Nature is increasingly understood as a business-critical asset. All businesses depend on nature through their operations, supply chains, staff and customers, but with the Earth’s natural systems in freefall, physical risks to businesses are rising fast.

Many businesses are already feeling the effects, particularly in industries that are more heavily dependent on nature such as agriculture. Investors, lenders and insurers are also exposed. The value chains most at risk from nature loss generate over half of global GDP.

As the world reacts to the growing nature crisis, transition risks are also rising. Regulators, investors and consumers are all putting increasing pressure on businesses to take action. 

ICAEW has highlighted the significance of the Taskforce on Nature-related Financial Disclosures (TNFD), which has developed a set of disclosure recommendations and guidance for organisations to report and act on their evolving nature-related dependencies, impacts, risks and opportunities.

Enhancing reporting on nature is not the TNFD’s end goal. Its broader aim is to encourage action by enabling business and finance institutions to integrate nature into decision making, ultimately supporting a shift in global financial flows away from nature-damaging outcomes. The TNFD suite of disclosures are highly action-oriented as a result.

While adopting the TNFD’s recommendations may not be as difficult as it first seems, it still involves a learning curve for the businesses and finance functions that aim to embrace it. Business for Nature collaborated with PwC to create the Nature Strategy Handbook to help businesses develop a nature strategy in line with the Global Biodiversity Framework.

The guide is based on the widely accepted ACT-D high-level business actions on nature (Assess, Commit, Transform and Disclose), developed by Business for Nature, Capitals Coalition, Science Based Targets Network (SBTN), TNFD, World Business Council for Sustainable Development (WBCSD), World Economic Forum (WEF), WWF and others.

Businesses don’t have to do everything at once; it is worth breaking the process down into stages and making improvements over successive reporting periods. 

Assess

Start by assessing your relationship with nature. Identify and assess the organisation’s dependencies and impacts, and the associated risks and opportunities, across business operations and the broader value chain. This aligns with the ‘scope’ and ‘locate’ phases of TNFD’s LEAP guidance. 

List out your organisation’s primary sectors and subsectors. Identify parts of the value chain and where they are located, then start to look at where your nature impacts and dependencies are. Areas where these impacts and dependencies are highest should be your priority.

It is likely you will have more existing data than you realise. Consider work you’ve already done on sustainability, such as supply chain mapping and engagement, environmental compliance and climate risk assessment. Building on work you’ve already done on TCFD disclosures is a good way to get started. 

Bring this together as part of a risk and opportunity assessment for the business and key stakeholders. Use this as a basis to prioritise further action and inform a materiality assessment drawing on your existing (and other external) materiality screening tools.

The materiality assessment will likely sit within the remit of the finance function. You may need to source expertise from across the business and its partners. Prioritise impacts and dependencies rated as potentially high risk for further analysis and action. 

You may find that you identify data gaps when you start to look at nature-based risks and opportunities, but by focusing on one or two high-priority areas, you can slowly build capacity and capability in this area. Identify what data you have available, evaluate the quality of that data and check it against current frameworks to make sure it aligns. With that foundation, determine how you can improve data capture and analysis.

Example resources to use:

• ENCORE (Exploring Natural Capital Opportunities, Risks and Exposure)
• SBTN step 1a – materiality screening guidance 
• TNFD guidance on the identification and assessment of nature-related issues: the LEAP approach – Locate: steps L1/L2 
• WBCSD roadmaps to nature positive – foundations for all businesses – Assess stage

Commit

Organisations are advised to set science-based nature targets that are specific and measurable in order to align strategic actions with global nature ambitions. 

The SBTN approach is the starting place for setting nature targets. TNFD and SBTN have also collaborated to develop joint guidance for corporations. 

You may have already set (or be considering) nature targets for a range of reasons, for example, setting zero deforestation targets to reduce your greenhouse gas emissions in line with new Science-based Targets Initiative Forest, Land and Agriculture guidance or to get ahead of new deforestation regulations (eg EU Regulation on deforestation-free supply chains). All of these can feed into your nature strategy.

When setting nature targets, accountants and finance professionals can help to make a compelling business case. Setting science-based targets is critical to underpinning and informing subsequent action to help mitigate risks and shift to nature-positive strategies, enabling an organisation to build resilience and value in the future. 

