IMHO: With nature, start at the end

It’s fair to say that nature is having a moment. Quite why, exactly, is anyone’s guess. Perhaps climate change risk management was just seeming all too hard, and the nature space feels a lot more relatable? Relentless geopolitical unrest making us feel the need to hunker down and take care of our own nest? Who knows? But the discourse around how our respective entities could – and should – be taking care of our place of business is certainly heating up.

More important now than the why is the what. What does the impact our business has on the natural world mean for doing business today? And as responsible leaders, how do we even know what that is?

As hard as the first iterations of mandatory climate risk disclosures may have seemed, they also taught us some useful lessons when accounting for nature impacts:

1. You don’t get to choose what your material impacts are when it comes to nature. Nature will decide that (and the scale of it) for you. And, as Izzy Fenwick explains, nature will send in the debt collectors to make good on your unpaid invoices; whether you’re prepared for it or not.  
2. Measuring and disclosing your impacts are an important first step in understanding the non-financial (and financial) risks to and from your operations – but they are the means to an end. The end being what you’re going to do about avoiding said costs and risks. This is otherwise known as transition planning: the bit where you steer away from the projected consequences of where the science tells us we are going. 
3. In the current economic, social and cultural trifecta of global economic contraction, massive ongoing geopolitical turmoil and domestic policy uncertainty and insecurity, we are more than ever going to need to make nature conservation make good financial sense, first and foremost. As leaders, this means integrating good social and environmental indicators into business outcomes, without making them distinctive and labelling them in a way that might trigger undermining ideological resistance. 

Climate disclosure gave us robust tools to help investors understand financial implications and allocate capital toward a sustainable economy. Reporting provides protection against risk, just as any other enterprise risk management function does. But the real lesson is this: start with what you are going to do about it. 

The argument is well understood: nature is in crisis and businesses are critically dependent on it. For Aotearoa New Zealand, where natural capital underpins exports, tourism and infrastructure, the exposure is acute. So where to from here?

The choices we make today define what happens next. If your business is fundamentally dependent on something that will run out, sooner or later you will not be able to do it that way anymore. So, you regroup, plan and adjust. Here’s how:

1.      Figure out your impact

As Dr Robin Mitchell said in his recent article for the IoD: to govern effectively on nature risks, directors must start asking the right questions:

• • Do we understand the likelihood and financial impacts of material nature risks?
  • Are we screening for risks and opportunities across operations, value chain and investments?
  • Are nature risks represented in enterprise risk management, strategy and reporting?

2.      Turn a threat into an opportunity

There’s a whole lot of research that has been done (and is being done) demonstrating the business case for investment in nature, that aligns with your organisation’s current initiatives and strategic objectives. This little gem from the Sustainable Business Council (SBC) includes a handy step-by-step guide to explore the drivers and approach to develop a compelling business case for investment in nature. A 2024 World Wildlife Fund (WWF)/EY report put the net benefit to New Zealand’s economy of impacts associated with nature decline and through the realisation of additional opportunities provided through a thriving natural environment over a 50-year period at $271.8 billion, and helpfully models when and where the positive impacts of nature protection outweigh the negatives, per sector. 

 

3.      Identify your pain points

The threats and converse opportunities in the nature market are going to be vastly different for, say, a fisheries company than those for a property developer. As with carbon, having meaningful measurement metrics is key, and taxonomic guidance like that from the Taskforce on Nature-related Financial Disclosures (TNFD) can, and does, help with that. But, unlike with carbon, the distributive impacts across different sectors and activities will define what you’re able to do about it. Figure out what’s getting in your way the most – be it regulation, supply chain, financial fungibility or pressure coming from your customers. And start there – don’t try to do it all, all at once. 

 

4.      Understand your market

Deloitte and The Nature Conservancy (TNC) are currently doing some research on market demand for New Zealand's voluntary carbon and biodiversity credits, with support from BNZ, assessing domestic and international demand to understand market potential and attract investment. A 2024 report from EY and the Ministry for the Environment highlights how to increase available capital and attract a more diverse range of investors, by ensuring that projects provide a return on investment.

 

5.      Spread the load

Sustainability must support the wider business’ objectives, by working in concert with it across the relevant parts of the business. It isn’t, and shouldn’t be, the sustainability manager’s job to be solely accountability for delivering on the enterprise outcomes that will steer it away from negative impacts on nature. As Michael Kobori noted: “You don’t scale sustainability by centralising it – you do it by embedding it in the business: in the supply chain, operations, development, product and even executive compensation. We’re doing this to grow our business; to manage risk, drive productivity and unlock value. As long as we stay focused on that, we can’t be accused of doing the wrong thing.” WWF UK has come up with this very handy step-by-step guide to embedding nature into transition planning, including some real-world case studies as to how firms have integrated nature alongside carbon into transition planning processes.  

Boards now face a choice. We can treat nature as “just another thing” to deal with, piled on top of other ESG priorities and climate disclosures. Or we can choose to treat it as we would any other foundational risk to the business, and, in acting in good faith and in the best interests of the entity, protect and ensure the long-term health of the organisation. 

By figuring out what impacts and opportunities our natural critical dependencies mean to us, we can realise benefits, avoid critical risks, enhance capability and ensure the long-term resilience of both our operations and the place that they exist on.