The case for a nature positive business strategy The case for a nature positive business strategy

Introduction

Nature in crisis

The response

The business case for Nature Positive projects

Conclusion

Digital Transparency, carbon offsets, and nature-based infrastructure

TOPICS

The critical importance of nature should be obvious, yet it remains under severe stress as a result of both worsening climate impacts and a litany of direct human interventions, such as deforestation, agriculture, mining, infrastructure, and urbanisation. Consequently, biodiversity and ecosystem losses are accelerating with some scientists arguing we are in the midst of our planet’s sixth mass extinction event – and that this time humanity is to blame.

Introduction

For much of the 21st century nature and biodiversity have taken something of a backseat in environmental circles, as green businesses and campaigners alike have concentrated the bulk of their efforts on the fight against climate change. Rightly or wrongly, and to the considerable frustration of some conservationists, governments and corporates have tended to focus their environmental initiatives on the urgent need to cut greenhouse gas emissions. Wildlife has continued to provide the images and narratives synonymous with environmentalism, while nature loss has remained a source of reputational and physical risk for businesses. But at a policy and investment level, environmental measures have been seen almost exclusively through a climate lens.

The WEF’s Global Risk Report for 2023 identified “biodiversity loss and ecosystem collapse” as one of the fastest deteriorating global risks over the next decade, while “natural resource crisis” was also listed as a top-10 risk, both in the near term and over the coming decade. The WEF adds that “as current crises divert resources from risks arising over the medium to longer term, the burdens on natural ecosystems will grow given their still undervalued role in the global economy and overall planetary health”.

While the potential of the sector depends on how quickly costs can be brought down, if the sector were to grow by 25 per cent a year from 2025, DAC capacity could reach around 4.5Gt CO2/year by 2050, Burchett says.

The fear is that something has to give. Countless analysts have warned that water sources are at risk of running dry, mineral supplies are struggling to keep up with demand, and toxic air is contributing to millions of premature deaths. Studies show deforestation could trigger climatic tipping points as emissions rise, resulting in forests dieback and the failure of the planet’s ‘lungs’. Meanwhile, the UN is raising the alarm over the way desertification is combining with extreme weather to chip away at agricultural yields to the point where recent progress in tackling global food insecurity is being rapidly reversed.

The Dasgupta Review of the Economics of Biodiversity, produced for the UK government ahead of the COP15 Biodiversity Summit, flags that while produced capital per person doubled and human capital per person increased by about 13 per cent globally between 1992 and 2014, the stock of natural capital per person declined by nearly 40 per cent. “In other words,” the influential report states, “while humanity has prospered immensely in recent decades, the ways in which we have achieved such prosperity means that it has come at a devastating cost to nature. Estimates of our total impact on nature suggest that we would require 1.6 Earths to maintain the world’s current living standards.”

Nature in crisis

Critics insist such Malthusian warnings are hardly new and have repeatedly been proven wrong by decades of technological and efficiency gains. Even as biodiversity loss escalates, the global economy continues to grow, they contend, arguing that once countries reach a certain level of development environmental protection tends to improve. And ultimately, innovative new technologies such as alternative proteins or nuclear fusion should allow more land to be returned to nature, enabling both a biodiversity recovery and an expansion of natural carbon sinks.

But currently, there is little sign of largely negative trends being reversed. From deforestation and wildlife loss to overfishing and water pollution, multiple indicators are heading in the wrong direction. Scientists and economists fear the global economy is bursting far beyond planetary boundaries that it ultimately has to operate within if it is to achieve long term sustainability.

Introduction

These myriad warnings are starting to cut through. After several covid-related delays and a relocation away from the Chinese city of Kunming, last year’s COP15 Biodiversity Summit took place in Montreal and delivered the Kunming-Montreal Global Biodiversity Framework. The landmark treaty was backed by almost 200 countries, as governments committed to “halt and reverse” biodiversity loss by the end of the decade. Two “30×30” goals emerged from the meeting - an ambition to conserve 30 per cent of the world’s land and 30 per cent of the ocean by 2030; and an agreement by developed countries to mobilise $30bn of funding for developing countries by 2030. These overarching targets were underpinned by a raft of measurable targets and stronger implementation mechanisms that should ensure meaningful policy changes at a national level in the years to come.

The response

However, there are ways to build a compelling business case for nature positive strategies. S&P points out that the speed and scale of biodiversity loss and ecosystem degradation is the highest in history, at a time when “85 per cent of the world's largest companies have a significant dependency on nature, indicating the critical importance of greater transparency for market participants on nature-related risks and opportunities”. It adds that 46 per cent of large companies “have at least one asset located in a Key Biodiversity Area that could be exposed to increased reputational and regulatory risks in the future”.

Sadly, there are reasons to be sceptical that the Kunming-Montreal Global Biodiversity Framework targets will be met. The last wave of 20 international biodiversity goals - set in the Japanese city of Aichi in 2011 for delivery by 2020 - were all missed. Meanwhile, businesses and governments alike are badly off track to hit targets set at the COP26 Climate Summit in Glasgow to end global deforestation. Closer to home, UK government targets to reverse domestic biodiversity loss by 2030 are in danger of being derailed by sewage spills, tree planting targets that are set to be missed, and under-funding of key environmental agencies.

The business case for Nature Positive projects

One of the best-known tools for measuring and quantifying a company’s environmental impact has been pioneered by luxury goods firm Kering, which developed what is thought to be the world’s first Environmental Profit and Loss (EP&L) Account.

