Why is it more crucial than ever for business to identify, assess and disclose nature-related risks?

Daniel O'Brien, Sustainability and Climate Change, Partner, PwC Canada and Viviana Voorwald, ESG Leader for PwC Europe, Partner, PwC Netherlands

“Nature is at a tipping point and time is against us. We must recognise nature loss for the crisis that it is.” That was how some of the world’s largest and most important companies framed the risks posed by the rapid loss of biodiversity in an open letter to world governments that was published last month.

It’s a clarion call of concern that very much resonates with us here at PwC. As our Nature Risk Rising report (in collaboration with the World Economic Forum) highlights, the fabric of our existence is inexorably linked to the continued well-being of nature.

Right now, some 1 million species are facing extinction within decades. Ecosystems have declined in size and condition by an average of 47% globally compared to estimated natural baselines. It is not hyperbole to say we are crossing the planet’s boundaries and natural systems’ ability to cope. 

We know the risks to business are multiple and will affect operations, regulation, market sentiment and corporate reputation. Nature risks become material for businesses in three ways:

  1. When businesses depend directly on nature for operations, supply chain performance, real estate asset values, physical security and business continuity

  2. When the direct and indirect impacts of business activities on nature loss can trigger negative consequences, such as losing customers or entire markets, legal action and regulatory changes that affect financial performance

  3. When nature loss causes disruption to society and the markets within which businesses operate, which can manifest as both physical and market risks

No wonder then that one of the movements coming up the agenda within business right now is the adoption of a risk management and financial disclosure framework currently being formulated by the Task Force on Nature-related Financial Disclosure. We’re delighted to be contributing to this important effort.