WBCSD suggests looking at impact drivers such as a general commitment to reduce wastewater pollution, then company responses to avoid, reduce, restore or regenerate. In its wastewater example, this might be investment in water treatment facilities. Then look at the ‘state of nature’ aggregated from specific landscapes, for example, a commitment to keep pollution levels within local carrying capacity limits.

Example resources to use:

• SBTN site-by-step guidance on how to set a science-based target
• SBTi guidance on forests, land and agriculture - science-based targets
• TNFD guidance on the identification and assessment of nature-related issues: the LEAP approach – Prepare: step P2 
• Kunming-Montreal Global Biodiversity Framework

Transform

Now that you’ve set some targets, it’s time to develop a strategy and action plan to achieve them, and mobilise action and investment to deliver it. It is critical to integrate nature-related considerations into the organisation’s overall business strategy and decision-making processes.

The strategy should outline the actions, initiatives, policies and partnerships that the organisation will implement across its value chain to address its nature-related issues. It should also detail the resources, capacities and governance structures required to support them.

Assess and identify potential barriers to progress. Consider trade-offs and collaborations. Create a plan to tackle those barriers with clear roles and responsibilities for everyone involved. This may also require some considerable cultural changes, so make sure that you factor that into the transformation process.

Accountants can and should play a key role in aligning the established targets with the organisation’s long-term goals, operational plans and risk management procedures, developing effective strategies and financial plans. 

The finance function can facilitate the development and practical execution of the organisation’s strategy and action plan, ensuring the necessary resources, capacities and incentives are allocated efficiently. They can establish robust monitoring systems, tracking progress and adjusting strategies based on feedback and changing contexts. 

Example resources to use:

• Use WBCSD’s Roadmaps to Nature Positive and Sector Actions to help identify practical actions and your strategy.
• TNFD guidance on the identification and assessment of nature-related issues: the LEAP approach – Prepare: step P1 
• Follow the TNFD’s guidance on engagement with indigenous peoples, local communities and affected stakeholders to ensure you are integrating this critical component into your strategic planning. 
• ICAEW’s series on effective business transformation

Disclose

With a plan of action in place, it’s crucial to communicate to stakeholders in a transparent, consistent and credible manner. Look at TNFD’s general requirements for disclosure, which include disclosing your governance, strategy, risk management and metrics, and targets related to nature. 

Also consider your current disclosures and consider opportunities for integration – for example, TCFD. Integrated climate-nature reporting will increasingly become the market norm. You may have already identified many climate-nature connections from a risk perspective (eg, carbon emissions from deforestation) and opportunities (eg, investment in nature-based solutions to capture carbon and build resilience to climate change impacts). 

Through their expertise in financial reporting, accountants can facilitate the integration of nature-related financial disclosures into existing reporting frameworks. Improving data availability and quality certainly factors into this stage, but the release of more consistently adopted (or soon to be adopted) frameworks should make this easier.

Example resources to use:

• Read the TNFD’s guidance on getting started
• TNFD: Recommendations of the Taskforce on Nature-related Financial Disclosures 
• WBCSD’s TNFD pilots: shared lessons for businesses to consider when starting with TNFD disclosures
• CDP reporting and disclosure guidance

Five practical actions to take today

Organisations could consider these five things to help them get started and position themselves for success, and accountants have a crucial role to play.

1. Deepen your understanding on why nature matters to businesses, the TNFD recommendations and what a roadmap towards a credible nature strategy looks like. 
2. Make the business case for nature and gain buy-in from the board and management to secure the resources and mandate to begin your nature journey.
3. Leverage climate risk and TCFD experience and information, recognising climate-nature interconnections and looking for solutions that deliver on net zero and nature ambitions.
4. Join the TNFD forum to learn, engage and collaborate on nature-related issues with other organisations. 
5. Seek assistance and collaborate with other organisations actively involved in TNFD disclosures and the development of nature strategies to combine expertise, knowledge and experience. 

For further information or to ask any questions on this topic, please email Toby Roxburgh (Nature and Biodiversity Manager, ICAEW) at toby.roxburgh@icaew.com