Case study

the world’s first and largest climate-positive direct air capture and storage plant

Crucially, the company has sought to share many of the learnings from its decade of experience operating the EP&L, hailing it as “a key enabler of a sustainable business model, and one that Kering wishes to share with its peers in the luxury industry and other sectors”.

It was already a niche technology particularly well suited for sites with a high heat demand, such as hospitals, universities, and leisure centres, but large-scale CHP units can also be used effectively in district heating schemes.

Those businesses that have decided to pursue nature positive strategies are being aided by an emerging field of standards, guidelines, and solutions providers.

To encourage early adoption, the TNFD uses the same four disclosure categories as the TCFD: governance, strategy, risk and impact management, metrics and targets. The Framework, which is set to be formally launched in September 2023, also draws from and feeds into other frameworks such as the ISSB, the Global Reporting Initiative (GRI), and the European Financial Reporting Advisory Group (EFRAG).

Combined Heat and Power

Regulation and reporting

Heat pumps are arguably the key technology for decarbonising heating over the coming decades. The technology, which effectively works like a fridge in reverse, uses heat exchangers and compressors to extract ambient heat from the air, ground, or even water and then amplify and transfer it into the property. The approach is inherently efficient and in recent years concerns over the technology’s performance in cold temperatures have been alleviated, as real-world evidence from the Nordic countries has stacked up, confirming that heat pumps work just fine in even the most hostile of climates. Fears that heat pumps cannot keep properties sufficiently warm are fading by the day.

Heat pumps

Meanwhile, venture capitalists and investors are also looking to get in on the act. For example, Canada’s CarbonCure Technologies, which has developed a way to mineralize CO2 by injecting it into concrete, recently announced $30m of funding from two companies – Invert, an investment firm, and cryptocurrency firm Ripple – while Heirloom recently raised $58m from investors including Carbon Direct Capital Management, Ahren Innovation Capital and Breakthrough Energy Ventures, along with the Microsoft Climate Innovation Fund.

Another grouping, the Coalition for Negative Emissions, is bringing together fledgling DAC operators, nature-based carbon offset providers, landowners and environmental stewards, carbon traders and financiers, and carbon intensive firms that are likely to provide demand for providers of negative emissions. Members range from Airbus to Bank of America to Heathrow and International Airlines Group, as well as key industry players.

The fund is looking to finance solutions that can deliver a cost of $100/ton and scale up to at least 0.5 gigatons a year of additional CO2 removal.

Most notably, the Frontier fund, started by payments company Stripe and backed by a host of technology giants, including Meta, Shopify, McKinsey, and Alphabet, this year launched a $925m “advanced market commitment”, building on an idea borrowed from vaccine development. This commitment aims to accelerate the development of carbon removal technologies by guaranteeing future demand for developers who can deliver successful projects. “The goal is to send a strong demand signal to researchers, entrepreneurs, and investors that there is a growing market for these technologies,” the fund states. “Importantly, Frontier aims to help create net new carbon removal supply rather than compete over what exists today.”

A new Frontier

A growing number of businesses are investors are clearly convinced DAC has a big and important future ahead of it.

However, the DAC Coalition now boasts 25 member companies from all around the world:

Key players

The IEA reported that, as of April 2022, there were 18 projects operating – in Canada, the US and Europe – with Climeworks’ 4,000-ton Orca project the biggest. In a sign of the sector’s exponential growth, the first large-scale DAC plant being financed and developed in the US by 1PointFive is set to use Carbon Engineering’s liquid DAC technology to capture up to one MtCO2 per year and could come online as early as 2024. Storegga is another company using Carbon Engineering’s technology, highlighting how the sector is likely to develop with technology providers licensing or selling their technology to project developers.

Canada

Carbon Cantonne TerraFixing Carbon Engineering

RedoxNRG

estonia

Soletair Power

Finland

BlancAir DACMa NeoCarbon

Germany

RepAir Carbon Capture

Israel

Octavia Carbon

Kenya

Carbyon Skytree

netherlands

Nordic DAC Group

Sweden

Mission Zero Technologies

Parallel Carbon

Air Capture AirMyne Aircela Carbon Blade Carbon Reform Global Thermostat Hago Energetics Heirloom Carbon Noya Sustaera

This is a sector where new players are emerging all the time. The biggest companies in the nascent industry are Climeworks, based in Switzerland, and Canada’s Carbon Engineering, which says it is “engineering facilities capable of capturing one million tons of CO2 annually”.

Net zero corporates - Companies that have made net zero commitments and want to decarbonise their Scope 3 value chain emissions themselves, such as real estate investors, retail, pharma, and the big consultancies, may look to offset their emissions through DAC as they continue with the multi-decadal effort to curb their supply chain emissions.

These investors confident there are multiple avenues by which they can generate a return. Storegga’s Parekh reckons there are four key markets for carbon credits issued by DAC projects:

The business case for DAC needs to be set out clearly, both to build interest among prospective buyers and to attract investors for what are capital intensive projects.

Building the business case

Already, organisations such as Breakthrough Energy Ventures, Prelude, and Lower Carbon Capital have invested in the sector, while programmes such as the XPRIZE - which offers up to $100m for promising carbon removal proposals - and Breakthrough Energy’s Catalyst Program, which raises money from philanthropists, governments and companies. Developers have also raised significant amounts – Climeworks raised $110m in 2020, for example, while Heirloom recently raised $53m.

Hard-to-abate sectors such as long-range transportation, heavy industry, and construction – these industries face a major challenge cutting emissions at source, and as such carbon credits from DAC projects could become a component of their decarbonisation plans.

Marketplaces and resellers – Carbon traders could see a potential new source of high quality carbon credits from DAC projects that could have value on the voluntary carbon market and regulated markets such as the EU ETS.

