17 January 2024

Measuring the biodiversity footprint of a company or portfolio

Why biodiversity matters

Biodiversity is essential to sustaining humanity, society and people through the provision of ecosystem services and nature's multiple contributions. In its latest Global Assessment Report on Biodiversity and Ecosystem Services, the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (Ipbes) identifies five main drivers of direct pressures responsible for biodiversity decline :

  • Changes in land and sea use
  • Direct exploitation of organisms and resources
  • Climate change
  • Pollutions
  • Invasive species

Of the global boundaries set by the Stockholm Resilience Centre for the nine planetary processes essential to sustain human life on Earth, already six have been crossed such as land-system and freshwater changes.

How to measure Corporate Biodiversity Footprint

Iceberg Data Lab (IDL) has developed a Corporate Biodiversity Footprint (CBF) measurement tool which assesses biodiversity footprinting using the metric of Mean Species Abundance (MSA). The MSA is a biodiversity metric expressing the average relative abundance of native species in an ecosystem compared to their abundance in an ecosystem undisturbed by human activities and pressures. This indicator is based on species abundance and measures the conservation status of an ecosystem compared to its original state. An area with an MSA of 0% will have completely lost its original biodiversity (or will be exclusively colonised by invasive species) whereas an MSA of 100% reflects a level of biodiversity, equal to an original, undisturbed ecosystem. The MSA metric is commonly used and scientifically recognised by international parties (IPCC, IPBES, etc.).

The CBF assesses the most material pressures on terrestrial biodiversity shown in Figure 1.

We partially cover marine biodiversity through the pressure of plastic entanglement related to marine species only.This pressure is part of the main pressure "Water Pollution".

The CBF models the impact of corporates on biodiversity through four main environmental pressures on species and habitats:

  • Change of land use, with occupational, transformational, incremental, encroachment and fragmentation impacts;
  • Climate change, due to greenhouse gases emissions (GHG emissions);
  • Air pollution, leading to the ecosystems' disturbance due to terrestrial eutrophication and acidification (Nitrogen and Sulphur emissions respectively); and
  • Water pollution, through freshwater ecotoxicity with the release of toxic compounds in the environment and plastic entanglement.

Two additional pressures, Invasive Species and Water stress, will be added in 2024 to extend our coverage of the biodiversity pressures.

Figure 1: Pressures and sub-pressures on biodiversity considered in the CBF methodology and based on the five main drivers identified by IPBES

These pressures are calculated along the whole value chain of the corporations, appraising their processes, products, and supply chains. All pressures are aggregated into Scope 1, 2 and 3 (upstream and downstream) according to the definitions and boundaries outlined in the GHG Protocol.

Finally, the CBF provides a footprint expressed in the unit of km2.MSA (see Figure 2).

Figure 2: Illustration of the global approach and modelling process of IDL's biodiversity accounting methodology

The CBF metric is carried out in a bottom-up manner. Absolute and relative impacts (computed with financial indicators) enable peer comparisons to be made. It covers the whole value chain (Scope 1, 2 & 3 upstream & downstream) and the four main environmental pressures (Land Use, Water Pollution, Climate Change and Air Pollution).

Using a comparative measurement approach allows users to implement "best-in-class" or "best-in-universe" approaches as well as positive or negative screenings. The CBF also allows financial institutions to integrate their impact on biodiversity in their strategies and decision-making processes with a science- based approach.

How to create a Positive Contribution

Corporations' positive contribution to biodiversity is assessed through three pillars:

  • Reduction
  • Avoidance
  • Compensation

The "Reduced Impact" can be defined as the reduction of impact on biodiversity of a company or financial institution over time. The goal of the reduced impact is to track a corporation's performance over time to compare its current impact to its predicted impact based on the environmental performance of its products and services from a base year.

The "Avoided Impact" is defined as the impact on biodiversity that a company or financial institution will have avoided compared to a baseline scenario established for each main sector. The goal of the avoided impact is to quantify how much the corporation's products and services perform better than the market's average.

The "Compensated Impact" or "Positive Impact" will be approached through positive land transformation (restoration, rehabilitation of lands, etc.).

Figure 3: Illustration of the three pillars of the Biodiversity Positive Contribution

How to assess the dependency

IDL developed the Dependency Score derived from the ENCORE tool. Based on 26 ecosystem services sectioned into three pillars: regulating, provisioning and cultural. IDL provides three sub-scores for each type of ecosystem service alongside an average score aggregated at the company level. This approach allows companies and financial institutions to evaluate, measure and calculate their dependencies to ecosystem services for each sector.

Looking at a company's dependency on natural capital alongside its biodiversity impact has become an increasingly crucial topic for many stakeholders such as regulators and intergovernmental institutions. Double materiality means analysing a company's biodiversity footprint, describing how it destroys and disturbs nature, while also looking at its dependency on nature and the impact of nature related risk on the company.

Figure 4: Double materiality principle linking impacts and dependencies

How to align with the regulations

Conference of the Parties 15 (Convention on Biological Diversity, CBD)

The Global Biodiversity Framework (GBF) that was adopted in Montreal includes four goals and 23 targets. Target 15 requires companies and financial institutions to monitor, assess and disclose their risks, impacts (positive and negative) and dependencies on biodiversity all along their operations, supply chains and portfolios.

From a regulatory perspective, the CBF provides an analysis of the contribution to the reduction of the main pressures and impacts on biodiversity identified by the IPBES. IDL's positive contribution can be used to measure positive impact, which is also one of the GBF's objectives.

The CBF largely meets the objectives of the CBD (first adopted in 1992). Expressed in -Km2.MSA, it is a quantitative metric, comprehensible by non-experts which reflects the ecosystem condition and allows users to account for stocks and variations of stocks of biodiversity through the MSA.

Taskforce on Nature-related Financial Disclosures

IDL is a Forum Member of the Taskforce on Nature-related Financial Disclosures (TNFD). Following the working groups of the TNFD, IDL conducted one pilot test of the beta TNFD framework and the LEAP-FI and V-Process approach with the CBF and in partnership with some financial institutions and currently has two ongoing pilots to continue to test the framework. Our biodiversity measurement approach uses metrics and indicators as recommended in the TNFD guide.

The CBF can be used for impact metrics (in an absolute value) and measuring impact drivers such as change of land-use or pollution.The CBF can also give indicators in a relative value (per impact/€Million).This helps financial institutions and investors to evaluate companies' impacts and dependencies on nature.

After two years of work and publishing four beta frameworks, the TNFD launched its final recommendations and guidelines in September of 2023. Following this, IDL has developed a packaged dataset aimed at answering the TNFD requirements and most of the core metrics presented by the taskforce.

For more information, see: icebergdatalab.com, or contact@icebergdatalab.com