· 6 min read
In the past, biodiversity loss was often framed as a philanthropic or compliance-related issue — an add-on to corporate responsibility initiatives. Today, that framing is dangerously outdated. Biodiversity loss is not just an environmental issue but a financial and strategic risk for businesses.
As scientific consensus and market signals converge, it is increasingly clear that biodiversity is not peripheral to business, it is foundational. According to the World Economic Forum, over $44 trillion of global GDP—more than half—is moderately or highly dependent on nature.
Companies depend on nature, and their actions impact ecosystems, leading to regulatory, operational, financial and reputational consequences. Yet fewer than 5% of companies have implemented formal biodiversity strategies, even as biodiversity loss emerges as a top-tier systemic risk.
Despite alarming declines — 69% of wildlife populations lost since 1970 — corporate action remains sparse. This disconnect between biodiversity risk and corporate preparedness creates blind spots for operational stability, regulatory compliance and investor confidence.
From a corporate perspective, these blind spots arise from traditional risk management frameworks that often overlook or underweight nature-related risks, treating them as externalities rather than integral factors in long-term value creation.
Failing to recognize and address these risks leaves companies exposed to unexpected disruptions in supply chains, increased regulatory scrutiny and reputational damage. For example, biodiversity loss can disrupt raw material availability, reduce ecosystem services that companies depend on and increase the likelihood of stricter regulations or stakeholder demands for action.
This strategic blind spot is underscored by the 2019 IPBES Global Assessment, which highlighted how key drivers of biodiversity loss — including land-use change, pollution, overexploitation, climate change and invasive species — are directly linked to business activities across multiple industries.
The report calls for transformative change across economic and governance systems to reverse the biodiversity crisis — an imperative that companies must now internalize as part of core risk management. Here are five key points:
1. Why biodiversity strategy is a business imperative
Dependency risk: Biodiversity-related dependencies refer to how a company’s operations, supply chains, or value chains rely on ecosystem services—such as pollination, water provisioning, climate regulation, and soil stability. In contrast, impacts are the effects—positive or negative—that a company’s activities have on biodiversity, including deforestation, land conversion, pollution, and over extraction of natural resources.
In this context, biodiversity is not a peripheral concern—it is a critical production input. However, most companies still lack a structured process to identify and manage these dependencies. Implementing a “dependency filter” across procurement, site selection, and enterprise risk management (ERM) would enable firms to quantify nature reliance and embed it into financial and strategic planning.
Fallout risk: As companies contribute — directly or indirectly — to environmental degradation, they become vulnerable to regulatory fines, legal liabilities and market backlash. In 2023, major retailers and food companies operating in the U.S. faced lawsuits and consumer pressure for alleged ties to deforestation in their soy and palm oil supply chains.
Investors are demanding greater transparency and accountability on biodiversity-related impacts, especially as ESG scrutiny intensifies across federal and state levels.
Systemic societal risk: Biodiversity loss exacerbates broader social and geopolitical instability. It affects food security, public health (e.g., zoonotic disease outbreaks), and water availability—conditions that can destabilize the communities and markets in which companies operate.
The January 2025 Southern California wildfires, intensified by prolonged drought and biodiversity degradation, displaced over 150,000 people and caused billions in agricultural losses. Critical pollinator habitats and watershed ecosystems were destroyed, highlighting how biodiversity loss can directly disrupt local economies, supply chains, and public services.
2. From disclosure to strategic integration
Biodiversity strategy must move beyond static ESG reports and into the systems that shape corporate decisions. This means embedding nature-related risks and dependencies across four critical business functions:
Enterprise risk management: Map ecosystem dependencies (e.g., pollination, water, soil) across operations and supply chains. Use tools like ENCORE or IBAT to integrate biodiversity into risk registers and scenario planning.
Capital planning: Factor biodiversity risk into site selection and investment decisions to avoid stranded assets, project delays, and regulatory setbacks.
Financial disclosure: Align with frameworks like TNFD to reflect nature-related risks in filings. TNFD’s LEAP methodology helps companies prepare for regulations like CSRD and CDP C15.
Impact measurement: Quantify impacts on ecosystems and stakeholders. Set targets (e.g., via SBTN) and report biodiversity KPIs to drive accountability and build trust.
Integrating biodiversity risk into ESG strategy isn’t just about compliance, but it’s about unlocking value. Nature-aware firms are better positioned to de-risk their portfolios, access green finance and innovate in climate-resilient product and service design. Biodiversity is not just a matter of image anymore; it is a strategic necessity in an economy built on nature.
3. Nature-tech tools
Businesses now have access to advanced platforms that translate biodiversity risk into strategic, financial insight. Tools like IBAT (Integrated Biodiversity Assessment Tool) and ENCORE (Exploring Natural Capital Opportunities, Risks and Exposure) allow companies to visualize and quantify their ecological exposure.
IBAT helps firms overlay operational sites with protected or sensitive ecosystems, crucial for project screening, permitting, and ESG due diligence, while ENCORE maps sector-specific dependencies on ecosystem services, showing how environmental degradation can disrupt key business functions.
By turning natural capital into operational data, these tools empower businesses to anticipate and mitigate biodiversity risks before they escalate into financial losses.
4. Frameworks to watch
As biodiversity rises on the regulatory and investor agenda, companies can no longer rely on fragmented disclosures or ad hoc reporting. A new generation of standardized frameworks is emerging to help businesses move from general sustainability rhetoric to credible, comparable and decision-useful integration of biodiversity across their operations.
These frameworks offer structure for evaluating ecosystem dependencies, managing nature-related risks and aligning corporate action with global biodiversity goals.
TNFD (Taskforce on Nature-related Financial Disclosures) provides the governance framework, using its LEAP approach: a four-step process to integrate biodiversity into strategy and risk management. Companies first locate where in their operations and value chains they interact with nature, then evaluate their dependencies (e.g., water, soil, pollinators) and impacts (e.g., deforestation, pollution).
Next, they assess the risks and opportunities these relationships present—whether regulatory, financial, or reputational. Finally, they prepare by developing targets, governance structures, and disclosure mechanisms to respond effectively.
Global Reporting Initiative standard 101( Biodiversity): The updated GRI demands site-level transparency, requiring companies to report on the location and condition of ecosystems impacted, as well as consequences for local communities and Indigenous Peoples.
SASB Ecological Impacts: SASB’s industry-specific standards link biodiversity loss to financial materiality, providing metrics like land disturbance, incidents of environmental harm, and exposure to protected areas—tools investors can use for cross-company comparisons.
5. The first-mover advantage
Here’s the opportunity: while most companies treat biodiversity as an ESG afterthought, forward-thinking leaders are building competitive advantages through nature-positive strategies.
They are reducing operational risk by mapping ecosystem dependencies. They are staying ahead of regulation by proactively managing environmental impacts. They are attracting capital by demonstrating biodiversity resilience to investors. The companies that move first will set the standards.
Biodiversity isn’t just an environmental issue, but it’s the next frontier of strategic risk management. The question isn’t whether nature-related risks will impact your business. The question is whether you’ll be prepared when they do.
This article was previously published on Equities.com. illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.