Climate leaders - Companies that want to show stakeholders they are at the forefront of the attempts to stabilise the climate and can attract kudos by supporting cutting edge clean technologies. The large tech companies are a good example of this segment.

The idea of a nature positive economy is still a long way from reality. Both domestically and internationally nature remains in crisis, and for all the progress made by the green economy over the past few decades there are good reasons to think the impact of environmental degradation on the economy is intensifying. The recent inflation afflicting economies around the world is in part the result of pandemic stimulus plans and the impact of Russia’s invasion of Ukraine on energy markets, but it is also a function of how the interlocking climate and nature crises are impacting supplies of food and other nature-based commodities.

Conclusion

But at the same time, awareness of these risks is higher than ever, and governments and businesses are responding.

Delivering on the goals of the Kunming-Montreal Global Biodiversity Framework and ensuring nature loss really is reversed by 2030 will be supremely challenging, but the targets will help drive the policies, regulations, and investments that enable a new wave of nature positive projects to advance. Expect plenty more regulations and subsidy schemes designed to curb deforestation, incentivise the adoption of regenerative agricultural practices, and ensure developers deliver net gains in biodiversity.

Meanwhile, growing corporate understanding of ecosystem services, natural capital, nature-focused reporting standards, and the continued expansion of the carbon offset market will all serve to ensure more boardrooms start to pursue nature positive strategies. And at the same time, growing numbers of innovative businesses in fields as diverse as alternative protein, satellite tracking, and climate resilient infrastructure are working on the cutting-edge solutions that could one day allow vast swathes of land to be returned to nature.

Nature may still be in crisis, but a path to recovery is being forged.

TNFD has already developed a risk management and disclosure framework for organisations to report and act on nature-related risks, which aims to help organisations of any size, across every sector that interacts with nature. More broadly the taskforce is aiming to improve disclosure of nature-related issues by companies, to give them a framework for disclosure that will enable regulators and investors to identify firms that are properly assessing nature-related risks and opportunities and those that are failing to do so.

Nature in crisis

The response

The business case for Nature Positive projects

Conclusion

Digital Transparency, carbon offsets, and nature-based infrastructure

At the heart of the TNFD guidelines is a recommendation that companies set nature-based goals using science-based targets such as those of the Science Based Targets Network (SBTN). Science Based Targets for Nature were released in May 2023, with the aim of helping companies to align their operations with both net zero and nature positive targets. The first targets will cover fresh water and land, with later targets set to address biodiversity and oceans.

Mike Scott is the founder and CEO of Carbon Copy Communications. He has more than 30 years’ experience of covering environmental and business issues and won the Contribution to Climate Change Journalism prize at the 2021 Sustainability Media Awards.

About the author

The accounting exercise measures carbon emissions, water consumption, air and water pollution, land use and waste production along the company’s entire supply chain, “making the various environmental impacts of the Group’s activities visible, quantifiable, and comparable”.

“TNFD, even before it has launched, is further down the road than TCFD was 18 months after its launch, and TCFD has now entered the mainstream,” says Seega. “There’s no reason why TNFD shouldn’t be part of the mainstream environmental agenda within five years.”

While lobbyists and policymakers debate the relative merits of heat pumps and hydrogen, other more established green heat technologies are in danger of being ignored

Combined Heat and Power (CHP) plants have long been recognised as a more efficient alternative to gas boilers because they use the waste heat from a gas turbine power generator to provide space and water heating. The technology is estimated to have an efficiency of about 80 per cent and can cut emissions by 30 per cent compared to generating power and heat separately.

Since its introduction back in 2012, the methodology has continually evolved to take into account the lessons of previous years and updated scenario modelling to better gauge the potential impact of future projects. The company says the EP&L has given it greater insight into its main impacts – for example, it quickly discovered that 93 per cent of its impacts lie in its supply chain, in particular the production and processing of raw materials - and helped it make clearer strategic choices in improving its raw material sourcing. It has also strengthened relationships with its suppliers and improved its financial performance.

Meanwhile, corporates looking to curb their impact continue to find that efforts to develop nature positive business models are routinely hampered by the complexity of transforming sprawling supply chains, the difficulty of marrying expansion plans with environmental protection, and cost.

According to the World Economic Forum, more than half of global economic output - some $44tr a year - is moderately or heavily dependent on services that nature provides. Although, if you accept that it is nature that ultimately provides water, air, and soil, then fully 100 per cent of the global economy is dependent on natural resources to varying degrees.

• Unlimited access to BusinessGreen.com • Exclusive must-read daily Overnight Briefing • Expert monthly Editors Briefing

You are receiving this because you are an BG Intelligence member. Here are your other membership benefits:

Editor-in-chief, BusinessGreen

James Murray

Replacing fossil gas boilers with low and zero carbon alternatives remains a significant challenge, but ultimately it is one all businesses are going to have to take on if they are to deliver on their net zero promises. And as this whitepaper makes clear and recent developments underscore, the solutions are now available.

Our latest BusinessGreen Intelligence Whitepaper provides an overview of this fast-evolving trend, as well as invaluable guidance on how to develop an effective heat decarbonisation plan that can feed into an organisation’s overarching net zero goals.

However, challenges remain. Businesses looking to decarbonise their heating need to consider a range of technology options, develop a compelling business model, and then navigate the various financing, regulatory, and practical barriers green heat projects can face.

Thankfully, that is now changing as green heating technologies mature, businesses recognise the importance of tackling emissions from heating systems, and trail-blazing projects demonstrate the benefits of fully ending their reliance on fossil gas.

