Consulting firm looks at how businesses can manage nature risks

The world’s ecosystems are under threat, and businesses are increasingly recognising that managing nature-related risks is essential for their long-term sustainability. However, understanding and managing these risks can be complex and challenging.

In a recent report by advisory firm PwC, titled “Managing nature risks: From understanding to action,” the company highlighted the need for businesses to take a holistic approach to managing nature-related risks. This means looking beyond the immediate impacts of their operations and considering the broader context in which they operate.

The report explained that businesses need to take a science-based approach in order to understand the risks they face. This means using data and evidence to identify and assess the potential impacts of their operations on ecosystems and biodiversity. It also means engaging with experts and stakeholders to understand the wider environmental and social implications of their activities.

“But what happens to businesses when ecosystems deteriorate? The short answer is that they face the risk of costly disruptions. And that risk is building up,” authors Will Evison, Lit Ping Low, and Daniel O’Brien said.

“A 2019 report by the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES), a UN-appointed body, said that 14 of 18 categories of ecosystem services have been in decline since 1970, and 1 million species are at risk of extinction because of human activity,” they added.

One key challenge for businesses is the lack of standardisation and transparency around nature-related risks. The report noted that there is currently no consistent methodology for assessing these risks, and data is often incomplete or unreliable. This makes it difficult for businesses to compare and benchmark their performance, which can hinder progress towards sustainable practices.

To address this challenge, the report calls for greater collaboration between businesses, governments, and civil society organisations. It explained that by working together, these stakeholders can develop shared standards and metrics for assessing and reporting on nature-related risks. This would enable businesses to better understand their performance and identify areas for improvement.

What is more, the report also highlighted the importance of integrating nature-related risks into overall risk management frameworks. This means incorporating these risks into decision-making processes and governance structures, and ensuring that they are considered alongside other financial and non-financial risks.

To do this effectively, the report said, businesses need to have a deep understanding of their dependencies on nature and ecosystems. This means identifying the critical resources and services that they rely on and understanding the potential impacts of disruptions to these systems. By doing so, businesses can develop more robust risk management strategies that take into account the long-term sustainability of their operations.

“In looking at their company’s nature dependencies, executives might be guided by a general understanding of where dependencies exist for their industry. Each of the 20 industries we studied is exposed to risk because of high or moderate dependencies on nature somewhere in its value chain,” the authors stated.

“Investors, too, will want to scan widely for potential risks: on ten of 19 major stock exchanges, more than half the value of the listed companies exhibits high or moderate nature dependence,” they added.

In addition, the report provided a range of practical recommendations for businesses looking to take action on nature-related risks. These include conducting a thorough assessment of nature-related risks and opportunities, developing a clear strategy for managing these risks, including targets and performance indicators, and integrating nature-related risks into existing risk management frameworks.

Businesses can also collaborate with stakeholders to develop shared standards and metrics for reporting on nature-related risks, invest in research and innovation to develop new approaches to managing nature-related risks, as well as engage with customers and suppliers to promote sustainable practices across the value chain.

Ultimately, the report argues that managing nature-related risks is not just a matter of compliance or reputation, but an essential aspect of long-term business sustainability.

By taking a proactive and science-based approach to understanding and managing these risks, businesses can ensure that they are operating in a way that is both financially and environmentally sustainable.