From EHS to ESG
When WHC was created 33 years ago, the intersection of business and biodiversity was firmly located in the realm of environmental health and safety (EHS), with a focus on regulation, compliance and operations. EHS leveraged the power of government to promote best practices and punish bad actors. Today, the intersection of business and biodiversity has migrated to the realm of environmental, social and governance (ESG), a framing first defined by the United Nations in 2004 as a set of criteria to be incorporated into corporate financial decision-making. ESG acknowledges and leverages the power of the finance sector by linking the cost and availability of credit to better business practices.
This migration is both welcoming and troubling.
Welcoming the migration to ESG
The shift of business and biodiversity towards the realm of ESG is to be welcomed because biodiversity has long been a lagging concern for the private sector, trailing behind immediate concerns like labor shortages and supply chain disruptions,[1] longer-term concerns like the climate emergency and recent concerns like the impacts of COVID on social cohesion and livelihood[2]. In addition, assessments of biodiversity as a materiality for business have focused on sectors with a direct impact on nature, allowing those with impacts occurring in the supply chain – like scope 3 emissions for carbon – to declare absence of materiality. Add these corporate blind spots to the continuing decline of nature as outlined by the IPBES Global Assessment Report[3] on Biodiversity and Ecosystem Services and further detailed in recent publications showing that of 11,000 species of birds, 48% are in decline with billions of birds at risk of disappearing from our skies[4] and that one in five of all reptile species are threatened with extinction[5]. This is why the migration of biodiversity to a topic of ESG concern for the private sector is to be welcomed.
The migration has been driven by a number of initiatives like the EU Due Diligence Legislation, the Sustainability Accounting Standards Board, the Task Force on Nature-related Financial Disclosure (TNFD) and the EU Taxonomy, which have in turn enabled and encouraged reporting mechanisms like the CDP to broaden its scope, “expanding its work to accelerate the protection and restoration of nature and … put more emphasis on biodiversity in the upcoming questionnaires[6].” In earlier iterations of ESG, biodiversity was a nested or secondary concern, but in recent years — in large part due to the suite of EU regulations around corporate sustainability — biodiversity has emerged as a stand-alone concern with specific needs in terms of impact and opportunities in terms of uplift. Indeed, the opportunity for uplift (positive impact) is newly emergent in TNFD, a welcome development following an exclusionary focus on negative impacts by business, which ignored the role companies can take to create positive change for nature.
The adage “what is measured is managed” is why we welcome the migration to ESG. If ratings agencies, financial institutions and governments are finally asking questions about biodiversity, companies will have to answer and, in answering, will have to act.
But it’s not that simple, as there is also cause for concern in the migration to ESG.
Troubled by the shift
Andrew Winston, a sustainability thought leader and co-author of recently published Net Positive: How Courageous Companies Thrive by Giving More Than They Take, outlined his concern about the shift in language from sustainability to ESG in a recent piece in MIT Sloane Management Review[7]. He is concerned about placing a company’s sustainability efforts into the ESG realm, which further cements the prioritization of finance within the private sector. As he says, “Seeing all things through the lens of markets and the quest for shareholder maximization is largely how we got into this mess in the first place.” This thought can be extended to the recent ascent of biodiversity into ESG and manifests as a renewed attempt to translate nature into a value that a shareholder or financier can understand. As Winston says, investors aren’t well-positioned for this approach. A UNEP study[8] carried out by PwC found that a long-standing biodiversity tool for finance, the Mitigation Hierarchy, was poorly understood by the sector and had limited application.
In addition, the explosion of tools and taxonomies on biodiversity can lead to extreme confusion (or exhaustion) across the corporate reporting function. As part of our work developing strategic biodiversity frameworks for the private sector, we regularly assess biodiversity and biodiversity-adjacent tools. A recent assessment of 76 guidances, tools and standards has found a lack of cohesion on the basics, e.g., the very definition of biodiversity, which ranges from the classic definition of the “variety of life on earth” to human-centered definitions like “the provision of humanity with essential amenities.” Across the spectrum, we found few common areas of goals, approaches and unsurprisingly, metrics. With a plethora of confusing directions, companies will opt out until a simpler accessible framework is offered. The complexity also excludes small and medium-sized operations that don’t have resources for spatial analysis, ecosystem assessments or metric development.
Another troubling trend in this shift to ESG is the focus on areas of high biodiversity value and the exclusion of everyday nature from consideration. This exclusion leans into the global decoupling of nature from humanity and ignores the fact that common species are also under pressure from habitat loss and fragmentation, invasive species and climate change. Placing only areas of ‘high’ biodiversity value into the ESG realm is dangerous and short-sighted. This is akin to requiring companies to address their air or water impacts in only special and specific places. Companies should be judged on how they manage their relationship with nature in a holistic way.
In this framing of ESG and biodiversity, “what is measured is managed” excludes common species, omits community ecosystems and redirects focus on metrics over management, which can then deny resources for uplift implementation.
If this evolution continues — and it surely will — biodiversity will become a concern of the corporate office, but it must remain a concern at the operations level. It’s at operations where impacts occur and where uplift potential lies. It’s at operations where habitats and ecosystems can be restored and species can recover and thrive. It’s in the realm of the EHS function that facilities can manage in harmony with nature, mines and quarries can restore beyond compliance for biodiversity and all types of corporate lands can contribute meaningful metrics for corporate reports.
It’s not so much a question of EHS or ESG. It’s both for biodiversity.
[1] https://www.conference-board.org/pdfdownload.cfm?masterProductID=38504
[2] WEF – Global Risks Report 2022
[3] https://ipbes.net/global-assessment
[4] State of the World’s Birds Alexander C. Lees, Lucy Haskell, Tris Allinson, Simeon B. Bezeng, Ian J. Burfield, Luis Miguel Renjifo, Kenneth V. Rosenberg, Ashwin Viswanathan, Stuart H.M. Butchart
Annual Review of Environment and Resources 2022 47:1 https://doi.org/10.1146/annurev-environ-112420-014642
[5] Cox, N., Young, B.E., Bowles, P. et al. A global reptile assessment highlights shared conservation needs of tetrapods. Nature (2022). https://doi.org/10.1038/s41586-022-04664-7
[6] https://dfge.de/biodiversity-cdp-2022-questionnaire/
[7] https://sloanreview.mit.edu/article/whats-lost-when-we-talk-esg-and-not-sustainability/
[8] https://www.forest-trends.org/wp-content/uploads/imported/PwC_BBOP_UNEPFI_FINAL%20040310.pdf
