An organisation’s assets, business processes, products and services (direct, upstream and downstream) interface with nature at specific locations. Nature-related dependencies and nature impacts – the sources of risks to business continuity, earning and ultimately enterprise value – are often location-specific. Location therefore matters greatly for the identification, assessment, avoidance, mitigation and management of nature-related risks facing corporates and financial institutions.
While there will be similar types of nature-related dependencies and impacts across similar business processes in different locations, their size and scope will be location-specific. One example would be a beverage manufacturer that operates water extraction plants drawing water from two different watersheds.
- Nature-related dependencies and nature impacts will be broadly the same (e.g. dependency on water supply and water purification services; impact driver of water use);
- One watershed may be under stress, creating an increasing risk to the company and adverse impacts on the local ecosystem and other people and organisations that depend on it; and
- The other watershed may be under less stress, healthy and resilient, presenting modest to low risks for the company.
Clearly, in this scenario, understanding aggregate, organisation-wide measures of water consumption and water quality is insufficient; one must consider impact drivers such as water use, and ecosystem services such as water purification and water supply within the context of each local ecosystem.
By overlaying, or mapping, the location of assets, business processes, value chains and downstream products to each ecosystem, an organisation and its investors and creditors can create a foundation for evaluating nature-related dependencies and impacts and, in so doing, then assess nature-related risks and opportunities.
A thorough assessment should consider not only the organisation’s interface with nature across directly owned and operated assets and operations, including upstream (supply) and downstream (product and service use) value chains related to their operations, but also across locations, business units and, for investors, by asset types.
Note – Location-specific assessment and disclosure is clearly complex and subject to ongoing evaluation by a number of scientific and disclosure mechanism organisations, including the TNFD. This is an ongoing area of research for the TNFD, with a range of knowledge partners, which requires close collaboration with other initiatives and tools being developed. The TNFD looks forward to feedback from market participants and will revise this approach in future iterations to provide more specific guidance and suggested tools.
Guiding Questions for Corporates
- L1: Business footprint – Where are our direct assets and operations, and our related value chain (upstream and downstream) activities?
- L2: Nature interface – Which biomes and ecosystems do these activities interface with? What is the current integrity and importance of the ecosystems at each location?
- L3: Prioritisation – At which locations is our organisation interfacing with ecosystems assessed as being low integrity, high biodiversity importance and/or areas of water stress?
- L4: Sector identification – What sectors, business units, value chains or asset classes are interfacing with nature in these priority locations?
Internal and External Tools to Support your analysis
- Internal or external data on the location of the organisation’s physical assets and operations.
- Internal data on the organisation’s value chain locations, both upstream (supply) and downstream (consumer).
- External data sources and online mapping tools identifying the location of ecosystems and ecosystem types (i.e. biome). Other spatial nature-related data measuring ecosystem integrity, biodiversity importance and water stress, such as measures of critical habitats, protected areas, key biodiversity areas, stressed watersheds and endangered species.
Suggested outputs from the LOCATE Phase
- A geospatial map of the organisation’s operational locations, and upstream and downstream value chain locations, overlaid on geospatial data highlighting ecosystem type, integrity and biodiversity importance, such as key biodiversity areas, protected areas, critical natural habitats and/or natural capital hotspots, and geospatial data relating to other environmental assets such as watersheds, water risk and water stress.
- A list of the organisation’s priority locations (direct, upstream and downstream) as defined in the glossary of terms. This is a list of ecosystems (not company asset locations) with which the organisation has an interface that is defined as being in a state of low integrity, or of high biodiversity importance, or areas of water stress.