What is nature and why does it matter to accountants?

Nature refers to the natural world, including living organisms, ecosystems, and physical resources like water, air, and minerals. It consists of four realms: land, ocean, freshwater, and atmosphere. Biodiversity, a critical part of nature, ensures ecosystems function effectively, increasing their resilience to climate change and other pressures.

All businesses depend on nature - for example, for clean water, food and raw materials; for protection from hazards such as flooding, drought, erosion and excess heat; and for regulation of the climate. Healthy ecosystems provide essential services, such as clean water, food production, climate regulation and protection against natural disasters. These essential services, often taken for granted, contribute significant value to businesses and wider economies.

In business terms, nature is often referred to as natural capital, as ecosystems and other natural resources are considered assets that generate benefits of value to society and businesses. Like all assets, natural capital must be maintained to sustain the flow of benefits it provides. 

Nature loss, climate change and social inequality are closely connected. Developing a better understanding of the interlinkages will help you to bring nature into the picture, as a key part of the “E” in ESG and an integral element of your business strategy.

Climate change, driven by greenhouse gas emissions, is a major cause of ecosystem damage. Rising temperatures, shifting weather patterns and extreme events are already altering marine, terrestrial and freshwater ecosystems. For instance, nearly half of all coral species face extinction due to warming oceans, impacting fisheries and coastal protection.

At the same time, the destruction of ecosystems contributes to climate change. For example, deforestation and land conversion for agriculture and urban development releases stored carbon, increasing global emissions. Without intervention, nature loss and climate change will continue to reinforce each other, escalating risks for businesses and economies worldwide.

Social inequality is also intertwined with environmental issues. Poorer communities often depend more directly on nature for their livelihoods but lack the resources to adapt to environmental changes. As nature declines, vulnerable populations suffer the most, reinforcing economic disparities. 

A holistic approach is needed to address these interlinked challenges. Protecting and restoring ecosystems can help mitigate climate change, enhance biodiversity and support social well-being. The UN’s Sustainable Development Goals (SDGs) and Global Biodiversity Framework (GBF) emphasise integrated solutions that balance economic, social and environmental priorities.

All businesses depend on nature, yet nature is declining globally at an alarming rate creating growing physical risks for companies, investors, as well as stability in the wider financial system. Most of nature’s vital services, on which business and society depend, and which provide the foundation for every economy, are in decline.

The goals and targets agreed by 188 countries through the Kunming-Montreal Global Biodiversity Framework (GBF), reflect governments’ understanding of the situation and the urgency with which the global community must act. The GBF included four overarching goals to be achieved by 2050 (as laid out below), setting out an ambitious roadmap for collective action across society, including governments, regulators, businesses and finance institutions. These goals are underpinned by 23 targets to be achieved by 2030, highlighting the need to embed nature into policy, finance and business decision-making, and reporting.

As international efforts to reverse nature loss accelerate, transition risks to businesses are also multiplying. Regulations and investor expectations are shifting towards greater transparency on nature-related risks. Governments and financial institutions are introducing policies to reverse biodiversity loss and promote nature-positive economic activity. Businesses that fail to adapt risk losing investment, face regulatory penalties or suffer reputational damage.

Investors are increasingly demanding detailed disclosures on how businesses manage their environmental impact. Reporting standards are evolving to incorporate nature-related risks alongside climate considerations. Consumers are also driving change, favouring businesses with strong sustainability credentials and many employees are prioritising working for organisations that align with their environmental values.