Biodiversity and Land Use: The New Frontier of ESG
For years, the "E" in ESG (Environmental, Social, and Governance) was dominated by a single metric: Carbon. However, as the global economy acknowledges that over half of its GDP is moderately or highly dependent on nature, the focus is shifting. Biodiversity and Land Use have emerged as critical material risks that investors and regulators can no longer ignore.
1. The Interconnectedness of Biodiversity and Business
Biodiversity isn't just about wildlife conservation; it is about the ecosystem services that underpin entire industries. From agriculture and pharmaceuticals to construction and energy, companies rely on natural processes that are now under threat.
Key Ecosystem Services:
Provisioning: Raw materials like timber, fresh water, and medicinal plants.
Regulating: Climate regulation, pollination of crops, and natural water purification.
Supporting: Soil formation and nutrient cycling necessary for food security.
When land use changes—such as converting forests into plantations—these services degrade. This creates physical risks (e.g., crop failure due to lack of pollinators) and systemic risks (e.g., supply chain collapse).
2. Land Use: The Leading Driver of Loss
Land-use change is the primary driver of biodiversity decline. In an ESG context, a company's "Land Footprint" is now scrutinized alongside its "Carbon Footprint."
Material ESG Issues in Land Use:
Deforestation: Companies sourcing soy, palm oil, or beef must now prove their supply chains are "deforestation-free" to avoid regulatory fines and reputational damage.
Habitat Fragmentation: Infrastructure and mining projects that cut through wildlife corridors can lead to local extinctions and legal challenges from conservation groups.
Soil Degradation: Industrial farming practices that deplete soil health represent a long-term threat to asset value and productivity.
3. The Regulatory and Reporting Shift
Global frameworks are evolving to bring biodiversity reporting to the same level of rigor as climate reporting.
| Framework / Regulation | Primary Focus |
| TNFD | Helps organizations report and act on nature-related financial risks. |
| CSRD (ESRS E4) | European standards requiring disclosure on how business models affect ecosystems. |
| GRI 101 | Updated standards for transparent reporting on biodiversity impacts. |
| EU Taxonomy | Criteria for activities to be considered "sustainable" regarding ecosystem protection. |
4. Why Investors Care: The Financial Perspective
Investors are no longer viewing biodiversity as a niche concern. It is now tied to financial materiality:
Transition Risks: New laws (like the EU Deforestation Regulation) can lead to stranded assets or restricted market access for non-compliant companies.
Reputational Risks: High-profile controversies can trigger divestment and consumer boycotts.
Opportunities: The rise of Nature-Positive investments and biodiversity credits offers new avenues for capital growth in restoration and sustainable land management.
Key Insight: Without biodiversity, achieving "Net Zero" is impossible. Nature-based solutions are estimated to provide over a third of the climate mitigation needed by 2030.
5. Strategic Steps for Companies
To lead in the "Nature-Positive" era, companies should consider the following actions:
Map Dependencies: Identify where the business relies on nature (e.g., water sources, pollination).
Assess Impacts: Quantify land-use impact across the entire value chain.
Adopt "No Net Loss" Goals: Aim for a "Net Positive Impact" by restoring more habitat than is disturbed.
Supply Chain Transparency: Move beyond primary suppliers to ensure land-use standards are met at the source.
The integration of biodiversity and land use into ESG frameworks marks a transition from "carbon-centric" to "nature-centric" thinking. As planetary boundaries are pushed to their limits, the ability of a company to manage its relationship with the land will determine its long-term resilience. Organizations that proactively address biodiversity loss will not only mitigate significant financial and regulatory risks but will also be better positioned to capitalize on the emerging nature-positive economy.
The Interconnectedness of Biodiversity and Business
For decades, biodiversity was viewed through the lens of philanthropy or corporate social responsibility (CSR). Today, it is recognized as a fundamental economic pillar. With over $44 trillion—more than half of global GDP—moderately or highly dependent on nature, the relationship between business and the biological world is no longer just ethical; it is material.
1. The Circular Relationship: Impact and Dependency
The connection between business and biodiversity is "double-material." Companies are not just actors that impact nature; they are entities that depend on it for survival.