It is self-evident that corporate net zero targets cannot be met unless businesses work out how to decarbonise their heating systems. And yet for years this key plank of the net zero transition has been largely ignored as corporates focus on switching to renewable power, deploying electric vehicle fleets, and tackling emissions in their supply chains.

This surge in activity is also quietly extending to the business community, correcting a blindspot that has been allowed to persist for too long.

Exciting developments are belatedly underway in the world of green heating. Across Europe sales of heat pumps are soaring; investors are responding, with Octopus Energy and Legal and General’s £70m investment in ground source heat pump specialist Kensa Group just the latest example; and policymakers are deploying the targets, grant schemes, and tax breaks that can help tilt the market in favour of low carbon technologies. Flagship projects to drive down the cost of heat pumps, install district and geothermal heating systems, and pilot the use of hydrogen for heating are all advancing. Targets to end the sale of fossil gas boilers by the mid-2030s at the latest suddenly look feasible.

Introduction

Case study: Kering

But this fixation on climate action has started to evolve in recent years, thanks to a growing realisation around how important the natural world is to society, the economy, and, of course, those climate-focused efforts to slash global emissions, bolster climate resilience, and build a net zero economy. Climate action and biodiversity protection are not necessarily in conflict - they are often two sides of the same coin.

It is a crisis that demands a response, and over the past five years a growing number of governments and businesses have started to ask, ‘what would it take to not just halt biodiversity loss, but reverse it?’ Under the umbrella term ‘nature positive’, a still small group of businesses and policymakers have started to set targets to first strengthen nature protection efforts, and then ultimately deliver economies and business models that allow for an expansion of nature.

It remains to be seen whether such ambitious goals can be met, but all around the world projects are being pioneered that aim to marry nature protection and restoration with commercial success. Ultimately, the health of the global economy will depend on the success of these projects and the ability of businesses and governments to deliver economies that are not just net zero, but also nature positive.

To complicate matters further, nature is feeling the squeeze on all sides. As the UK’s Royal Society explains: “The main direct cause of biodiversity loss is land use change (primarily for large-scale food production) which drives an estimated 30 per cent of biodiversity decline globally. Second is overexploitation (overfishing, overhunting and overharvesting) for things like food, medicines and timber which drives around 20 per cent. Climate change is the third most significant direct driver of biodiversity loss, which together with pollution accounts for 14 per cent. Invasive alien species account for 11 per cent.”

And on top of that, climate scientists tell us it will be near impossible to limit temperature rises to the well below 2C goal set out in the Paris Agreement without halting and reversing nature loss. About half of the Earth’s carbon emissions are absorbed by nature every year and with more than half of global GDP dependent on nature, it is clear that tackling climate and nature emergencies will have to happen in tandem.

Although the precise term did not make it into the final Global Biodiversity Framework communique, the summit yielded widespread support for the idea of working towards a “nature positive world” by 2030, or one where biodiversity increases year-on-year, rather than goes into reverse. The commitment to “reverse” biodiversity loss tacitly endorses this concept, fuelling hopes more governments will pursue nature positive strategies.

The Cambridge Institute for Sustainability Leadership (CISL) defines a nature positive economy as “one in which businesses, governments and others take action at scale to minimise and remove the drivers and pressures fuelling the degradation of nature, to actively improve the state of nature itself and to boost nature’s contribution to society”.

Advocates of this nature positive goal argue that it heralds a watershed moment in the history of the sustainability movement, as it moves beyond conservation and seeks to actively reverse losses that have inflicted such damage on the natural world. It is an approach that aims not to constrain the economy, but rather protect it by putting it on a sustainable footing. “We need to fully rewire the economic and financial system, and we don’t have much time to do it,” explains Dr Nina Seega, director of sustainable finance at CISL. “Half of the world’s GDP is said to have medium or high dependency on ecosystem services but that’s an underestimate. You would struggle to find an activity that doesn’t draw in some way on biodiversity and nature, or have an impact on it.”

The risks of inaction are obvious. Ecosystems services include direct inputs for many businesses, such as food, water, and raw materials, but also less obvious benefits such as air and water filtration, cooling, flood and stormwater mitigation, and CO2 sequestration, many of which are “externalities” that are not accounted, or paid, for by businesses.

The most obvious impacts and dependencies are in the food and agribusiness sector, with agriculture using 70 per cent of the world’s fresh water and being responsible for almost a quarter of greenhouse gas emissions, as well as significant air and water pollution, soil depletion, destruction of habitats, and loss of biodiversity.

But the pharmaceuticals, cosmetics, and luxury goods sectors also have clear dependencies, while less visible examples of nature-exposed industries include semiconductors, where chipmakers require clean water to operate, and infrastructure, which can be severely affected by extreme weather events such as heatwaves and flooding. Utilities are also highly dependent on nature - nuclear power stations in France have had to temporarily shut down in recent years, for example, when the rivers they use to cool their reactors became too hot to provide that service.

As S&P argues, if businesses and financial institutions can gain the knowledge, capacity, data, and analytical skills required to understand, manage, and disclose the nature-related risks they face, they can then build a business case for investing in the ecosystem services they rely on. For example, it is likely far more cost effective and a lot less reputationally damaging for a firm to invest in a forest protection project delivering secure water supplies for a region, than it is to over abstract groundwater and then have to close their factory.

The technology’s green credentials have also been evidenced. Correctly balanced heat pumps can play a major part in helping to slashing CO2 emissions and they are also incredibly efficient, since they simply transfer and compress heat rather than generating it. The heat output from a heat pump is often three to four times the amount of electricity used. As such, heat pump’s relatively low running costs have become ever more competitive as the cost of fossil gas has soared.

