Working Paper for Sub-Group 1 on Business Applications and Targets

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Working Paper for Sub-Group 1 on Business Applications and Targets

6 September 2019

Aligning Biodiversity Measures for Business project

DRAFT FOR DISCUSSION

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1. Introduction

This working paper is based on the output of the “Biodiversity Accounting Approaches for Business”

workshop held in Brussels on 26-27 March 2019. It was prepared by the chair of SG1 as a draft for discussion on:

• the typology of business applications in the field of corporate biodiversity strategies and actions, and the link with biodiversity measurement approaches or tools currently in use globally

• the range of relevant biodiversity targets for businesses and Financial Institutions (FIs).

The draft working paper will be circulated to all SG1 participants approximately one week before the initial webinar, which will be held on September 6, 2019. It is circulated as a draft for discussion with all SG1 members to be elaborated into a SG1 position paper as input for the workshop which will be held in Brazil on October 2019 and subsequent discussions.

2. Objectives and outputs of the sub-group

The following objectives were defined on the basis of the findings of the Technical Workshop on 26 and 27 March 2019 in Brussels:

Objectives Outputs

To agree a typology of business applications and targets relevant for selecting an appropriate biodiversity measurement approach

Agreed typology of business applications and targets as a basis to enable companies to navigate through various measurement approaches and understand how they might be of benefit

To map measurement approaches to the business applications and targets

Matrix indicating which business applications are supported by which tools (based on input from tool developers)

To develop a first outline of a navigator/ decision tree supporting users to select the right tools, i.e. those that fit best to their specific needs

First outline of a decision tree.

Short section in this paper outlining which measurement approaches could be used to address which business application and targets with a decision tree, illustrative case studies and key definitions (simple, business focused communication material).

This work will be linked and aligned with the Natural Capital Protocol supplementary guidance on biodiversity.

To create a convincing narrative on the business case for application of different biodiversity measurement approaches

Short narrative, illustrated with simple but convincing examples

To identify common ground principles

List of common ground principles related to the use of the concepts ‘business application’, ‘and targets in biodiversity measurement approaches for business’

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To agree a common vocabulary of relevant terms

Glossary of terms and definitions, aligned with terms and definitions defined in other sub-groups

Do we all agree with the objectives and envisaged outputs?

The first webinar for this sub-group (6 September 2019) will focus on the typology of business applications and biodiversity targets. Participants will be invited to read this paper and the

consolidated matrix in Annex 2 describing how the different business applications are covered by the biodiversity measurement approaches.

The second webinar at the end September 2019 will then focus on the decision tree. The discussion on the decision tree will require additional work, such as the completion of Table 3 (see further in this paper), for which we need the support of the tool developers.

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3. Business applications and targets in the field of corporate biodiversity action

Business applications (BA)

The concept of ‘business applications’ in a natural capital context is introduced in the Natural Capital Protocol (2016). It is defined as “the intended use of the results of your natural capital assessment, to help inform decision making”. The Protocol¹ presents a list of possible business applications with examples of the types of strategic or operational decisions that could be informed. These applications are neither mutually exclusive nor exhaustive but should provide an idea of the potential scope of applications. The following applications are mentioned:

• Assessing risks and opportunities

• Comparing options

• Assessing impacts on stakeholders

• Estimating total value and/or net impact

• Communicating internally or externally

Also, in the field of corporate biodiversity action, several types of business applications (BA) can be distinguished.

Many businesses are seeking one indicator for biodiversity performance to be used across a variety of business applications. The diversity of measurement approaches that are developing with business suggests that assessing biodiversity performance for different BA may require different approaches. It is important to link biodiversity measurement approaches and related biodiversity indicators to the type of applications businesses and finance institutions (FIs) are interested in. Therefore, it is important to have a clear picture of these BA and how the range of measurement approaches that are developing fit within them. Without this there is a risk that businesses become confused by the range of approaches that are developing.

