Nature-positive business strategy: Why and how

Corporate sustainability strategies have long focused on climate change and greenhouse gas (GHG) emissions reduction. However, the climate crisis is inextricably linked to the nature and water crises. Recognizing water and nature’s critical role in their growth plans, operational continuity, and business models, leading companies are beginning to weave nature-related initiatives into their sustainability frameworks and risk management processes.

That said, overall progress is still limited. Corporate climate action is far more advanced than nature, and very few fully understand their impacts and dependencies – only 5% of companies have assessed their impact on nature, and less than 1% have assessed their dependencies on nature.

These numbers are understandable. Water and nature impacts are complex, time- and location-specific, and deeply embedded in the supply chain. For water, social and spiritual dimensions increase the complexity of issues and solutions. How does a water-intensive business grow when water is unavailable at any price? How do you measure biodiversity impacts? How do you quantify the financial value of water- and nature-related risks and opportunities?

Luckily, new frameworks are emerging to answer some of these questions and guide businesses through the nature stewardship journey. The Taskforce on Nature-related Financial Disclosures (TNFD), Science Based Targets Network (SBTN), and investor- and corporate-led initiatives like the Valuing Water Finance Initiative and CEO Water Mandate are just a few examples.

All this to say, the tide is turning on water and nature. Now is the time to start meaningfully valuing these precious, over-exploited resources in your business strategy and balance sheet. Read on to learn why having a robust nature and water strategy is so important and 6 steps to get started.

Why businesses need a water and nature strategy

Acting on water and nature isn’t just about risk management. Embracing a nature-positive business strategy gives you the opportunity to drive business value, unlock new revenue streams, and boost return on investment (ROI).

The nature-positive framework helps you realize these benefits through:

• Investing in novel technologies
• Investing in supply chain resilience initiatives
• Engaging customers in new ways
• Creating new products and services
• Business model innovation
• Elevating your brand image

Of course, the risks can’t be ignored either. For companies, especially those with value chains dependent on natural resources, water and nature pose very real risks to business continuity.

Imagine a world where degraded soil health, disease, and severe weather patterns made Ghana unsuitable for growing cacao. Or where your factories polluted the local water supply to the point where communities no longer had access to safe, clean drinking water. How would that impact your business model and social license to operate? Understanding your relationship with nature and having a plan to address your impact on Earth’s ecosystems and its local inhabitants is crucial to sound business strategy.

For instance, PepsiCo partnered with N-Drip to help farmers in its supply chain adopt high-efficiency irrigation technology. This partnership has enabled farmers across the world to use up to 50% less water, achieve larger crop yields, and reduce use of fertilizer. The result? A better livelihood for farmers, less strain on local water sources, and long-term crop security for PepsiCo. Another powerful example is the 100+ Accelerator. This pre-competitive collaboration between AB InBev, Coca-Cola, Colgate-Palmolive, Danone, and Unilever provides funding to startups working on water stewardship, sustainable agriculture, biodiversity, and more.

These kinds of investments aren’t limited to food and beverage and consumer-facing companies, whose business models rely on an abundant supply of water and land-based commodities. Even tech giants like Microsoft are using nature to drive new business offerings. Take AI for Earth (now called The Planetary Computer), Microsoft’s $50 million initiative tackling issues like land use, water shortage, and species loss through AI, machine learning, and the cloud. The initiative has already led to breakthroughs in data-driven agriculture and land cover mapping.

Resource security and risk management aside, here are some other reasons to develop a nature-positive business strategy:

• The health of business and nature are connected.
• Nature-positive business models create financial and economic opportunities.
• Emerging regulations require disclosure on nature topics.
• Stakeholder expectations are shifting.
• Nature-positive strategies support climate goals.

More than half of global GDP, or $58 trillion, depends on nature, and it’s estimated that natural ecosystem services provide an astounding $125 trillion in economic value per year.

6 steps to build a nature positive business strategy

As mentioned above, nature is more than just a risk. A meaningful nature-positive strategy capitalizes on the business value of nature, but not through the traditional lens of exploitation. Rather, it derives value from restoring and replenishing Earth’s resources. Here are 6 steps to build a strategy that delivers positive impact to your business and the ecosystems on which it depends:

1) Assess baseline impacts and dependencies

Identify where your organization interacts with nature and water and conduct a comprehensive materiality assessment to uncover how your operations impact Earth’s ecosystems and how reliant you are on their services.

