Frankfurt Notes – Biodiversity in reporting

While the topic of “biodiversity” was a niche topic for a long time, it has recently moved noticeably into the focus of the capital markets. In an editorial published in the Börsen-Zeitung in October 2023, Wolf Brandes even called species protection a “megatrend” with reference to its increased relevance among investors. Biodiversity has also found its way into the EU taxonomy and CSRD.

Why you should pay attention to the trend topic of biodiversity?

In general, the term biodiversity has a positive connotation. This is because it is assumed that species-rich ecosystems are more stable than species-poor ones. Some scientists have also tried to put a monetary value on different ecosystems or individual species, for example because insects pollinate the majority of crops, i.e. they provide their “labour” for free.

Diverse ecosystems also support us in our efforts to farm in a climate-friendly way. Species-rich forests and meadows absorb more carbon than monocultures. Biodiversity thus generates – in the sense of environmental economics – considerable positive external effects. This might explain why biodiversity is also a trend among investors with a focus on sustainability.

Biodiversity and the SDGs

The importance of the topic is underlined by the fact that biodiversity also receives attention in voluntary reporting, for example in the SDGs. These 17 development goals of the United Nations are a frequently used framework to which “impact” investors in particular pay attention, and thus those capital investors who aim for a particular ecological or social purpose with their capital investment. The high degree of recognition and the colourful presentation ensure a high recognition value. By integrating them into their non-financial reporting and displaying them on their website, companies make it clear which ESG issues they stand for and what contribution they make. Several of the SDGs deal with biodiversity, most clearly Goal 14 (“Life under water”) and Goal 15 (“Life on land”). Goal 14 deals with water protection, especially issues such as avoiding overfishing and pollution of the oceans are central. Goal 15 revolves around aspects such as protecting forests and avoiding desertification.

How can you report on biodiversity?

Although biodiversity is on everyone’s lips, so far few companies report comprehensively on their work with ecosystems. When it is mentioned, it is often in a few sentences, citing, for example, cooperation with NGOs without concrete goals or progress. This is changing, at least for companies that fall under the CSRD. This is because the Biodiversity & Ecosystems Standards ESRS E4 require organisations to, among other things, comment on their biodiversity objectives, risks and opportunities, should biodiversity be material to them.

You should pay attention to these points:

Survey the current state: This is about how your company influences biodiversity and vice versa. What is the current state of the ecosystems you are dealing with? (For example, what species are present on your factory site? How sensitive is the biodiversity near your sites? Does the use of your products affect ecosystems positively or negatively)?

Set targets: The SBTN (Science Based Targets for Nature) are often used. The UN’s 2030 Agenda for Sustainable Development is one of the cornerstones of the SBTN approach. This means it is worthwhile to think holistically about your biodiversity communication and incorporate the SDGs.

In all circumstances, your targets should be measurable, and we recommend thinking early on about how often or when you might usefully survey progress. If the number of species present on the company premises is a relevant indicator for you, you should check the flora and fauna several times a year.

Think strategically: Establish governance mechanisms to ensure the implementation of your biodiversity activities. Don’t forget to consider your supply chain. Which internal and external stakeholders do you need to involve? Are there trade-offs, for example, between your climate and biodiversity goals?

Be prepared to disclose your goals and progress: Remember that not all audiences tick the same. The TNFD (Taskforce on Nature-related Financial Disclosures) is a supportive model for your disclosure obligations. Sometimes you should communicate in more detail in reports than on the website or in your marketing materials, for example.

In conclusion, reporting on biodiversity aspects is still in its infancy in many places. In our opinion, this will change quickly. Regulation, investor behaviour and the interaction between biodiversity and climate protection, for example, speak for this. Please feel free to contact us if you have any questions.