Linking business performance with nature dependence

When executives think about risks and opportunities for their business, they often overlook a key consideration: nature. Specifically, how and where their operations depend on natural resources, such as wood and water, or ecosystem services, such as flood control.

The value at stake can be surprisingly large. PwC analysis in 2023 found that all industries have financially material dependencies on nature in their value chains—meaning that disruptions to ecosystems could meaningfully reduce their financial returns.

When businesses do determine how they rely on nature, they gain insights that can help them create more value.

One mining company, for example, cleared vegetation around operational sites to make them easier to access. But it turned out that those native trees, shrubs, and grasses had provided a natural buffer against frequent dust storms. Without them, repeated storm-related shutdowns and poor air quality cost the company about US$100 million each year. Management restored and maintained the vegetation for the sake of the company’s bottom line.

Similarly, when a lack of water in one region began to affect operations for a company, executives made an initial commitment to invest $2 billion to $4 billion in a desalination plant. Further analysis suggested the company could continue operations at a fraction of the cost through natural means, such as restoring local catchment areas.

Finding connections like these requires a deliberate effort. Here are three steps that executives can take to identify and protect the business value that flows from nature:

Assemble data. To understand a company’s links with nature across its value chain, managers will want to bring together financial data with specialized data on the use of natural resources and the health of local ecosystems. In many cases, they’ll need to incorporate data from third-party tools and global databases to complete the picture.

Analyse dependencies. With many variables at play across locations and business units, executives need a structured process to reveal material risks and focus on the subset of nature-related issues with the greatest potential impact. Typically, this involves quantifying high-level risks and opportunities and then focusing on the value chains, suppliers, assets, and operations where performance depends most on specific nature-related matters.

Take action. Once companies have assessed their impact and dependencies on nature, they can set specific, transparent, time-bound, science-based targets and adjust their operations and strategy to reduce or eliminate nature-related costs and build competitive advantage. They’ll also need to disclose those activities and their performance against goals, in line with regulatory standards, and to their investors.