Corporate biodiversity reporting standards and the risk of distorting what is material

Biodiversity is making its way into the corporate sphere and becoming a key topic of target setting and disclosure for companies and investors. This is welcome for two reasons; because biodiversity underpins the ecological goods and services that economies and societies depend on, and because information on corporate impact on biodiversity is a prerequisite for estimating likely progress towards biodiversity targets   and informing corporate, financial and societal risk analyses. In other words, corporate reporting standards are the infrastructure that promise to generate the much-needed data necessary to assess sustainability progress and related risks in the corporate community.

Ecological goods and services on which economies depend range from water and air purification in urban environments, to soil formation in agricultural land, flood protection and pollination services, to name a few. Many of these described services are not automatically associated with biodiversity hotspots, or areas referred to as ‘biodiversity/ecologically sensitive’. In fact, most represent provisioning or supporting services provided by nature in environments that have already been heavily impacted by humans. Yet, contrary to conservation areas, they underpin most corporate dependencies on nature.

It is therefore remarkable and concerning that all three corporate sustainability reporting standards (GRI, ESRS) and frameworks (TNFD) that dominate the reporting space for nature-related disclosures essentially incorporate proximity to biodiversity sensitive areas into their materiality assessment, using it to help companies prioritize locations for which further disclosure of impacts should be done. An obvious risk with such an approach is that by emphasising proximity to BSAs as a criterion for site selecting for reporting, companies may under-report other sites that have material impacts but are not near a BSA. The risks of such underreporting are significant.

This paper discusses these risks supported by a structured review of what biodiversity and environmental science concludes regarding the relative contribution of managed land, protected areas, and biodiversity hotspots to ecosystem service provision. It also proposes alternative ways to design disclosures that can capture relevant indicators of pressure on biodiversity across all sites and thus avoid the growing risk of reporting bias and materiality distortion.