Published on May 22, 2024
The world is facing an unprecedented biodiversity crisis. In fact, the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) has highlighted, among other things, the fact that one million animal and plant species are currently threatened with extinction and that, respectively, 75% and 66% of terrestrial and marine ecosystems have been significantly modified by human activity. This same organization identified five factors that are responsible for biodiversity loss: changing use of sea and land; direct exploitation of organisms; climate change; pollution; and invasive non-native species.
Since the UN Biodiversity Conference (COP15), which was held in Montreal in December 2022, various regulations and investor initiatives have emerged. For example, we can mention the Nature Action 100 initiative, which counts Æquo as a member. In September 2023, the 100 targeted companies received a letter explaining investors’ main expectations. The first dialogues will take place in 2024. We also support PRI’s Spring initiative, whose focus is on halting and reversing forest loss and soil degradation, as well as shining a spotlight on companies’ political lobbying.
As for important legislative changes, the European Sustainability Reporting Standards (ESRS), recorded in the CSRD (Corporate Sustainability Reporting Directive), were adopted by the European Commission in July 2023. The ESRS E4 standard deals specifically with biodiversity and includes the obligation for companies to disclose information on, among other things, corporate biodiversity strategy, its targets and metrics, and actions implemented.
Furthermore, the Taskforce on Nature-related Financial Disclosure (TNFD) published its first final version of recommendations and guidelines regarding nature related disclosure. Financial companies and institutions can now assess, disclose and implement actions regarding their nature-related dependencies, impacts, risks and opportunities. Disclosure is based on four pillars: governance, strategy, risk and impact management, and metrics and targets.
While biodiversity is in crisis and more than half of the world’s GDP depends on nature, many companies have still not taken any measures to protect biodiversity. In fact, the Carbon Disclosure Project (CDP) revealed in its 2022 analysis that only 31% of companies had publicly committed to or supported biodiversity-related initiatives, 55% of companies had not taken any action to fulfill their commitments, and 70% of companies were not assessing the impacts of their supply chain on biodiversity. This is why we require concrete information on the impacts, dependencies, risks and opportunities associated with biodiversity, as well as clear, measurable objectives, along with actions that help halt and reverse biodiversity loss.
To ensure this, we begin by asking companies to develop a global biodiversity-related approach, through the following:
- Analysis of impacts, dependencies, risks, and opportunities associated with nature in their operations and value chain.
- Adoption of targets that make it possible to halt and reverse biodiversity loss by 2030.
- Implementation of an action plan to achieve these targets.
Fight against deforestation
Among the issues related to biodiversity and climate, deforestation plays a key role, since it has decimated tropical forests that shelter 80% of terrestrial biodiversity and is responsible for 11% of global greenhouse gas emissions.
In 2023, new regulations were created to combat deforestation. For example, the European Union regulation on the placing of products on the European Union market and the export from the European Union market of certain basic products or products associated with deforestation and forest degradation (EUDR), aimed at prohibiting the marketing of goods and products derived from a number of raw materials (beef, cocoa, coffee, palm oil, soy and wood, or products derived from the latter) if these materials come from deforested lands or degraded forests. This regulation is considered the most ambitious currently to combat deforestation. In practice, all companies marketing their products within the European Union must put in place a due diligence process to ensure that their operations and supply chain are deforestation-free.
According to the Global Forest Report by the Carbon Disclosure Project (CDP), 84% of all companies that answered the CDP Forests questionnaire and undertook a risk assessment for a specific product identified deforestation-related risks. Nonetheless, only 12% of companies stated that they were on track to eradicate deforestation. What’s more, just 3% of companies responding to CDP’s Forests questionnaire have since carried out a complete assessment of forest-related risks or are mapping out their suppliers’ operation sites.
Consequently, when it comes to the question of deforestation, we are asking companies to implement the following measures in their operations and supply chain:
- Disclose information on risk management processes and deforestation-related traceability.
- Disclose measures taken to fight deforestation.
- Disclose zero deforestation and conversion targets, covering all high-risk commodities, such as beef, palm oil, cocoa and soy, among others.
Marine Martal, Shareholder engagement advisor