Using these insights, surface your top nature-related risks and opportunities. If you’re a beauty company reliant on plant-based oils, perhaps it’s the near-term risk of olive shortages. If you’re a luxury goods company like Kering, perhaps it’s an opportunity to increase market share by developing a lower-impact line of leather accessories.

2) Identify synergies with net zero and social impact workstreams

Tackling nature and water is often the next evolutionary step to GHG emissions. Quantify the positive impact of your existing interventions and investments and see if there are opportunities to build on them.

For instance, if you’ve already mapped your supply chain and engaged priority suppliers on energy use, use those lines of communication to determine your facility-level water footprint. Similarly, if you’re piloting initiatives with farmers to use less GHG-intensive fertilizers, see what ideas they have on restoring the local ecosystem or what barriers they face to adopting water-saving practices.

3) Set clear, measurable goals

Establish specific, measurable goals for water use, land use, pollution, ecosystem restoration, and more. Remember that your goals shouldn’t just reduce use and mitigate impacts – they should deliver a net positive benefit to the ecosystems and communities where you operate.

Setting science-based targets aligned with the SBTN framework is the gold standard, but applying them can be a significant undertaking that requires robust data collection systems. If you’re not ready to commit to science-based targets, be sure your goals are location-specific and quantifiable and enable you to deliver tangible, positive impacts to the ecosystems and communities where you operate.

For instance, Ab InBev set an ambitious goal of measurably improving water availability and quality for 100% of communities in high-stress areas by 2025. Salesforce, proving that action on nature isn’t just for commodity-based sectors, strives to distribute $100 million through its Ecosystem Restoration & Climate Justice Fund by 2031 as part of its holistic nature-positive strategy.

4) Collaborate with suppliers and Indigenous communities to co-create solutions

Indigenous communities are critical stewards of the land, protecting 80% of Earth’s remaining biodiversity. These communities, alongside your local suppliers, have years of generational knowledge. As you identify the biggest nature and water hotspots in your supply chain, work hand-in-hand with these groups to co-create solutions and design pilot programs that integrate their wisdom and empower them with tools, leadership, and financial resources.

The Women + Water Collaborative, a partnership between Gap, Cargill, GSK, WaterAid, and the Water Resilience Coalition, is a great example. Targeting India’s water-stressed Krishna and Godavari basins, the Collaborative aims to replenish local water resources and provide communities with climate-resilient sanitation infrastructure. Notably, the program leverages local women’s leadership to build water resilience, improve water security, and enable equitable access to water and sanitation at scale.

5) Monitor and report on progress

Implement robust monitoring and data collection systems to review progress regularly. As part of your review process, be sure to engage with supplier communities and Indigenous populations to learn from their experience, identify any unintended consequences, and adapt your strategy to new insights.

Consider becoming a TNFD early adopter and disclosing nature- and water-related impacts, risks, and opportunities as part of your annual climate or sustainability reporting.

6) Weave water and nature into business strategy

Developing a nature-positive strategy is a powerful first step to acting on your biggest nature-related risks and opportunities. However, to harness nature’s full potential to drive brand value, ROI, and long-term growth, it’s critical to integrate nature into your overarching business strategy.

This means incorporating nature and water into product development, strategic planning, annual budgeting, and other core business processes. It also means quantifying the impact and ROI of nature and water, which are treated as endlessly available, “free” resources. Just as many leading companies have instituted a price on carbon, consider developing an internal price for nature and water to spur innovation, incentivize sustainable behaviors, and generate capital to accelerate your nature-positive initiatives.

Finally, you’ll need a thoughtful governance structure to activate your integrated nature-positive business strategy. Governance is more than decision-making and bureaucracy. Effective governance models break down silos, establish meaningful ways of working, and unlock the funding you need to drive progress toward your goals.

Thinking forward

Healthy ecosystems are the backbone of resilient societies and businesses. We can no longer treat water and nature as infinite, expendable resources – they must be integrated as strategic assets on the balance sheet.

Yet nature positive shouldn’t be a conversation solely about mitigating risks. It should be a conversation about finding new ways to create long-term value for your business, the local ecosystems, and the populations inhabiting them. Approached this way, you’ll find that truly embracing nature-positive positions your business to thrive in an ever-changing world.

This piece was originally published in Earth Finance on 8 September 2024.