Dependencies: Nature as a Provider
Businesses rely on ecosystem services, the benefits provided by healthy environments.
Provisioning: Direct inputs like timber, fiber, fresh water, and genetic materials for pharmaceuticals.
Regulating: Protection from floods, natural water purification, and pollination (on which roughly 75% of global food crops depend).
Resilience: Genetic diversity acts as an insurance policy against pests and diseases that could wipe out monoculture supply chains.
Impacts: Business as a Driver
Conversely, business operations often drive the primary causes of biodiversity loss:
Land-use change (the #1 driver of loss).
Pollution (toxic runoff, plastics, and nitrogen).
Overexploitation of resources (overfishing or over-harvesting).
Climate Change (driven by emissions but exacerbated by the loss of natural carbon sinks like forests).
2. Industry-Specific Interconnectedness
The level of exposure to biodiversity risk varies significantly across sectors. The following table highlights how different industries interface with nature.
Table: Sectoral Dependencies and Biodiversity Impacts
| Sector | Dependency on Nature | Primary Impact Driver | Key Material Risk |
| Agriculture & Food | Pollination, soil fertility, water regulation. | Land-use change (deforestation), nutrient runoff. | Supply chain collapse; volatile raw material prices. |
| Pharmaceuticals | Genetic diversity for R&D and drug discovery. | Over-harvesting of rare plant species. | Loss of "natural library" for future medical breakthroughs. |
| Energy & Utilities | Cooling water, biomass, natural barriers for infrastructure. | Habitat fragmentation; thermal water pollution. | Regulatory fines; loss of social license to operate. |
| Consumer Goods | Raw materials (cotton, rubber, palm oil). | Supply chain deforestation; waste/plastic pollution. | Reputational damage; consumer boycotts. |
| Finance | Resilience of underlying assets in a portfolio. | Indirect impact through lending and investment. | Stranded assets; systemic financial instability. |
3. The Shift from Risk to Opportunity
As the global community moves toward a "Nature-Positive" economy, the interconnectedness of business and biodiversity is evolving into a competitive advantage for early adopters.
Efficiency through Nature: Using nature-based solutions (like restoring wetlands instead of building concrete dikes) can often reduce capital expenditures (CAPEX).
New Markets: The emergence of biodiversity credits, green bonds, and certified "deforestation-free" products allows companies to tap into a growing segment of conscious consumers and investors.
Resilience: Companies that restore the ecosystems they depend on (e.g., a beverage company protecting its watershed) ensure their long-term operational viability.
4. Beyond "Carbon Tunnel Vision"
The business world is moving beyond "carbon tunnel vision"—the idea that climate change is the only environmental metric that matters. Biodiversity and climate are two sides of the same coin; you cannot reach Net Zero without a healthy biosphere.
The interconnectedness between biodiversity and business is now a strategic imperative. For companies, the path forward involves moving from merely "doing less harm" to "actively restoring" the natural systems that make commerce possible. Those that fail to recognize their dependence on nature risk obsolescence, while those that embrace it will lead the next wave of sustainable economic growth.
ESG – Land Use: The Leading Driver of Loss
While carbon emissions often dominate the "Environmental" pillar of ESG, land use has quietly become the most urgent threat to global biodiversity. According to major reporting frameworks like the TNFD (Taskforce on Nature-related Financial Disclosures), land-use change—primarily for agriculture, mining, and infrastructure—is the number one driver of nature loss worldwide.
For businesses and investors, land use is no longer just a site-management issue; it is a material financial risk that can lead to stranded assets, regulatory penalties, and supply chain collapse.
1. Why Land Use is the "New Coal"
In the ESG landscape, land use is being treated with the same level of scrutiny once reserved for coal. Just as carbon-intensive assets face devaluation, companies with "land-heavy" footprints are facing a reckoning.
Habitat Fragmentation: When large natural areas are broken up by roads or industrial sites, species lose the ability to roam, breed, and survive, leading to "biological deserts."
Ecosystem Service Collapse: Healthy land provides "free" services like water filtration and crop pollination. Degrading that land forces companies to pay for artificial replacements, increasing operational costs.
