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Businesses more dependent on biodiversity than expected

“The New Nature Economy report will help build momentum towards the crucial UN Biodiversity Conference in Kunming, China later this year, where we expect to adopt a new post-2020 global biodiversity framework and set the path to transforming society’s relationship with biodiversity and to living in harmony with nature by 2050.” -- Elizabeth Maruma Mrema, Acting Executive Secretary for the Convention on Biological Diversity

Businesses, according to a new report from the World Economic Forum, are more dependent on nature and biodiversity than previously thought, with approximately $44 trillion of economic value generation - over half the world’s total GDP - moderately or highly dependent on nature and its services, and, as a result, exposed to risks from nature loss.

The New Nature Economy Report, released 19 January, suggests construction ($4 trillion), agriculture ($2.5 trillion) and food and beverages ($1.4 trillion) are the three largest industries that depend most on nature. Combined, their value is roughly twice the size of the German economy. Such industries rely on either the direct extraction of resources from forests and oceans or the provision of ecosystem services such as healthy soils, clean water, pollination and a stable climate.

The report’s revelations come at a critical time, as the latest science suggests that about 25% of our assessed plant and animal species are threatened by human actions, with a million species facing extinction, many within decades. As nature loses its capacity to provide such services, these industries could be significantly disrupted. Industries highly dependent on nature generate 15% of global GDP ($13 trillion), while moderately dependent industries generate 37% ($31 trillion).

Furthermore, the report found that many industries have significant “hidden dependencies” on nature in their supply chain and may be more at risk of disruption than expected. For example, there are six industries which have less than 15% of their direct gross value added (GVA) that is highly dependent on nature, yet over 50% of their supply chains' GVA is highly or moderately nature-dependent. The industries are chemicals and materials; aviation, travel and tourism; real estate; mining and metals; supply chain and transport; and retail, consumer goods and lifestyle.

The report notes however that there is potential for a win-win-win for nature, climate, people and the economy if business and economic actors can respond with urgency to protect and restore nature and start regularly identifying, assessing, mitigating and disclosing nature-related risks to avoid potentially severe consequences.  Accordingly, the report says nature-related risks can be incorporated within existing ERM (enterprise risk management) and ESG (environmental, social and governance) processes, investment decision-making, and financial and non-financial reporting. Using a similar framework across environmental risk, categories should enable more efficient and effective integration into business decision-making.

As the trend for greater transparency and accountability continues, the report says costs are likely to rise for businesses which do not include nature at the core of their enterprise operations. Businesses that ignore this trend will be left behind while those that have embraced this transformation will exploit new opportunities.