“The Carbon Trust found that heat pumps have the potential to deliver CO2 savings of up to 70 per cent compared to conventional electric heating, and up to 65 per cent compared to an A-rated gas boiler,” says Johnson Controls’ Anderton. “The huge impact these new technologies can have both in terms of cost saving and in achieving sustainability goals is clear.”

Crucially, because they run on electricity the emissions savings offered by heat pumps are set to increase further as the electricity network becomes more reliant on renewables. “As the grid decarbonises further in coming decades, the carbon savings delivered by heat pumps are expected to increase further towards 90-100 per cent CO2 emissions reduction by 2050,” the Carbon Trust states.

Consequently, most models for exploring how the economy can achieve its net zero goals lean heavily on heat pumps. The Climate Change Committee estimates that 19 million heat pumps will need to be installed by 2050 to achieve net zero goals in the UK.

While the heat pump sector is currently focused on the domestic market, there is a growing school of thought that the technology is well suited to commercial premises, because unlike residential properties, offices, shops, and universities often have a considerable demand for cooling as well as heating. This is only projected to increase as temperatures continue to rise. Modern commercial heat pumps can work in reverse, taking heat out of a building as well as bringing heat in from outside.

“The electrification of heat pumps, driven by renewable sources, makes them a far superior option to outdated fossil fuel boilers in the generation of heat,” says Anderton. “They can now work at higher temperatures, meaning they are a great option for spaces like hotels, hospitals, and leisure centres where there is a high demand for hot water at peak times - removing the need to use a gas boiler.”

Moreover, heat pumps are very flexible in that they can be scaled from heating individual floors of office buildings to being big enough to run district heating networks. And, like air conditioners, they can integrate effectively with modern demand management services, offering businesses the chance to dynamically tweak power use to match peaks and troughs in generation without meaningfully impacting levels of comfort in the building.

Unfortunately, challenges remain, chief amongst them being the high upfront cost of heat pump technologies. The industry is adamant it can drive down costs to a level where they are comparable with gas boilers, but it is not there yet and most commercial heat pump installations require a price premium. That investment can serve to unlock emissions savings and reduced long-term running costs, and as such growing numbers of banks are offering attractive financing packages to support the switch to heat pumps. But financial considerations can still hamper many businesses’ green heating ambitions.

Why, then, isn’t everyone rushing to deploy heat pumps?

In addition, some heat pump projects can face technical challenges. Many buildings have been designed for gas heating, but heat pumps tend to have different space and power requirements. The most complex projects may also require radiators to be replaced and the building’s overall energy efficiency performance to be improved, adding further cost to the project. These challenges are further complicated by skills shortages across the fast-expanding sector.

However, the industry is increasingly confident heat pumps are feasible for the vast majority of buildings – a fact underscored by how the technology has become the default option in a growing number of European markets

Meanwhile, policymakers are working to overcome the financial barriers households and businesses face. The UK’s Boiler Upgrade Scheme is primarily aimed at the domestic market, offering households £5,000 to £6,000 off the price of an air or ground source heat pump, but businesses are also eligible to apply for the grants as long as they own their property. Similarly, the government’s wide-ranging Enhanced Capital Allowance tax break regime also covers some heat pumps, as well as solar thermal systems.

In addition, as part of its recent package of ‘Green Day’ announcements the UK government unveiled plans to shift green levies away from electricity bills and on to either gas bills or general taxation – a move which should further reduce running costs for electric heating systems. And it confirmed it is looking to create an overarching Clean Heat Market Mechanism, which would be designed to provide incentives that can accelerate the heat pump market so as to ensure new gas boilers are phased out by 2035 at the latest.

Similar policies are being adopted across the EU and the US, all of which aim to drive demand for heat pumps and help create the economies of scale that should allow the industry to push down the technology’s upfront costs.

The most significant schemes are the Taskforce for Nature-related Financial Disclosures (TNFD), which aims to replicate the success of the Taskforce for Climate-related Financial Disclosures (TCFD) by providing a standardised approach for corporates to report on nature-related risks and opportunities, and the Science Based Targets for Nature (SBTN) initiative, which similarly aims to mirror the Science Based Targets initiative and provide a standardised approach for setting credible targets for nature protection and recovery. Moreover, the International Sustainability Standards Board (ISSB), which recently released a climate standard, has announced plans to better incorporate nature and biodiversity into its reporting structure.

A group of 17 companies are trialling the SBTN approach and will submit their first targets this year. They include a raft of global brands and household names from a range of high impact sectors, including AB InBev, Alpro (part of Danone), Bel, Carrefour, Corbion, GSK, H&M Group, Hindustan Zinc Limited, Holcim Group, Kering, L’OCCITANE Group, LVMH, Nestlé, Neste Corporation, Suntory Holdings Limited, Tesco, and UPM.

However, despite this encouraging activity, it is still very early in the journey towards a nature positive future. The World Benchmarking Alliance said recently that while 50 per cent of companies in its Nature Benchmark have set targets to reduce emissions, only five per cent had carried out a science-based assessment looking at the impact of their operations and business model on nature and biodiversity.

But pressure on companies to get a grip of nature-related risks is increasing. Large investors are expected to call on companies in their portfolios to adopt the TNFD standards, just as they have done for the TCFD guidelines. The reputational risks associated with being linked to environmental damage are more pronounced than ever. And alongside the various voluntary approaches, governments are starting to strengthen their biodiversity and environmental regulations and policies as they attempt to deliver on the goals set through the Global Biodiversity Framework.