The Carbon Link: Deforestation and land conversion account for approximately 22% of global emissions. You cannot reach "Net Zero" without addressing how land is used.
2. Material Risks Across the Value Chain
The impact of land use varies by sector, but the financial implications are becoming standardized through ESG ratings.
Table: Land Use Impacts and ESG Materiality
| Driver of Loss | Primary Industry | ESG Material Impact | Financial Risk Type |
| Deforestation | Agriculture, Paper, Mining | Loss of carbon sinks; violation of EU Deforestation Regulation (EUDR). | Regulatory & Reputational |
| Soil Degradation | Industrial Farming | Reduced crop yields; loss of arable land value. | Physical & Operational |
| Water Diversion | Utilities, Textiles | Localized water scarcity; conflict with local communities. | Social (License to Operate) |
| Urban Sprawl | Real Estate, Construction | Destruction of "Green Belts"; loss of flood protection. | Asset Vulnerability |
| Conversion of Peatlands | Energy, Palm Oil | Massive methane/CO2 release; permanent habitat loss. | Transition (Policy Risk) |
3. The Regulatory Pressure Cooker
Regulators are moving away from voluntary disclosures toward mandatory, location-specific reporting.
EU Deforestation Regulation (EUDR): Requires companies to provide exact geo-coordinates to prove products (like coffee, soy, and rubber) did not come from deforested land.
CSRD (ESRS E4): The European Sustainability Reporting Standards now mandate that large companies disclose their "land-use footprint" in hectares and identify high-risk geographic locations.
TNFD LEAP Approach: A new voluntary standard that helps businesses Locate their interface with nature, Evaluate dependencies, Assess risks, and Prepare to act.
4. Strategic Implications for Investors
For the financial sector, land-use risk is becoming a "litmus test" for long-term resilience. Investors are increasingly using Satellite Imagery and Geospatial AI to verify corporate claims. A company that claims to be "sustainable" while operating in a biodiversity hotspot without a mitigation plan is now flagged for "Nature-washing."
Did you know? Some estimates suggest that food and agriculture firms could lose up to 26% of their value by 2030 if they fail to transition to sustainable land-use models.
Land use is the frontline of the biodiversity crisis. In an ESG context, it represents the physical foundation upon which all other environmental goals are built. As planetary boundaries for "Land-System Change" are crossed, the "business as usual" approach of land exploitation is becoming a liability.
Companies that prioritize Land Stewardship—through regenerative agriculture, reforestation, and circular land use—will not only protect the ecosystems they depend on but will also secure their standing in a global economy that is rapidly putting a price on nature.
ESG – The Regulatory and Reporting Shift
For a long time, biodiversity and land-use reporting were voluntary, qualitative, and often relegated to the "fine print" of sustainability reports. However, 2025 marks a definitive pivot. We have moved from a "wait and see" approach to a "comply or pay" environment.
Driven by global agreements like the Kunming-Montreal Global Biodiversity Framework, new regulations are treating nature-related data with the same financial rigor as balance sheets. For companies, this means moving beyond simple carbon counting to mapping every hectare of land touched by their supply chains.
1. The "Big Three" of Nature Disclosure
The current regulatory landscape is anchored by three major pillars that work in tandem to create a global baseline for nature reporting.
I. CSRD & ESRS E4 (The Mandatory Hammer)
The Corporate Sustainability Reporting Directive (CSRD) is now live for thousands of companies in the EU. Its specific standard for biodiversity, ESRS E4, requires "Double Materiality."
Impact Materiality: How your business harms or helps ecosystems.
Financial Materiality: How the collapse of those ecosystems will hurt your bottom line.
II. TNFD (The Strategic Lens)
The Taskforce on Nature-related Financial Disclosures (TNFD) provides the "how-to" guide. While technically voluntary, it is being rapidly adopted as the gold standard for identifying nature-related risks. Its LEAP approach (Locate, Evaluate, Assess, Prepare) is now the industry-standard methodology for meeting mandatory requirements in other frameworks.
