The Business Case for Board Engagement in Nature

Board members are responsible for strategic oversight, risk management, and long-term value creation. Given that over 50% of global GDP depends on nature, ignoring environmental risks is no longer an option.

Why Nature Matters to Boards:

• Material financial risks: Nature loss leads to supply chain disruption, increased costs, and asset devaluation.
• Regulatory pressure: Emerging laws require greater transparency and action on biodiversity and ecosystem impacts.
• Investor scrutiny: Capital markets are integrating nature into ESG performance metrics.
• Competitive advantage: Companies that proactively manage nature risks attract consumers and investors, positioning themselves as leaders in sustainability.

Nature-Related Dependencies, Risks & Opportunities for Business

Understanding Nature-Related Dependencies

All businesses rely on nature, whether through raw materials, water use, or ecosystem services like pollination and carbon sequestration. Identifying and mapping these dependencies is essential to mitigate exposure to future environmental shocks.

Recognising Nature-Related Risks

The Taskforce on Nature-related Financial Disclosures (TNFD) outlines three main categories of risk:

• Physical Risks – Supply chain disruptions from biodiversity loss, water shortages, extreme weather events.
• Transition Risks – Policy shifts, legal liabilities, and reputational damage from unsustainable practices.
• Systemic Risks – Large-scale economic shocks from ecosystem collapse and global nature degradation.

Unlocking Nature-Related Opportunities

Boardrooms must move beyond risk mitigation to value creation. Companies integrating nature into strategy can:

• Reduce operational costs through resource efficiency.
• Tap into growing markets for sustainable goods and services.
• Build resilience by investing in nature-based solutions, such as reforestation or regenerative agriculture.

The Financial Impact of Nature-Related Issues

Understanding how nature affects financial statements is critical for board-level decision-making. Nature-related risks influence:

• Revenue: Disruptions in supply chains can lead to lower output and lost market share.
• Costs & Expenditure: Compliance with new regulations or investing in sustainable solutions can impact operating expenses.
• Assets & Liabilities: Devalued assets (e.g., land degradation) and increased liabilities from environmental damage lawsuits.
• Investor Confidence: Market access and financing conditions increasingly depend on a company’s environmental footprint.

Five Key Actions for Board Members

To integrate nature into corporate governance, boards should:

1. Embed Nature in Corporate Strategy & Risk Management

• Ensure nature-related risks and opportunities are considered in board discussions.
• Link nature to corporate strategy, sustainability targets, and financial risk planning.

2. Enhance Governance & Oversight

• Assign board-level responsibility for nature and biodiversity.
• Establish internal expertise or a dedicated sustainability committee.

3. Strengthen Nature-Related Financial Reporting

• Align corporate disclosures with TNFD, IFRS Sustainability Disclosure Standards, and EU CSRD.
• Work towards transparent and data-driven reporting on nature dependencies and impacts.

4. Drive Innovation and Sustainable Business Models

• Encourage investment in nature-based solutions, regenerative agriculture, and circular economy initiatives.
• Support R&D in green technologies and sustainable supply chains.

5. Engage Stakeholders & Align with Regulatory Trends

• Proactively engage with investors, regulators, and industry bodies on nature-related risks.
• Monitor evolving regulatory frameworks (e.g. EU Green Deal, UK Environmental Act, Global Biodiversity Framework).

Conclusion: Board Leadership in a Nature-Positive Future

Board members play a pivotal role in future-proofing businesses against nature-related financial risks and ensuring compliance with global standards. The time to act is now. Leading companies are already integrating nature into their strategies, securing long-term value, and gaining a competitive edge.

By embedding nature into decision-making, risk assessment, and reporting, boards can turn environmental responsibility into a strategic advantage, ensuring their businesses thrive in an economy increasingly shaped by sustainability and resilience.

This is the second blog in a two-part series. The first blog explored how accountants and board members can integrate nature-related financial considerations.

Why Nature Matters to Accountants – A guide to building resilience and value through nature-positive action. Source: https://globalaccountingalliance.com/why-nature-matters-to-accountants