Draft recommended disclosures

: Risk Management

Guidance for all sectors

An organisation should describe its processes for identifying and assessing nature-related dependencies, impacts, risks and opportunities in its direct operations.

Important aspects of this description are:

• How an organisation identifies existing, new, emerging and changing nature-related dependencies, impacts, risks and opportunities that may affect the organisation, including factors such as:
  • The degree of location-specificity used (e.g. site-specific, local, national), taking into account the differences in dependencies, impacts, risks and opportunities across locations;
  • The timescales considered;
  • If and how ecological thresholds and tipping points were considered;
  • The frequency of assessment; and
  • Whether and how existing and emerging regulatory requirements related to nature loss were considered (e.g. restrictions on water or land use);
• How an organisation assesses nature-related risks for severity of potential effects on the organisation, including processes for assessing the potential size and scope of identified nature-related risks; and
• How an organisation determines the relative significance of nature-related risks in relation to other risks and prioritises risks to inform risk responses and risk management decision-making.

The organisation should provide:

• The methodology and data sources used for any indirect estimates;
• The improvements in data quality since the previous disclosure;
• An assessment of the quality of the data used and the implications for the analysis;
• The strategy to increase data quality over time; and
• The definitions of risk terminology used or references to existing risk classification frameworks used, where appropriate and relevant to understanding the process.

An organisation should consider reporting the following indicators to support this disclosure:

• The level(s) at which the assessment is taken (corporate, location-specific and/or project/service-line-specific); and
• Proportion of direct operational locations assessed.

Guidance for all sectors

An organisation should describe its approach to identifying nature-related dependencies, impacts, risks and opportunities in its upstream and downstream value chain(s) and financed activities and assets for assessment. For the remainder of this disclosure recommendation, value chain(s) refers to upstream, downstream and/or financed activities and assets.

Important aspects of this description are:

• The scope of the value chain(s) considered;
• The elements of the value chain(s) identified for assessment;
• How the organisation determines those elements (e.g. based on the priorities set out in the TNFD sector and biome-specific guidance, where available; the commodities used; likely materiality; products, locations, processes; and/or degree of influence over the issue);[1]
• Why this approach to prioritisation was adopted; and
• How an organisation reviews this approach to identify new, emerging and changing risks and opportunities that may affect the organisation. For example, how existing and emerging regulatory requirements related to nature loss are considered, which could result in water or land use restrictions.

An organisation should describe its approach to evaluating and assessing nature-related dependencies, impacts, risks and opportunities in the prioritised elements of its value chain(s). Important aspects of this description are:

• The timescales considered;
• If and how ecological thresholds and tipping points were considered;
• The degree of location-specificity achieved and the implications for the analysis, including:
  • An assessment of the quality of the data used;
  • Which data are obtained directly from suppliers or customer and what is estimated indirectly;
  • The methodology and data sources used for any indirect estimates;
  • The strategy to increase data quality, traceability and location-specificity over time, the barriers to such improvements and the approach to overcoming those barriers; and
  • The improvements in data quality, traceability and location-specificity achieved since the previous disclosure.
• How an organisation assesses nature-related risks in its value chain(s) based on the severity of potential effects on the organisation, including processes for assessing the potential size and scope of identified nature-related risks and opportunities; and
• How an organisation determines the relative significance of nature-related risks in its value chain(s) in relation to other risks and prioritises risks to inform decision-making about its risk responses and risk management.

An organisation should consider reporting the following indicators to support this disclosure:

• Proportion of suppliers screened on nature-related issues, by spend and/or volume;
• Proportion of suppliers engaged for priority nature issues identified and/or when assessing nature-related issues, by spend and/or volume;
• Proportion of inputs, by spend and/or volume, traced to original location; and
• Proportion of operational locations assessed upstream and downstream.

Guidance for all sectors

An organisation should describe its processes for managing nature-related dependencies, impacts, risks and opportunities. This should include how it makes and implements decisions to avoid and reduce negative impacts on nature, regenerate and restore ecosystems and transform business practices, following the mitigation hierarchy and principles of extended producer responsibility.[2]

An organisation should describe the actions taken in response to the dependencies, impacts, risks and opportunities identified. This could include changes to business practices, investments in new technology or research and development, decisions about the location of business operations, and collaboration with other partners and stakeholders. An organisation should discuss how these actions will evolve in the future.

An organisation should describe how dependencies, impacts, risks and opportunities in their value chain(s) have affected its approach to sourcing and interactions with downstream entities. This could include the adoption of tracing, certification practices, collaboration with suppliers, customers and other stakeholders, or extended producer responsibility schemes. An organisation should report on the coverage of these policies, as well as efforts to increase such coverage.

An organisation should consider reporting the following indicators to support this disclosure:

• Proportion and/or value of production, consumption and sourcing of raw materials covered by third-party certification schemes, listed by certification scheme used.

Further indicators and metrics that demonstrate businesses response to nature-related dependencies, impacts, risks and opportunities (non-exhaustive), are outlined in Annex 3.

Guidance for all sectors

An organisation should describe whether and how its processes for identifying, assessing and managing nature-related risks are integrated into its overall risk management process.

Guidance for all sectors

In describing how affected stakeholders are engaged in an organisation’s identification, evaluation, assessment and management of nature-related dependencies, impacts, risks and opportunities, an organisation should include the following information:

• A statement of its efforts to comply with international standards of responsible business conduct and other human rights and stakeholder engagement policy, guidance and declarations, as set out for example in the UN Guiding Principles on Business and Human Rights, OECD Guidelines for Multinational Enterprises, UN Declaration on Rights of Indigenous Peoples, ILO Convention 169, Convention on Biological Diversity;
• The organisation’s approach to identifying and addressing grievances related to the organisation’s potential and actual impacts on nature, including the grievance mechanisms that the organisation has established or in which it participates;
• A list and description of the affected stakeholders including those whose human rights might be affected, and a description of how they were identified;
• A statement of the purpose of the engagement and whether it takes place in relation to assessment, solution-finding, monitoring and/or evaluation of nature-related issues;
• A description of the mode of engagement, the process used for engagement, whether engagement is one-off, periodic or ongoing, and through formal or informal structures;
• A description of whether engagement has been based on Informed Consultation and Participation (IPC) and how Free, Prior and Informed Consent (FPIC) has been attained, especially as it relates to Indigenous Peoples and local communities;
• The results of the stakeholder engagement processes and how those results have been used by the organisation, including evidence that relevant information is disclosed in a timely manner, using appropriate means, and has been incorporated or otherwise addressed in the organisation’s decision-making and responses to nature-related issues; and
• A statement of whether and how senior management and the board are informed about stakeholder engagement processes and their results.

An organisation should consider reporting the following indicators to support this disclosure:

• Proportion of sites that have active engagement with local stakeholders on nature-related issues; and
• A description of participation in sector-wide and multi-stakeholder agreements.

In preparing this disclosure, organisations may also refer to the TNFD’s additional guidance on stakeholder engagement.