Business at risk: How does your company stack up against “1.5 degrees for nature?”

As regulators and investors sharpen their focus on nature-related risks, boards need to understand how environmental performance beyond carbon will influence their licence to operate.

At the board level, there is a growing level of sophistication and understanding around carbon accounting and climate risk. Many companies are now proficient in measuring and reporting their carbon emissions, and directors are increasingly equipped with the data and insight needed to identify, assess and manage climate risks and opportunities, and build them into their overall strategy. Others are still building this capability.

However, carbon accounting (alone) and climate reporting are no longer enough. As Izzy Fenwick articulated at both the IoD’s Climate Governance Forum and Leadership Forum this year “if climate is the lighting, nature is the entire stage your business performs on.”  As highlighted in KPMG’s report The Challenge of Greenwashing: An International Regulatory Overview, investors, regulators and customers are demanding substantiated, transparent, verifiable, environmental performance data, beyond carbon.

There is compelling evidence that environmental impacts are amongst the top considerations by buyers. However, there is little evidence that eco-credentials (from eco-labels to impact reports) are generating a return on investment. This is because buyers are confused by and mistrusting of claims.

The challenge in managing impacts on nature arises when we look beyond carbon to broader impacts on nature such as water use, waste, biodiversity loss and deforestation. Decision makers are left wondering whether to prioritise decarbonisation, water efficiency or waste reduction. If an initiative decreases carbon emissions, but at the cost of water pollution, waste or impacts on biodiversity, is this a good solution?

Moreover, unlike decarbonisation – where we can use science-aligned targets to understand the quantum and pace of carbon reductions needed to align with limiting global warming to 1.5 degrees C – most businesses do not have science-aligned targets for water, waste, biodiversity or other nature related impacts.

It’s akin to having only one side of a financial ledger—tracking expenses without knowing your income. Just as financial oversight requires a full understanding of both costs and revenues, effective environmental governance demands performance metrics that are both comprehensive and contextualised. Without this balance, directors cannot accurately assess their organisation’s true environmental position or make informed strategic decisions.

Planetary boundaries – the "1.5 degrees for nature”

The planetary boundaries is a scientific framework that defines a “safe operating space for humanity”. It sets out the critical global environmental limits we need to stay within to avoid irreversible and catastrophic environmental change. As well as climate change and carbon emissions, it incorporates forest systems, biodiversity, water use and water pollution, synthetic waste, the ozone layer and air pollution.  

Few board directors are aware of the planetary boundaries in New Zealand, yet it underpins nearly every market and regulatory standard for nature, including Nature-Related Financial Disclosures, Science-Based Targets for Nature, and the European Commissions’ Green Claims initiative and Product Environmental Footprint (PEF) scheme. The UK’s Institute of Grocery Distributors (the supermarket collective body) is working on a universal product labelling scheme based on the planetary boundaries.

For New Zealand to remain relevant on a global stage and maintain key trading relationships, we need to be able to robustly quantify our impacts on nature, in context of the planetary boundaries.  

Planetary accounting

Planetary accounting is an internationally recognised system of environmental accounting across the planetary boundaries – like carbon accounting, for nature. Governed by New Zealand-based charitable trust The Planetary Accounting Network (PAN) to retain scientific independence, it can be used to assess organisational performance to support ESG reporting to investors and other key stakeholders; and to assess and communicate product performance through a new era of eco-label called planetary facts.

Planetary accounting uses the planetary boundaries as a basis to show the relative importance of emissions verses waste, water, biodiversity loss and over impacts; and to show what “good” looks like; enabling businesses to quantify and manage current and potential future market and regulatory risk.

In 2021 Orion Energy was the first organisation to establish planetary boundary-aligned targets. By 2024, Sage Group (the UK’s second largest tech company) had augmented their organisational planetary accounting assessment into one of the world’s first nature-related financial disclosures.

Planetary facts eco-labels were established to disrupt greenwashing, inspired by nutrition facts. Instead of disclosing critical health indicators such as calories, protein, and fat in context of a Recommended Daily Intake, they disclose critical environmental indicators including carbon, waste, and biodiversity in context of a Recommended Daily Limit (per capita), derived from the planetary boundaries.

Raglan Food Co. was the first to disclose its planetary facts to highlight the relatively light environmental footprint of their product to their customers, and to identify the hotspots in their supply chain.

Silver Fern Farms was close to follow, using planetary facts to understand opportunities to enhance environmental performance from on-farm activities through processing and distribution.

Now, 15 leading organisations including Raglan, SFF, Bremworth Carpets, Wool Impact, Prevar, Bragato Wine Research and others are working with PAN, to scale up Planetary Facts across New Zealand’s food and fibre sector to demonstrate the collective environmental leadership of NZinc, whilst retaining brand differentiation, accessing the data and insights they need to keep ahead of regulatory and market pressures, including incoming UK and EU regulations which follow the same underlying environmental assessment methodologies as planetary facts.

In parallel, the Heavy Engineering Research Association (HERA)[JW2]  is paving the way for planetary facts to demystify environmental performance in the construction sector, from the translation of Environmental Product Disclosures to support better material selections, to the use of this data to inform and report on whole building design and performance.

Other early adopters of planetary accounting span the financial sector, tourism, events, apparel, beauty products and more, with update is growing across New Zealand’s private sector, research organisations and other advocates – who see value of having science-aligned data to guide decisions and clearly communicate their impacts. It is also gaining international traction, in the UK and EU.

Whether businesses are already actively managing climate impacts and risks or are just beginning their sustainability journey, boards need to incorporate nature into decisions making, using data and science to inform those decisions. Only then can directors be confident that their strategies are not just compliant, but future-proofed to navigate regulatory change, resilient to emerging risks and aligned with long-term value creation.