A recent paper by Addison et al. (2018)² introduces a spectrum of BA for biodiversity indicators. This was designed to be a resource for businesses seeking to clarify the BA where biodiversity indicator(s) are required. This spectrum outlines four BA for biodiversity indicators, which range from site-level to corporate-level assessment of biodiversity performance (scopes A – C), through to third-party biodiversity performance assessment (scope D).

As an input for the technical discussions in the workshop of 26 and 27 March 2019 in Brussels, an adapted categorisation of BA was produced. A key suggestion at the workshop was to put more emphasis on the organisational focus (see Section 0). Based on the findings in the workshop the BA categorisation was further adapted and submitted to 14 tool developers with a request to indicate which BA are covered by their approach (see Section 0).

Targets

A key step upon defining the business application is to ‘set clear objectives relating to what the business wants to achieve in relation to the management of biodiversity and how that can be measured’. Such commitments could be voluntary, regulatory or could relate to international biodiversity goals such as the Aichi targets or Sustainable Development Goals (SDGs). To be effective, companies need to set and declare their targets upfront and these should be tailored to their influence and impacts.

While some targets are well defined (e.g. a regulatory target to plant 100 ha of trees), others are challenging to quantify. Commitments to no net loss (NNL) and net gain (NG) are growing in number,

1More specifically, see Table 1.2

2 Addison, P. F. E., Carbone, G., McCormick, N. (2018) The development and use of biodiversity indicators in business: an overview. Gland, Switzerland: IUCN. vi + 16pp., see https://www.iucn.org/theme/business-and- biodiversity/our-work/business-partnerships-projects/development-and-use-biodiversity-indicators-business

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but demonstration of these requires a scientifically robust methodology and monitoring system. The same applies on commitments to Planetary Boundaries as this requires insights in the carrying capacity and thresholds of the local ecosystem as well as in the specific contribution of the company’s impacts on that ecosystem. Work is underway to try and articulate a science-based target for biodiversity (such as the 2^oC target for climate change).

It will be vital for biodiversity tool developers and users to understand how their methodologies can be used to track progress in delivering against these targets. Indicators that align with key corporate – and societal - targets will create a strong business case for the adoption of both the indicator and the biodiversity target with which it is aligned.

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4. Proposed list of business applications and biodiversity targets

Methodological approach

Annex 2 includes a matrix consisting of the proposed list of Business Applications (BA) in the context of business³ biodiversity performance measurement and the respective organisational focus areas. 8 different BA have been distinguished, which are explained in Table 1. Only BA 3 ‘tracking progress to targets’ was further split into 9 more specific BA according to the type of biodiversity targets (see Table 2).

The list of BA is based on preparatory work by IUCN and Oxford University (Addison et al., 2018), CDC Biodiversité (Berger et al., 2018), the Natural Capital Protocol (NCC, 2016) and the outcomes of the Technical Workshop on 26 and 27 March 2019 in Brussels (organised as part of the Aligning Biodiversity Measures for Business initiative, and supported by the EU Business & Biodiversity Platform).

It is important to note that the BA ‘internal reporting and external disclosure’ has been removed from the list as this applies to all BAs which are covered in the table and does not require specific methodologies. As such it is not a differentiating element for the selection of the most appropriate biodiversity measurement approach for a company’s or investor’s specific purposes.

Please also note that overlaps are possible between different business applications.

Table 1: Proposed list of BA, submitted for feedback to tool developers in July 2019 Business applications (BAs) Explanation

BA 1: Assessment of current biodiversity performance

This is a very common BA. A company might do this just to demonstrate that it’s doing well in terms of biodiversity performance, or simply to know its current level of performance. It could be part of BA 3 (tracking progress to targets), 4 (comparing options) or 7 (assessing risks and/or opportunities).

BA 2: Assessment of future biodiversity performance

A company might be interested in assessing future biodiversity performance as a result of, for instance positive impact actions (e.g.

restoration actions and/or actions that reduce pressures on biodiversity) or changes in its activities.

BA 3: Tracking progress to targets

Companies that have set targets on biodiversity performance will need to track progress periodically. There are many categories of targets and the current list (see Table 2 and points 3.1 to 3.9 in the matrix in Annex 2) covers the main categories.

