Module 4
What business and finance should do
WEF’s case, WBCSD’s sequence, the mitigation hierarchy
Learning objectives
- Can drop the mitigation hierarchy (avoidance first) into practice
- Can explain the difference in roles between operating companies and financial institutions
- Can place WEF’s dependence and opportunity figures and WBCSD’s ACT-D
WEF: why this is a management issue
Nature Risk Rising (New Nature Economy Report I, 2020) showed that more than half of the world’s economic value generation (about USD 44 trillion) is moderately or highly dependent on nature. The Future of Nature and Business (Report II) then places fifteen transitions in three systems — food, land and ocean use; infrastructure and the built environment; extractives and energy — as able to generate up to USD 10.1 trillion in annual business value and 395 million jobs by 2030. The Global Risks Report continues to place biodiversity loss among the top long-term risks. The figures are analyses as of the source year, not annual GDP flash estimates.
WBCSD: how to proceed
Roadmaps to Nature Positive: Foundations for all businesses (2023) takes ACT-D (Assess–Commit–Transform–Disclose) as its backbone and turns TNFD LEAP and SBTN AR3T into a business sequence. ACT-D itself is a set of high-level actions shared by Business for Nature, WBCSD, WEF, TNFD, SBTN and others. On the organisation that about 90% of pressure on nature is concentrated in three systems, there are sector Roadmaps for agri-food, forest products, built environment, energy and pharmaceuticals.
Do not get the order wrong
The biodiversity mitigation hierarchy is Avoid → Minimize → Restore (on-site recovery) → Offset (compensation of residuals). SBTN’s AR3T adds Transform (change of the business model and of systems). Continuing to convert important habitat while planting trees somewhere else is the order reversed. The first thing a first-year officer can say inside the company is “avoidance before offsets.”
The operating-company practice cycle
Typical first-year work is (1) decide management and board ownership, (2) provisionally place priority sectors and sites and Locate, (3) hypothesise dependencies and impacts with ENCORE and similar tools, (4) take data from procurement, plants and development officers, (5) make material gaps (weak traceability) explicit, (6) load avoidance and reduction measures and KPIs onto the existing environmental medium-term plan. Incomplete primary data is normal. The job is not to hide what is missing, but to produce a prioritised plan to fill it.
Finance’s levers
Banks, insurers and asset managers are exposed to nature risk through the portfolio even if they do not themselves convert land. Levers include sector policies (palm, timber, mining, infrastructure), support for clients’ TNFD responses, engagement, and including nature in the use of proceeds of sustainable finance. TNFD also has additional guidance for financial institutions.
Instruments available in Japan
Nature coexistence sites (private and other efforts that can be registered as OECMs in the international database), the 30by30 Alliance, regional circular and ecological spheres, growing TNFD-aligned disclosure, and the domestic sustainability-disclosure base including SSBJ. Realistic entry points include avoidance design and OECMs for construction and real estate, feedstock traceability and landscape approaches for food, and sector policies for finance.
Takeaways
- Avoidance is first. Offsets are last.
- A first-year result is visualisation of priorities and gaps, more than “perfect data.”
- Finance is through the portfolio. Operating companies are land and the supply chain.