Executive Summary
7
What action is needed?
lines of business, as biodiversity risks are embedded in every value chain, including real estate, aviation, and electronics. We need only look at the impact of a zoonotic disease like Covid-19 – a result of diseased wild animal populations coming into closer contact with humans – to appreciate the enormous financial and human risks posed by biodiversity loss. Companies that fail to anticipate the scale of the transition to a sustainable economy will also find themselves exposed to liability risk. Businesses will need to stay nimble and anticipate incoming investor and regulatory pressures, as well as rapidly changing procurement priorities for value chain partners. With increasing understanding of biodiversity loss as a financial risk, companies will increasingly need to understand and report on how their operations impact and are impacted by biodiversity loss. Liability risks may arise from failure to adequately or accurately disclose those risks.
At pages 54 to 55, this report sets out some recommendations to corporates and their officers to take a proactive approach to managing the looming material risk of biodiversity loss, incoming regulation and liability risks. Compared to climate risk, the timeline here is accelerated. We expect wide-ranging value chain due diligence standards of care to be in place in many jurisdictions by 2024. A framework for nature- related disclosures will likely have crystallised in 2023, and ambitious nature conservation targets will be in place, with a ratcheting-up of ambition on nature-based solutions to climate change mitigation and adaptation through the climate COP process, including this year’s COP27 in Sharm El Sheikh Egypt. If they haven’t already done so, forward-looking corporates in every sector need to begin their biodiversity risk journey by:
– understanding incoming regulations and the scope of value chain due diligence that will soon be expected
What developments heighten the risk?
At the same time as due diligence laws create obligations for companies to scrutinise biodiversity loss and other impacts in the value chain, courts in some developed jurisdictions – e.g. the UK, Netherlands and Canada – are increasingly willing to look behind the fiction of “legal personhood” and lift the “corporate veil” to hold parent companies liable for the acts of subsidiaries. As knowledge of biodiversity loss and risk grows, including through nature-related financial disclosures, the standards of care expected of directors and officers, including as to reporting, will rise. There is an increasing ability to account for, monitor and quantify biodiversity loss, including through remote sensing, and data-driven supply chain management permits greater transparency, also raising the standards of care that will be expected in this area. The Rights of Nature movement is creating new legal persons with standing before the Courts to sue for biodiversity harms: rivers and forests now have standing and constitutionally-protected rights and cases may be brought by Indigenous Peoples, children or other guardians in the name of Nature itself. Biodiversity-focused litigants are emerging and, with biodiversity risk increasingly recognised as the next most urgent planetary boundary, this could be the next frontier in strategic litigation.
– mapping vulnerabilities and exposures to biodiversity risk for the company, its subsidiaries and value chain partners, as part of a wider environmental and human rights risk assessment
– getting to grips with emerging reporting standards
– identifying opportunities and strategies for the transition to a sustainable economy
These actions and more will help to mitigate biodiversity liability risks.
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