III. EUDR (The Traceability Enforcer)
As of December 30, 2025, the EU Deforestation Regulation (EUDR) officially applies to large operators. This is not just a reporting standard; it is a market-access requirement. If you cannot prove—with precise geolocation data—that your coffee, soy, rubber, or timber did not cause deforestation after 2020, you cannot sell it in the EU.
2. Global Reporting Frameworks: A Comparison
The following table summarizes the key instruments driving the reporting shift in 2025.
Table: Key Biodiversity & Land Use Frameworks
| Framework / Law | Status (2025) | Scope | Key Reporting Requirement |
| CSRD (ESRS E4) | Mandatory | Large EU companies & non-EU firms with major EU turnover. | Double materiality; disclosure of sites in biodiversity-sensitive areas. |
| EUDR | Mandatory | Importers/traders of cattle, cocoa, coffee, oil palm, rubber, soy, and wood. | Geolocation coordinates of land plots; "Deforestation-free" verification. |
| TNFD | Voluntary / Market Standard | Global (600+ organizations committed). | Reporting on nature-related dependencies, impacts, risks, and opportunities. |
| GRI 101 (2024) | Effective 2026 | Global sustainability reporting (universal standard). | Location-specific reporting; drivers of biodiversity loss (pollution, land use). |
| ISSB (IFRS S1/S2) | Expanding | Global capital markets. | Currently climate-focused, but launching nature-related standards in 2025/26. |
3. From "Global" to "Local": The Geospatial Revolution
The most significant change in reporting is the shift from Global Averages to Local Truths.
Old Way: "We sourced 500 tons of sustainable soy."
New Way: "This specific 20-hectare plot at [Latitude, Longitude] produced this soy, and satellite imagery confirms no forest was cleared there since 2020."
This shift requires companies to invest in Geospatial AI and blockchain-enabled supply chain tracking. Regulatory compliance is no longer a paperwork exercise; it is a data-science challenge.
4. The Cost of Inaction
The reporting shift is closing the "transparency gap." In 2025, a lack of data is interpreted by the market as a presence of risk. Companies that fail to adapt to these rigorous standards face three primary threats:
Legal Fines: Up to 4% of total annual EU turnover for EUDR non-compliance.
Higher Cost of Capital: Banks are increasingly linking interest rates to biodiversity performance.
Market Exclusion: Being "blacklisted" from the EU or other major markets due to untraceable supply chains.
The regulatory shift has turned biodiversity from a "green" initiative into a core fiduciary duty. The era of voluntary, vague environmental claims is over; the era of radical transparency has begun.
ESG – Strategic Steps for Companies: Navigating the Nature-Positive Transition
The shift towards integrating nature and biodiversity into ESG strategies is no longer optional; it's a strategic imperative. As regulations tighten, investor scrutiny intensifies, and physical risks from ecosystem degradation mount, companies must proactively redefine their relationship with the natural world. This means moving beyond simply "doing less harm" to actively pursuing "Nature-Positive" outcomes.
1. Understand Your Nature Footprint: The LEAP Approach
The foundational step for any company is to understand where and how it interacts with nature. The TNFD's LEAP approach (Locate, Evaluate, Assess, Prepare) offers a robust framework.
LEAP in Action:
Locate: Identify your interfaces with nature. Where do your operations, supply chains, and financing activities physically touch ecosystems? This requires detailed geospatial mapping.
Evaluate: Understand your dependencies on nature (e.g., clean water, fertile soil, pollinators) and your impacts on nature (e.g., deforestation, pollution, habitat degradation).
Assess: Quantify the material risks and opportunities arising from these dependencies and impacts. This includes physical, transition, and systemic risks.
Prepare: Develop a strategy to address these risks, set targets, and report on progress.
2. Key Strategic Steps for Companies (2025 Onwards)
To effectively navigate the nature-positive transition, companies should focus on the following actionable steps.