BA 4: Comparing options A company might want to compare the impact of different options on biodiversity. This BA can inform different levels of decision.

Some examples of this BA:

• Which site offers least harm to biodiversity values?

• Which product scores best in terms of biodiversity performance?

• Which supply chains are riskier from a biodiversity point of view?

3 Business community including financial institutions.

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Business applications (BAs) Explanation

• Which companies within a sector are performing best (according to rating agencies)?

• Which sectors are performing best in terms of biodiversity (for investment decisions by FIs)?

BA 5: Biodiversity Return on Investment / Testing effectiveness of reduction measures

This category goes beyond ‘comparing options’ as it includes an explicit ‘Return on investment’ focus (or Cost benefit analysis) which addresses both biodiversity return and economic return.

Companies aiming for improving biodiversity performance can take measures to actively increase biodiversity (e.g. investments in biodiversity conservation or restoration) and/or measures to reduce pressures (i.e. in a project context often denominated as mitigation measures). It is worth measuring the situation without and with measures (ex-ante or ex-post).

This category includes ‘capturing opportunities’.

BA 6: Assessment / rating of biodiversity performance by third parties, using external data

Third party assessment based on biodiversity criteria and fed with external data (in to the absence of company data). This can be applied to compare company biodiversity performance across a sector.

BA 7: Certification by third parties

Third party certification based on auditing of a clearly established methodological approach.

BA 8: Screening and assessment of biodiversity risks and opportunities

Accounting approaches can be used, for instance in case of due diligence assessments as part of mergers and acquisitions, or assessment undertaken by investors to differentiate between investment options, either based on the biodiversity performance or return on investment of different companies. This might also be undertaken by lenders to assess biodiversity risk and inform pricing credit.

This application often, but not always, overlaps with BA 4.

The organisational focus areas in the matrix under Annex 2 do not completely align with the Protocol.

It is a more practical and simplified combination of the separated focus areas distinguished in the Protocol: organizational focus (corporate, site/project, product) and value chain focus (upstream, direct operations, downstream). It avoids complicating overlaps. Value chain focus is completely covered:

‘supply chain’ is ‘upstream’, ‘site/project’ is ‘direct operations’ and ‘product/service’ covers the whole value chain as biodiversity measurement tools for products are LCA (Life Cycle Analysis) based.

Portfolio and sector are added as this is a specific focus area for financial institutions. Public policy is added given the increased tendency for alignment between approaches developed for public authorities and approaches for businesses.

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Table 2 sets out a range of targets and goals. Differentiating between these targets might be relevant for the selection of the appropriate biodiversity measurement tool.

Table 2: Influential targets and goals relevant to establishing robust corporate biodiversity indicators

Target/ Goal Implication for biodiversity measurement Aichi targets and

post 2020

biodiversity targets

Aichi targets will be subject to review and potential update if adopted in the post 2020 biodiversity policy framework. Indications are that private sector uptake has been limited to date. Given the Convention on Biological Diversity focus on mainstreaming and industry in recent years, it is likely that these targets will be adjusted in a manner that either more closely reflects a need to engage the private sector in their delivery or that translates them for application by the private sector⁴.

Sustainable Development Goals

Corporate disclosure of progress against the SDGs is increasing. However, indications are that the biodiversity focused targets (SDG 14,15) are not currently well addressed by companies⁵. It should be noted that these goals are well aligned with Aichi Targets and so approaches aiming to support one should also support the other. Measurement approaches that can demonstrate contribution to these targets are likely to resonate with the private sector.

Planetary Boundaries

The Stockholm Resilience Centre developed a model – planetary boundaries – that provides the parameters for the planet to maintain a stable state, fundamental to supporting contemporary society. A number of companies are beginning to explore how this model might be applied within corporate decision making and disclosure⁶.

No net loss/ net gain

No net loss or net gain commitments placed within the context of the biodiversity mitigation hierarchy are increasingly being adopted by business. The UK government, for example, have mandated a net gain commitment for all new developments⁷.

