The ESG "E" Doesn't Just Stand for Emissions
On nature, biodiversity, and the broadening of sustainability targets
In recent years, emissions have become the de facto corporate environmental KPI. As an organization, how do we measure, reduce, and report our Scope 1-2-3 CO2e?
In fact, arguably, greenhouse gas (GHG) emissions have been the only universal metric for corporate sustainability. Tech needs to worry about servers, CPG needs to focus on supply chains — but every business has a carbon footprint.
And yet, as we all know, there’s a lot more to the environment than emissions. Is it time to broaden how we approach the “E” in ESG?
There are capacity questions to be sure, but we’re clearly not the only ones who think so. In recent weeks, we’ve seen the beta launch of the new Taskforce on Nature-related Financial Disclosures (TNFD). TNFD builds and branches off of the better-known Taskforce on Climate-Related Financial Disclosure (TCFD), providing guidelines to help companies disclose nature and environment-related financial risks and opportunities.
TNFD’s four nature categories: land, ocean, freshwater, and air
If your first reaction is “please, not another ESG framework,” we don’t blame you. However, TNFD does fill an unmet need: companies really don’t have clear guidance on setting nature-based targets or biodiversity KPIs today. We know sustainability’s about more than emissions, but we don’t have a common language to talk about corporate impact on the environment — or measure progress.
TNFD doesn’t quite get there (yet) in its first draft. It orients around two goals:
No global net-loss of biodiversity by 2030
Net global biodiversity gains by 2050
Both are pretty abstract for an individual company and not particularly actionable. But either principle could be scoped down by boundaries like geography and/or value chain.
We expect future iterations of TNFD will clarify corporate-level nature-based KPIs so teams can more effectively set targets, track, and report on them. The Science-Based Targets initiative (SBTi) is also broadening its lens from emissions targets to recommendations on nature-based targets.
Added administrative burden for reporting entities aside — we think this is a positive development. By providing standards, assessment tools, and structure that closely resemble frameworks that are already in use (TCFD, SBTs for emissions), TNFD and science-based targets for nature should help companies broaden their ESG work and measurement from a narrower emissions lens to a more comprehensive environmental scope:
We’ve seen a lot of appetite among companies to pursue environmental programs, partnerships, and target-setting in the past year, and these standards developments will provide clarity, momentum, and — ultimately — regulatory structure to push the ecosystem forward.
Yes, everyone feels overwhelmed with reporting obligations — but that’s a problem process engineering and ESG reporting automation can solve.
TNFD’s already been endorsed by the G7 Finance Ministers from the U.S., EU, UK, Canada, Germany, France, Italy, and Japan, and we expect it to become the favored nature-based ESG risk framework by 2024.
Right now, TNFD’s still in draft form (and accepting comments), with the final version targeted for release in September 2023. That's welcome news, because it gives organizations time to invest in sound TCFD governance and practice understanding. Those learnings can then be applied to TNFD as well - ahead of investor and regulatory adoption.
For more on TNFD, have a look at our overview guide here.
No single company is going to solve the biodiversity challenges we face today, but we can have transformative impact collectively. Reducing destructive extraction, championing circularity, and protecting and replenishing natural habitats are critical responsibilities companies need to address and be accountable for.
Emissions measurement is an important metric and step, but the full “E” in ESG carries bigger responsibility.
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