businesses. It is critical for us to understand that biodiversity loss poses a huge risk for numerous business activities, and the more we deteriorate nature, the more our businesses are at risk. Let’s take a deeper look at the risks businesses face due to biodiversity loss.
What Risks Do Businesses Face Due to Biodiversity Loss?
The World Economic Forum, in its report “Nature Risk Rising: Why the Crisis Engulfing Nature Matters for Business and the Economy”, describes three ways through which biodiversity loss creates risks for businesses. These include:
- Risks due to the dependency of businesses on nature. All businesses depend on nature and its services, either directly for their operations, or indirectly through supply chain. Different economic sectors have varying dependency on nature. Sectors that are highly dependent on nature such as the construction; agriculture; and food and beverage, generate 15% of global GDP ($13 trillion), while moderately dependent industries generate 37% ($31 trillion). When nature is deteriorated, it loses its capacity to provide its resources or services to these economic sectors, and this puts several businesses at risk of suffering significant losses.
- Risks due to the negative impacts of business activities on nature. As awareness on biodiversity loss continues to grow among business stakeholders (consumers, employees, governments, etc.), businesses that carry out activities that are detrimental to nature increasingly face reputational and legal/regulatory risks.
The reputational risks come from the fact that public opinion is shifting, and consumers are becoming increasingly aware of the environmental impacts of companies and are demanding action. Consequently, a resource-intensive and waste generating company that fails to address its impacts on nature puts its reputation in danger.
The legal/regulatory risks result from the fact that, governments at various levels, are increasingly encouraged to take action against biodiversity loss. Such government action typically comes in the form of new and stricter laws that affect businesses. For example, with the COP 15 conference underway in Montreal, the aim is for governments to agree to set aside 30 percent of the globe’s land and water. This target will inevitably force numerous governments to adopt stricter laws on the commercial use of nature’s resources. And stricter laws, will imply higher legal risks for businesses concerned.
- Risks due to the impacts of biodiversity loss on the society. Apart from supporting economic activities, nature’s goods and services also support societies. As a result, the deterioration of nature could affect a business by destabilizing the society in which the business operates. Biodiversity loss could put businesses at risks by affecting global health, global peace, global trade, gender equality, etc. For example, biodiversity loss has been connected with an increase prevalence in certain diseases such as animal transmitted diseases like Ebola which have had great economic impacts on societies in several African countries.
In order to avoid these risks associated with biodiversity loss, businesses are encouraged to become actively engaged in combating biodiversity loss, and seek to seize the many opportunities that lie in it. Some of the business opportunities that lie in taking action against biodiversity loss include: enhancing business longevity; opportunities for cost savings and increases in operational efficiency; increases in market share; better relationships with stakeholders; and lastly, opportunities for new business models such as the need for eco-friendlier products.
How Can Businesses Take Action on Biodiversity Loss?
Solutions to the issue of biodiversity loss are complex, but unless we take transformative action urgently, the risks and impacts of such loss will only accelerate. Some of the ways businesses can take action include:
- Undertaking educational initiatives within the organization and beyond to grow awareness on the issue of biodiversity loss. This will enable the business to better understand its impacts, dependencies, risks and opportunities related to biodiversity loss.
- Integrating biodiversity loss in the business’ strategy, and decision-making process. This could include aligning corporate governance frameworks with biodiversity factors; undertaking biodiversity-related impact and dependency assessments; due diligence in order to identify and prioritise action to avoid or mitigate adverse impacts on biodiversity; as well as, performing disclosure and external reporting of biodiversity impacts, dependencies, risks and opportunities.
- Joining emerging business commitments, such as the Act4Nature initiative, which bring businesses together to act against biodiversity loss by pledging to factor biodiversity in all their activities in order to achieve a net positive contribution to nature.
As biodiversity is increasingly lost, the prospects for business success and future prosperity dwindle. On the other hand, the business opportunities that await those committed to restoring natural ecosystems could be considerable and are worth seizing starting right now.
- Why Should Businesses be Concerned About Biodiversity Loss? - December 16, 2022
- What are the Main Drivers of Biodiversity Loss? - December 9, 2022
- COP 15: The UN Biodiversity Conference is Coming Up in Montreal - December 2, 2022