ISO 14001, EMAS Environmental management system requirements (e.g., ISO 14001, EMAS) are more process level oriented targets, describing how an organisation should be organized in order to continuously improve in environmental performance.

Voluntary

standards at sector level or product level

Compliance to voluntary standards at sector or product level that aim to preserve biodiversity as its main focus (e.g. Roundtable on Sustainable Palm Oil RSPO) or secondary focus (e.g. EU Ecolabel) is another type of target.

Voluntary biodiversity assessment and reporting

frameworks

Many companies want to demonstrate to stakeholders that they manage biodiversity in a good way. Adopting the Global Reporting Initiative biodiversity indicators is a possible way. Working in line with the steps and principles of the Natural Capital Protocol is another possibility, in particular with the supplementary guidance on biodiversity which will be launched in 2020.

4 Smith, T., Smith, M., Beagley, L. and Addison, P. 2018. Mainstreaming biodiversity targets for the private sector:

Main Report & Case Studies. Final Report available from: http://jncc.defra.gov.uk/page-7678.

5 KPMG (2018) How to report on the SDGs. What good looks like and why it matters.

6 CISL (2019) Linking planetary boundaries to business. Part of Kering’s series on Planetary Boundaries for Business.

7 https://deframedia.blog.gov.uk/2019/03/13/government-to-mandate-biodiversity-net-gain/

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Voluntary biodiversity agreements

Companies can also undersign so-called ‘green deals’ with public agencies or can establish cooperation with conservation NGOs, all of them entailing specific requirements to be compliant with.

Regulatory and permitting requirements

Evidently, also in the field of biodiversity there is plenty of legislation that companies need to be compliant with, such as the obligations of the Birds and Habitats Directives in the EU.

Lender requirements

International financial institutions do increasingly request guarantees that projects are implemented with full respect to biodiversity (e.g. International Finance Corporation Performance Standard 6)

Site to landscape level

commitments

These are location specific commitments in the field of biodiversity conservation. These commitments can be underwritten towards a local government agency or an NGO in charge of a river catchment area or a protected area. Very often a landscape level multi stakeholder approach is applied, with the company as one of the stakeholders.

Specific corporate-level biodiversity commitments or engagements

Many companies commit e.g. to avoid operating in high biodiversity value areas, to exclude purchasing of non-certified palm oil, wood, etc. These are detailed in the corporate biodiversity policy/strategy and apply to all activities of the company.

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5. Findings from feedback tool developers

The EU Business & Biodiversity Platform has asked 11 developers of biodiversity measurement tools to indicate which BA are covered by their approach and to what extent biodiversity measurement approaches have been tested by companies. Developers were invited to score the extent to which the BA is covered (i.e. very well (XX), to some extent (X) or not at all (0)) for each of the ‘organisational focus areas’ which are relevant from the perspective of a company or an investor. Tool developers were requested to provide explanatory text if relevant (the more explanation, the better). Secondly, developers were invited to add the number of completed case studies for each of the grid cells where they have marked ‘XX’ or ‘X’. For instance, if the tool is strongly supporting the BA ‘Assessment of current biodiversity performance’ at product level and it has been applied on 6 cases, the indication will be XX (6).

8 developers have completed the matrix. Annex 2 provides the consolidated feedback. Table 3 provides the main findings and conclusions.

Table 3: Findings from feedback tool developers

Topic Findings

Consistency of feedback

• Not all tool developers have completed the matrix in the same way (e.g.

scoring of coverage of BA for organisational focus areas), although this has improved a lot after a second request.

• Some tool developers tend to be more flexible in indicating which BA and/or focus areas are covered by their tool than others. Therefore, it is very important to have evidence (case studies).

• Some tool developers are more extensive in terms of clarification than others.

BA Typology • Overall, the proposed typology has proved to work. No tool developer has commented on it.

• However, although not explicitly noted by tool developers, the following adaptations to the BA typology might be considered:

o It would be useful to add a specific BA on biodiversity accounting.