For example, in the UK, the Environment Act requires that all development projects in England must deliver a mandatory 10 per cent biodiversity net gain to be maintained for a period of at least 30 years. The concept requires developers to deliver measurable improvements for biodiversity by creating or enhancing habitats either on location or at an alternative site funded by the developer. Proposals must “leave biodiversity in a better state than before”.

To achieve biodiversity net gain, proposals must follow the ‘mitigation hierarchy’, which primarily aims to avoid harm, then, finally, compensate for any losses on-site, off-site or both. Planning approvals will depend on the ability of developers to demonstrate that they are providing real biodiversity net gain.

Moreover, emissions savings from CHP can be maximised further by switching from fossil gas to biogas, an approach that some organisations are taking to further reduce their carbon footprint.

However, the accelerating rollout of renewable energy technologies means the cost and carbon benefits associated with CHP units are not as big as they once were, according to Lowes. “The falling cost of renewable energy has really killed CHP,” he says. “The savings now are pretty negligible.”

The technology can still play a role for large buildings and district heat networks, especially in conjunction with biogas. But it is likely to face increased competition from commercial scale heat pumps that promise steeper emissions savings and potentially lower long-term running costs given soaring gas bills.

This policy progress remains patchy. Government ministers have also signalled their intention to water down some environmental rules post-Brexit, while the levels of environmental protection proffered in officially protected areas can be scandalously weak. The same challenges are repeated globally, as governments wrestle with often competing interests and maximise economic growth.

However, there is also ample evidence that ambitious and robust nature protection policies can work. Globally, there are now numerous rewilding projects that demonstrate if space is given back to nature, ecosystems can recover remarkably quickly. Meanwhile, the new Brazilian government of President Lula recently confirmed that rates of deforestation in the Amazon have fallen around 60 per cent in the last year. This near record slowdown is rooted in a combination of policy factors, including more robust policing by the government, coupled with better satellite-based detection technologies, banks’ willingness to deny credit to companies and landowners engaged in deforestation, and the EU’s new rules banning the import of products linked to deforestation. Biodiversity policies and investments can work.

All around the world the message is clear: businesses that continue to ignore their impact on nature could soon find themselves compelled to embrace a more responsible and proactive strategy.

District heating is one of the most promising and under-exploited ways to decarbonise heating, offering emissions reductions, lower costs, and reduced maintenance for consumers, along with improved air quality.

District heating

A growing number of developments and districts are being connected to heat networks whereby heat is generated at a central plant that typically makes use of CHP units or captured from an existing heat source, such as a waste to energy plant or factory. The approach maximises efficiency and captures energy that would otherwise go to waste, while emissions savings can be boosted further by switching to biogas or ultimately deploying a large-scale heat pump.

District heating is “in theory, the best friend of waste heat,” Lowes says. In Nottingham, for example, the district heating system captures heat from a waste-to-energy plant which generates power from burning waste. Energy that would otherwise have gone to waste is used to heat water, which is then pumped to surrounding shops, offices and residential buildings. Similarly, in London the Bunhill 2 Energy Centre is using waste heat from the London Underground network to provide heating and hot water to more than 1,350 homes, a school, and two leisure centres in Islington. Meanwhile, a heating network in Southampton makes use of the city’s geothermal resources to provide heat to local homes and businesses.

The technology is proven and effective, and in European countries such as Denmark district heating systems are widespread.

However, district heating is not available for everyone. It is easiest to build a heat network in new developments because significant amounts of infrastructure are needed, including pipework and a central energy centre. In contrast. retrofitting heat networks, particularly for private networks, is a significant technical challenge because it requires a lot of intervention and can prove expensive and disruptive. Planning can also be an issue because of the need to dig up roads and pavements to lay pipes. And once a district heating system is in place effective consumer protection policies are required, as buildings are essentially locked in to a monopoly heat provider.

For a district heating scheme to succeed, it needs a baseload offtaker, such as a leisure centre, hospital or commercial development that requires significant and predictable amounts of heat. In Birmingham, for example, the local authority created a network and connected its own buildings to it to guarantee demand for the energy.

There is a widespread view that, unlike in other countries, the UK government has failed to do enough to encourage heat networks. However, there have been a number of support schemes and a recently launched £288m Green Heat Network Fund aims to accelerate the rollout of heat networks incorporating a range of clean technologies including heat pumps, PV and geothermal energy. It has already awarded its first grants to projects in Hull and Peterborough and more are in the pipeline.

Where district heating networks are available, they offer an attractive and proven mechanism for businesses to slash emissions from heat, while potentially paving the way for full decarbonisation through the use of large-scale heat pumps or even geothermal energy.

Kering pioneers environmental profit and loss accounting

Crucially, these impacts are then converted into monetary values so as “to quantify the use of natural resources” and allow for direct comparison with the conventional financial P&L. Kering then uses the EP&L to guide its sustainability strategy, improve its processes and supply chain, and select the technologies and suppliers who deliver the best environmental performance.

The EP&L is applied through three stages: • Establishment of environmental impacts • Establishment of models for the group’s operations and supply chains • Support in decision-making

The role of efficient and low-carbon heating technologies continues to grow, but fossil fuels still meet over 60 per cent of heating energy demand

There is a lot more diversity in commercial space, so it is not as easy to come up with a standardised approach

85 per cent of the world's largest companies have a significant dependency on nature, indicating the critical importance of greater transparency for market participants on nature-related risks and opportunities

Unfortunately, challenges remain, chief amongst them being the high upfront cost of heat pump technologies.

