L3: Prioritisation according to the integrity and importance of relevant ecosystems

Guiding Question: At which locations is our organisation interfacing with ecosystems assessed as being low integrity or of biodiversity importance?

Generating a priority list of business locations

Based on the analysis undertaken for LEAP component L2, an organisation can identify business locations interfacing with ecosystems that are in a state of low integrity, are of high biodiversity importance, or identified as water-stressed areas.

In terms of business dependencies, the risks to the ecosystem services that an organisation relies on for its business processes will be greatest where the integrity of the underlying ecosystem is under pressure.

For these reasons, the TNFD draft disclosure recommendations requires organisations to:

Describe the organisation’s interactions with low integrity ecosystems, important ecosystems or areas of water stress (Strategy D).

For the purposes of informing a full and robust assessment of an organisation’s risks and opportunities, it is important to note that focusing on low integrity ecosystems, important ecosystems and areas of water stress is necessary, but may not be sufficient. Material risks and opportunities could emerge from business locations with significant dependencies and impacts in locations that do not meet these criteria. This underscores the need for judgement and stakeholder engagement to assess the most important locations for assessment through the LEAP approach, based on the unique nature of the business and its interface with nature.

The TNFD therefore recommends that analysts using the LEAP approach do not take a rigid, formulaic approach to the prioritisation of locations. Judgement of where material risks may lie, based on an understanding of dependencies and impacts, given the specific characteristics of the business and its business processes, will be critical.

The output of component L3 is a view of the company’s direct business operations and its upstream and downstream value chains, overlaid with an identification of those ecosystems deemed to present the greatest risks. These locations are subsequently referred to as ‘priority locations’ throughout the next ‘E’ phase of the LEAP approach, where nature-related dependencies and nature impacts are evaluated.

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