See the definition of natural capital accounting compared to the definition of natural capital assessment in Annex 1 (Glossary). In line with these definitions, biodiversity accounting is the process of compiling consistent, comparable and regularly produced data using an accounting approach on biodiversity and the flow of services generated in physical and monetary terms.

The majority of applications are done at a national level and by the public sector. Natural capital accounts are a possible output from a natural capital assessment, and this also applies to biodiversity. The Biological Diversity Protocol and Kering’s E P&L are both tools that explicitly support this specific BA (although to a different extent) and therefore it’s relevant to make it a separate BA.

o It might be more logical to integrate BA 5 ‘Biodiversity Return on Investment / Testing effectiveness of reduction measures’ into BA 4 ‘Comparing options’, for the simple reason that 1/ BA 5 is always comparing options (it is inherent to the methodology) and 2/

comparing options will always include both a biodiversity component and an economic component. The fact that IUCN’s STAR approach explicitly includes an economic component

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doesn’t justify a separate BA, as it is relatively easy to add an economic component to all biodiversity tools that cover BA 4.

• All BA are covered by one or more tools, although BA 6, 7 and 8 are covered by less tools than other BA. Also, within BA 3 ‘tracking progress to targets’ there is quite some difference (see topic ‘targets’ below) Organisational

focus

• The 6 different organisational focus areas are well understood by tool developers

• Site/project, supply chain and corporate are most covered by tools throughout the different BA

Targets • All targets under BA 3 are covered by one or more biodiversity tools, although Planetary Boundaries, environmental management systems, regulatory requirements, landscape level commitments are covered to a lesser extent

• Some tools only cover targets in a qualitative way. This has for instance been indicated as such for the LIFE methodology (‘Qual’) but this quotation should probably also apply to some other tools (e.g. ABD Index?). This is the case for tools which are partly based on checklists.

Case studies • There seems to be an increasing number of case studies. The LIFE methodology by far has the largest number of concrete applications by businesses. GBS, PBF and probably BIM have a growing number of case studies. BFFI has been applied for 4 years on one case. BD Protocol is developing first test cases. ABD Index and STAR don’t refer to case studies.

• Case studies cover product (PBF), site/project (PBF, BD Protocol, GBS and mainly LIFE), supply chain (PBF, GBS, LIFE and mainly BIM), corporate (GBS, LIFE), portfolio (GBS, BFFI). No case studies are reported for public policy.

• Case studies mainly cover BA 1 and BA 2.

Questions for WEBINAR 1

Which is the most suitable common denominator for the biodiversity measurement approaches which are analyzed here? Are we talking indeed about measurement approaches? Can we talk about tools? Anyway, from now on, we need to be consistent.

Do we agree with the proposed typology of BA?

Do we agree with adding a specific BA on biodiversity accounting?

Do we agree with integrating BA 5 ‘Biodiversity Return on Investment / Testing effectiveness of reduction measures’ into BA 4 ‘Comparing options’?

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6. Decision tree

The matrix in Annex 2 provides a good source of information facilitating the selection of a suitable biodiversity tool or metric for a specific business application.

Ultimately this matrix could be part of a decision tree designed for this specific purpose. As the Biodiversity Supplement to the Protocol, which is under preparation now, will include a decision tree (see ) for guiding users of the Supplement through relevant guidance on scope, measurement and valuation, and also linking to methodologies and data captured in an annex to the Supplement, it is key to achieve maximum alignment between both developments.

Table 4: Decision tree in draft wireframe Biodiversity Supplement to the Protocol (Cambridge Conservation Initative, June 2019)

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The following elements need to be discussed (with reference to question numbers in draft wireframe):

• Q 1.1. Alignment in terms of BA. The current list of 5 BA as proposed in the draft wireframe comes from Table 1.2 in the Protocol which was only an illustrative table and never had the intention to be exhaustive. In the Technical Workshop in Brussels it was agreed not to include ‘communication’ as a specific BA. All other BA are covered in our typology, although not always under the same name.