Table: Strategic Steps for Nature-Positive Companies
| Strategic Step | Description | Key Actions & Tools | ESG Pillar Addressed |
| 1. Map Your Value Chain | Understand every link from raw material extraction to disposal. | Geospatial analysis; supply chain mapping tools; traceability tech (blockchain). | E (Land Use, Biodiversity) |
| 2. Conduct Double Materiality | Assess both your impacts on nature and nature's impacts on your business. | ESRS E4 guidelines; stakeholder consultations; risk matrices. | E, S, G |
| 3. Set Ambitious, Measurable Targets | Move beyond vague commitments to science-based, nature-positive goals. | SBTs for Nature (under development); "No Net Loss" or "Net Positive Gain" goals. | E |
| 4. Implement Nature-Based Solutions (NBS) | Integrate natural processes into your operations and infrastructure. | Reforestation; wetland restoration; regenerative agriculture practices. | E (Climate, Biodiversity) |
| 5. Enhance Supply Chain Traceability | Pinpoint the origin of high-risk commodities (e.g., palm oil, soy, timber). | Satellite monitoring; GPS-enabled data; third-party verification (e.g., FSC). | E, S |
| 6. Engage Stakeholders & Local Communities | Build trust and identify risks/opportunities with affected parties. | Free, Prior, and Informed Consent (FPIC); community development programs. | S (Human Rights) |
| 7. Integrate into Financial Reporting | Elevate nature-related disclosures to board-level and financial reports. | Align with TNFD recommendations; embed in annual financial statements. | G (Governance) |
| 8. Invest in Innovation & R&D | Develop new products/processes that are inherently nature-positive. | Bio-inspired design; circular economy principles; sustainable alternatives. | E |
3. Beyond Compliance: Seizing the Opportunity
While compliance with new regulations like EUDR and CSRD is critical, the true competitive advantage lies in seizing the opportunity that the nature-positive transition presents.
De-risking Supply Chains: Diversifying sourcing and adopting regenerative practices can build resilience against climate shocks and resource scarcity.
Innovation & New Markets: Developing nature-positive products and services can tap into a growing market of conscious consumers and investors.
Brand Reputation & Talent Attraction: Companies leading on nature stewardship will enhance their brand image and attract top talent committed to purpose-driven work.
Conclusion: A Regenerative Future
The strategic steps outlined above represent a paradigm shift for corporate strategy. They require integrated thinking that sees environmental health not as an externality, but as intrinsic to long-term value creation. By embedding biodiversity and land-use considerations across governance, operations, and finance, companies can transform from contributors to nature's decline into stewards of a regenerative future. This proactive approach will be the hallmark of resilient and successful enterprises in the coming decades.
The Nature-Positive Pivot: Securing Resilience in a Finite World
The integration of biodiversity and land use into the ESG agenda marks the end of "carbon tunnel vision" and the beginning of a more holistic approach to corporate sustainability. As we have explored, the relationship between nature and business is one of profound interdependence; the $44 trillion of economic value currently at risk is not a theoretical figure, but a reflection of our reliance on stable ecosystems.
Final Summary of the Strategic Shift
| From: Old Paradigm | To: New ESG Reality |
| Nature as an Externality: Environmental costs were treated as "someone else's problem." | Nature as an Asset: Biodiversity is recognized as critical natural capital on the balance sheet. |
| Carbon-Only Focus: Reducing emissions was the sole environmental priority. | Holistic Stewardship: Protecting land and biodiversity is seen as essential to reaching Net Zero. |
| Voluntary Reporting: General, qualitative descriptions of environmental efforts. | Mandatory Transparency: Precise, geospatial data and "Double Materiality" reporting. |
| Risk Mitigation: Focus on "doing less harm" to avoid fines. | Value Creation: Investing in "Nature-Positive" models to build long-term resilience. |
The Path Forward
The regulatory and reporting shift—led by frameworks like the TNFD and CSRD—has eliminated the option of corporate silence on nature. For companies, the strategic steps are clear: they must move from broad commitments to granular, location-specific action. This requires a fundamental transformation of supply chains, moving away from extractive land-use models toward regenerative practices that restore the very resources they depend on.
Ultimately, the companies that thrive in this new era will be those that recognize that business cannot succeed in a failing ecosystem. By placing biodiversity at the heart of governance and strategy, organizations do more than just manage risk; they secure their place in a future where economic growth is decoupled from environmental destruction and re-coupled with natural restoration.