Meanwhile, farming subsidy reforms promise to see landowners and managers rewarded for delivering improvements in ecosystem services, with new schemes linking payments to proven progress in enhancing biodiversity, undertaking tree-planting, and improving soil and water quality, among other measures. More broadly, the UK is one of a host of governments to commit to expanding officially protected areas on land and sea in pursuit of the 30x30 goal.

Not your copy? Become a BusinessGreen member here

• Access to Policy Briefings, Trend Reports and Case Studies • Annual BusinessGreen party invitation

The case for a nature positive business strategy

“Nature loss and climate change are intrinsically interlinked - a failure in one sphere will cascade into the other,” this year’s WEF report warns. “Without significant policy change or investment, the interplay between climate change impacts, biodiversity loss, food security and natural resource consumption will accelerate ecosystem collapse, threaten food supplies and livelihoods in climate-vulnerable economies, amplify the impacts of natural disasters, and limit further progress on climate mitigation.”

Becoming nature positive is further complicated by a lack of consensus on which definitions and metrics companies should use. But most observers are clear that businesses need to make a start irrespective of terminologies and targets still being defined. “It is important that organisations act now towards becoming nature positive in order to achieve a more resilient business model and support a more resilient economy,” says A4S. “Organisations should start work to reduce their negative impacts on nature (from pollution, ecosystem conversion and resource exploitation) and increase positive outcomes (nature restoration both within their direct operations and their value chain). They can then highlight their contribution to the shared goal of a nature positive economy by 2030.”

Traceability is key, meaning organisations with complex supply chains spanning various jurisdictions may struggle at first to find reliable metrics, data, and measurement frameworks. “Becoming nature positive is likely to require significant investment, strategic collaboration and partnerships, and to some degree, business model transformation,” A4S stresses.

Such an audit needs to extend beyond the confines of an organisation and into its supply chain, according to the Accounting for Sustainability (A4S) group. “To be truly nature positive, a business or financial institution needs to contribute more to restoring, regenerating, and enhancing nature than to harming it, and needs to apply this across its value chains and portfolios,” it adds.

The first step, says Seega, is for businesses to perform a strategic review of their operations to get a picture of their nature-based dependencies and impacts, which will help them understand where they need to focus their attention.

Leading businesses are already looking to respond by first undertaking such risk assessments, and then grafting planned and existing biodiversity schemes, such as re-wilding, regenerative agriculture, or nature-based climate resilience or offset projects, on to their net zero strategies.

It is easy to think that nature positive approaches are only relevant to agriculture, but “it is fundamental to the entire economy, from heavy industry to pharma”, she adds. “The onus is on all sectors to think about how they interact with their environment and where they are using natural resources without currently taking into account their impact. You need to understand your dependencies and once you have identified potential hotspots, you need to think about how to mitigate them. There are tools such as the WWF biodiversity risk filter that can help companies understand, assess, and respond to their biodiversity risks.”

Consequently, growing numbers of corporates are responding to these pressures by launching biodiversity projects and developing nature positive strategies. “Many companies are still getting to grips with how to tackle climate change, and saying, ‘let me deal with climate first and then I’ll look at nature’,” says Seega. “But there is a growing understanding that you have to look at both at the same time. Climate change is a big exacerbator of nature risk, while nature plays a big role in the solutions to many climate risks.”

Corporate nature positive strategies

Becoming nature positive is likely to require significant investment, strategic collaboration and partnerships, and to some degree, business model transformation

Where possible, nature positive goals should be supported by detailed individual and assured science-based targets, but adoption of such targets is likely to depend somewhat on company size and the nature of its key nature-related impacts and dependencies.

Again, defining nature-based solutions and natural capital assets can prove challenging and some environmental campaigners question investment models that they accuse of ‘monetising nature’. But advocates of the expanding investment category argue that it can combine the protection and enhancement of nature with projects that deliver attractive long term returns for investors. Meanwhile, advances in “nature tech” are allowing investors to better “assess and calculate the value of natural capital assets” and demonstrate they are delivering promised improvements, according to Jo Hughes, senior ESG advisor for nature at engineering consultancy Aecom. “You have to allocate financial value to drive action,” she adds.

Alongside Mirova and Lombard Odier, the firm is one of the three founding partners of the Natural Capital Investment Alliance, which was established by the then Prince Charles with a goal of mobilising $10bn towards natural capital themes and the restoration and maintenance of highly biodiverse natural ecosystems worldwide.

“Investors are looking for opportunities in nature-based solutions such as blue natural capital and blue carbon, (the natural capital and carbon found in coastal and marine environments – in ecosystems such as coral reefs, mangroves and seagrass beds), soil protection and nature and carbon markets,” says Dr Helen Crowley, managing director, advisory at Climate Asset Management. “They are looking at real assets to see what can be done differently so that companies are more regenerative and restorative, rather than extractive.”

Growing numbers of investors want a piece of this action. Climate Asset Management, for example, is a joint venture between HSBC and Pollination “with the ambition to grow the world’s largest asset management company dedicated to natural capital”.

Execute such strategies effectively, and it is not just the planet that will benefit. WEF predicts that “a positive environmental transformation effort can generate up to $10.1tr a year in business value and create 395 million jobs by 2030”.

Opportunities await

Becoming nature positive is likely to require significant investment, strategic collaboration and partnerships, and to some degree, business model transformation

Riverford and its suppliers then use the resulting data to form biodiversity action plans, which can include a wide range of initiatives designed to boost nature, including turning unproductive areas of land back to woodland, and improving riparian buffers to help with flood risks and soil wash.

Riverford is also working with 30 of its suppliers to help them complete the Soil Association Exchange assessment, which brings together multiple food retailers, producers, suppliers, and investors to “put farmers in the driving seat, providing them with the measurement tools, the know-how, and access to the relevant financial opportunities to be rewarded for their positive contributions to the environment and nature”.

