Climate disclosures under integrated Task Force on Climate-related Disclosures (TFCD) and IFRS S2 standards have matured across many organisations, focusing on emissions, transition plans, resilience and adaptation. Dedicated climate reports communicate how management understands, manages and responds to the risks and opportunities posed by climate change and how the organisation is preparing for a low-carbon future. The next frontier in reporting and disclosures relates to nature, as climate and nature are two sides of the same coin.
You cannot achieve net-zero without halting and reversing nature loss. Many climate risks are amplified by nature degradation, such as droughts, soil loss and flooding. Access to land, water and community support increasingly depends on how nature is managed. Integrating nature drives innovation, such as regenerative value chains, circular inputs and ecosystem restoration credits.
According to a 2023 study by PWC, 55% of global GDP is moderately or highly dependent on nature. As our ecosystems deteriorate, the risk of disruptions to business grows, which are often the very cause of negative impact on the ecosystems in which they operate.
The Taskforce on Nature-related Financial Disclosures (TNFD) helps organisations report and act on nature-related dependencies, impacts, risks and opportunities. Integrating nature into decision-making, multinational grocery retailer Tesco mapped its palm oil supply chain to analyse how palm oil production drives deforestation and biodiversity loss in Indonesia. The aim was to develop a nature-friendly sourcing strategy that goes beyond certification and compliance to a future where nature and production work hand in hand through segregated palm oil sourcing and sustainable palm production.
The TNFD framework is following a similar trajectory to TCFD and is expected to be incorporated into the ISSB’s next wave of standards, likely branded ‘S3’ (biodiversity, natural capital and ecosystems), driving integrated environmental stewardship. Financial institutions, asset managers and companies in nature-dependent sectors (agriculture, forestry, mining, real estate, etc.) are under growing pressure to adopt TNFD early. We believe that in South Africa, we will see mandatory TNFD disclosures in the next couple of years, focusing on industries with a high nature dependence, such as agriculture, forestry, fisheries, food and beverages, real estate, mining and construction that make up roughly 40% of our GDP. PWC estimates that 46% of JSE-listed companies are exposed to financial risk due to high or moderate dependence on nature.
What does this mean for you?
Executives will need to start managing their dependencies on nature, firstly by understanding them and defining the risks and opportunities of nature on the business. With improved data, better decisions can be made, and planning is required to put in place the data sources, systems and controls, which will take time and resources. This sets the foundation for developing action plans to more effectively manage risks and improve outcomes related to nature.
For more information contact Tina Playne.
