This urgency is at the heart of COP16 discussions in Colombia, where global leaders highlight the need for accountability in biodiversity initiatives, including nature-based solutions and biodiversity credits. In alignment with these goals, Corporate Sustainability Reporting Directive (CSRD) compliance establishes a clear framework for biodiversity and ecosystem reporting that makes corporate sustainability efforts measurable and impactful. As the global focus sharpens on biodiversity and transparency, companies have a unique opportunity to foster resilience and actively contribute to ecosystem protection for a more sustainable future.
Against this backdrop, the European Sustainability Reporting Standard E4 (ESRS E4), under the CSRD, plays a key role in guiding companies to evaluate, manage, and transparently report their impacts on biodiversity and ecosystems.
ESRS E4 provides a structured approach for companies to assess and disclose their biodiversity impacts and dependencies. This standard is essential, given the growing recognition of how vital ecosystem services are to economies, public health, and human well-being. It underscores the need for businesses to assess and disclose their reliance on natural resources.
ESRS E4 aligns with global and EU environmental strategies, including the EU Biodiversity Strategy for 2030 and the United Nations Post-2020 Global Biodiversity Framework. It emphasises the importance of integrating biodiversity considerations into corporate strategies and reporting practices, reflecting wider sustainability goals
Beyond compliance, ESRS E4 empowers businesses to turn biodiversity-related risks into opportunities, driving long-term resilience and competitiveness. Integrating nature into corporate strategies is no longer optional—it’s key to future-proofing business in our rapidly changing world.
Determining whether biodiversity reporting is necessary under ESRS E4 involves conducting a double materiality assessment. This process looks at two key aspects: impact materiality—how a company’s operations affect biodiversity and ecosystems—and financial materiality—how biodiversity loss could affect the company’s financial performance and long-term viability.
By assessing both aspects, companies can prioritise which sustainability topics should be included in their reports. This involves evaluating the significance of their impacts on biodiversity, as well as the dependencies and risks that ecosystems pose to their operations, supply chain, and overall sustainability strategy. These materiality assessments are crucial for identifying the environmental, social, and governance (ESG) factors that are significant enough to influence stakeholder decisions and shape the company’s future success.
According to the World Economic Forum (WEF) in its report Nature Risk Rising: Why the Crisis Engulfing Nature Matters for Business and Economy, there are three main sectors highly dependent on nature, generating close to $8 trillion of gross value added (GVA) globally. These are construction ($4 trillion), agriculture ($2.5 trillion), and food and beverages ($1.4 trillion). However, even industries with less direct dependency on nature face risks through their supply chains, which are often deeply intertwined with natural resources. The report highlights the financial and operational risks of nature loss, including disruptions to supply chains, real estate, and business continuity. These material risks, emphasised by the WEF, further support the need for detailed reporting and management under ESRS E4.
The WEF also argues that nature-related risks are financially significant. As sustainability becomes more integral to financial decision-making, businesses may face asset repricing, increased insurance premiums, and shifts in investment if they fail to manage these risks effectively.
The CSRD and its accompanying ESRS, particularly ESRS E4 on biodiversity and ecosystems, mark a significant shift in corporate sustainability reporting within the EU. This directive aims to provide stakeholders with transparent, reliable, and comparable information on corporate sustainability, enabling informed decisions and fostering a more resilient economy. With increasing environmental scrutiny, businesses that fail to manage their biodiversity impacts face legal, reputational, and financial risks. Aligning with ESRS E4 can demonstrate a company's commitment to sustainability, enhancing its appeal to investors and customers who value environmental responsibility.
As a global leader in biodiversity solutions and an advisor on the CSRD, South Pole has been closely monitoring developments related to the CSRD and the ESRS regulations. We understand that navigating the complex landscape of biodiversity and ecosystem reporting can be challenging. Our team of experts is here to help guide your company through these complexities, ensuring you meet regulatory expectations while enhancing your sustainability credentials.
Contact us today to learn how we can help your business integrate biodiversity into your sustainability strategy and ensure compliance.