As an organic producer, Riverford is keen to promote as much biodiversity on its land as possible, using measures such as agroforestry, beetle banks and planting multiple crops in the same field. “If you don’t have that level of biodiversity, you won’t get the predators that we need to control pests,” he says, adding that farmers “need to look at species richness - the number of species on your land - and species abundance, how many of each species there are. That gives you an idea of what nature looks like on your land.”

“Nature positive farming is the way we will build resilience for the long term, allowing the business to remain profitable,” he said. “If we let ecosystems degrade, our business will suffer.

Such investments are particularly apparent in the agricultural sector, which is both one of the biggest drivers of nature destruction and one of the industries most exposed to nature-related risks. As such, Zac Goodall, head of sustainability at organic vegetable box company Riverford, argues there is a compelling case for more farming businesses to embrace regenerative and nature positive practices.

Smart farming

the world’s first and largest climate-positive direct air capture and storage plant

“What is driving this is advances in life sciences, combined with the ability to digitally manage, track and certify information,” he says.

Bayer is combining short stature hybrids with digital tools, which can further help farmers to optimise production and minimise impacts on nature, Terhorst says. “Digital precision allows them to plant, manage and document what is helping on the field and the outcomes of the growing cycle,” he explains, adding that the resulting data can provide a basis for sustainable farming certifications or carbon credits.

“Shorter crops allow farmers to apply fertilizer and crop protection in a more targeted way, only where they are needed,” he explains. “Shorter crops also need less water and are more resistant to drought.” Moreover, the corn can be planted more densely, allowing 20-30 per cent more plants per hectare and increased yields without expanding land use.

According to Frank Terhorst, head of strategy and sustainability for Bayer’s crop science division, the breakthrough provides a number of benefits, including better stability, resilience in strong winds and improved access for farmers.

Corn is the second most widely grown crop in the world, and like many staples it is facing escalating climate and nature-related threats. In response to these risks, Bayer Crop Science has developed short stature corn hybrids, which grow 30-40 per cent shorter than conventional corn, reaching a maximum height of seven feet.

Bayer debuts Smart Corn System

Case study

Robert Spencer, Aecom’s global ESG advisory services lead, argues that access to richer and more up to date environmental data can also help “bring nature into the boardroom”. “We now have the metrics and the ways to measure nature that we didn’t have until recently,” he says. “We can account for nature effectively and bring it into business and strategic analysis in a way that enables non-specialists to get their head around their nature risks and dependencies and how that affects their business.”

There are early signs that such infrastructure is starting to take shape. The Brazilian government credited the recent slowdown in Amazon deforestation in part on the ability of enforcement agencies to rapidly access satellite data showing where illegal deforestation was taking place. Corporates and regulators are similarly taking advantage of such tracking and monitoring technologies to try and crackdown on illegal deforestation in supply chains and verify carbon credits.

He adds that to deliver economy-wide nature protection there is an urgent need to “create an infrastructure that enables the sharing of data in a more cost effective and transparent way”.

“There cannot be any meaningful progress on becoming a nature positive future if you cannot measure your starting point and progress,” says Davide Ceper, CEO of Varda, an agtech start-up whose Global Field ID system aims to provide a ‘QR code for fields’, allowing land plots to be identified “in a common way across digital farming tools, agricultural service providers and the food value chain, [while] making the flow of information among industry participants easier and cheaper”.

The most effective nature positive initiatives tend to combine traditional practices with advanced digital technologies, which allow corporates, investors, regulators, and other stakeholders to see what is going on in the field.

Digital Transparency, carbon offsets, and nature-based infrastructure

We can account for nature effectively and bring it into business and strategic analysis in a way that enables non-specialists to get their head around their nature risks and dependencies and how that affects their business

Such technologies are part of an explosion in data and transparency that advocates of the voluntary carbon market are confident will enable a surge in investment in a sector that is already enjoying increased demand as corporates look to deliver on their net zero emissions targets. The growing maturity of the carbon offset market and the increasing rigour brought to monitoring and verifying emissions savings from nature-based projects is allowing a wider array of nature protection and recovery projects to access funding by selling carbon credits. By the same token, a number of governments are trialling biodiversity offset credits, which see developers pay directly for nature restoration projects in return for planning approval for new projects.

Such data can help both minimise the impact of supply chains on nature and shape the development of nature positive projects closer to home. Aecom is one of many companies looking at how nature-based solutions can be harnessed in infrastructure projects to address challenges such as flooding, water pollution, air quality, coastal defences, and urban overheating.

Professor Anusha Shah, senior vice-president (and incoming president) of the Institution of Civil Engineers and senior director for resilient cities at Arcadis, explains how dense, paved, urban environments with limited water storage capacity are facing increased risk of overflowing sewage systems and flooding due to runoff and high river levels, as climate impacts intensify.

One solution is “sponge cities”, where the infrastructure is designed to soak up water for reuse, using natural features such as rivers, lakes, and trees as well as permeable pavements and green roofs. As well as helping to reduce flood risks, such nature-based innovations can also help reduce the impact of drought.

Nature-based solutions will become increasingly important both to tackle climate change and to reverse the damage we have done to biodiversity and ecosystems. “Nature does not need us, but we need nature,” says Shah. “We need to use it as an asset, quantify its value and give it the same standing as financial value.”

There’s no reason why TNFD shouldn’t be part of the mainstream environmental agenda within five years

Regulation and reporting

Corporate nature positive strategies

Case study: Smart corn

Opportunities await

Smart farming