• Q 1.2 Is now covered by BA 3 in our list

• Q 2.1 and Q 2.2 are integrated into one ‘menu’ in our list. As explained in Section Erreur ! Source du renvoi introuvable. of this document, “organisational focus area” in our list does not completely align with the Protocol. It is a more practical and simplified combination of the separated focus areas distinguished in the Protocol: organizational focus (corporate, site/project, product) and value chain focus (upstream, direct operations, downstream). It avoids complicating overlaps. Value chain focus is completely covered: ‘supply chain’ is ‘upstream’, ‘site/project’ is ‘direct operations’ and

‘product/service’ covers the whole value chain as biodiversity measurement tools for products are LCA based. Portfolio and sector are added as this is a specific focus area of financial institutions.

Public policy is added given the increased tendency for alignment between approaches developed for public authorities and approaches for businesses

• All remaining questions Q 2.3 to Q 3.4 are not covered by our list of BA as they go beyond the typology of BA. In fact, for every BA in our list the above questions under Q 2.3 to Q 3.4 can be asked. However, for the selection of the most appropriate biodiversity tool this information is very important. Therefore, we’ve summarised this information in Table 5 (TO BE COMPLETED – FOR DISCUSSION IN WEBINAR 2).

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• Table 5: Key characteristics of biodiversity tools for supporting the selection process (TO BE COMPLETED)

Sector scope Impact drivers Dependencies Valuation

TERRESTRIAL FRESHWATER MARINE

Sectorswith highreliance on supply chain Extractives Financial All sectors Road disturbance Hunting Nitrogen deposition habitat fragmentation Climate change nutrient loadingaffecting water quality hydrological disturbance climate change affecting water flow Land use Water use Qual. Quant. Monet.

ABD Index

X X

BD Protocol

X X

BFFI X

BIM X

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GBS X Kering E

P&L

X X

LIFE X

PBF X

STAR X

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7. Business case for application of different biodiversity measurement approaches

(TO BE COMPLETED)

8. Potential common ground principles

The following principles are proposed for discussion, refinement or rejection in the sub-group:

■ Relevant: approaches should be relevant to the business application and to the material biodiversity impacts caused by the company and should be clear on the application they support as well as the impacts they cover’

■ Target focused: approaches should be considered as supportive tools to facilitate business applications in the field of biodiversity, not a goal on its own

■ Simple and convincing: approaches should be readily communicable to the private sector

■ Opportunity focused: approaches should be designed to incorporate positive impacts of companies as well as negative impacts

■ Transparent: approaches should have no black boxes and the methodology should be transparent with, for example, confidence margins explained

■ Consistent: different approaches applied to same case should be consistent in outcomes Do we agree with these common ground principles?

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Annex 1: Definitions

Business application for biodiversity measurement: the intended use of the results of a company’s biodiversity measurement, to help inform decision making (this definition is based on the Protocol’s definition of business application)

Biodiversity target: the objectives relating to what the business wants to achieve in relation to the management of biodiversity; these objectives could be voluntary or regulatory, and qualitative or quantitative. (own definition)

Natural capital assessment: the process of identifying, measuring and valuing relevant (“material”) natural capital impacts and/ or dependencies, using appropriate methods. Assessment is the method most typically used in the private sector. The majority of assessments will use natural capital information to answer a specific question, or inform a decision. A key step in the process is to identify an objective prior to undertaking the assessment – the aim is not about collecting a set of indicators. (definition comes from draft Biodiversity Supplement to the Protocol)

Natural capital accounting: the process of compiling consistent, comparable and regularly produced data using an accounting approach on natural capital and the flow of services generated in physical and monetary terms. The majority of applications are done at a national level and by the public sector.

Natural capital accounts are a possible output from a natural capital assessment. (definition comes from draft Biodiversity Supplement to the Protocol)

Natural capital valuation: (TBC)

Do we agree with these definitions?

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Annex 2: Consolidated matrix on business applications

See separate Word file.

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Working Paper for Sub-Group 1 on Business Applications and Targets