In an operating environment where nature-related risks and opportunities are viewed as business risks, organisations must understand their dependencies and impacts on nature.
It requires an assessment of the organisation’s operations and value chains to identify nature-related dependencies and impacts, which help organisations subsequently determine their material nature-related risks and opportunities. Therefore, an important first step is to identify these dependencies and impacts.
Nature-related dependencies are nature or ecosystem services that organisations rely on to operate or to provide goods or services.
For example, organisations depend on natural energy sources, raw materials, water, and regulations on climate and nature, such as regulations on erosion and soil.
Nature-related impacts, on the other hand, are the effects of an organisation’s activities on nature. These effects may be positive or negative, direct or indirect, and cumulative. For example, organisations’ greenhouse gas emissions, waste production, discharges to soil and into water systems, water extraction and management, including noise and light disturbances.
For organisations to integrate nature into their decision-making, they need to understand the nature-related issues impacting them.
Once organisations have understood their unique nature-related dependencies and impacts, they need to translate them into identifying material risks and opportunities.
Through this translation, the organisation can begin integrating nature into its decision-making.
This is why the LEAP approach in the Taskforce on Nature-related Financial Disclosures framework is recommended, as it requires organisations to identify their interference with nature, evaluate their dependencies and impacts, assess their risks and opportunities, and prepare to respond and report.
The following industries top the list of most significant dependencies and impacts: energy, mining, agriculture, forestry and fisheries, transportation, food and beverages, apparel, utilities, chemicals, manufacturing, and construction.
The degree of an organisation’s impact and dependencies would hinge on its industry, the unique context of its operations, and its value chain. Having identified the nature-related risks and opportunities affecting the organisation, the next step is to evaluate their financial impact.
From an income statement perspective, organisations need to assess how these risks and opportunities could affect their revenue and expenses. This should also be extended to the carrying value of assets and liabilities on the balance sheet. In addition, organisations should assess how these financial impacts affect their capital and financing.
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