Many countries have already passed nature-related legislation to address biodiversity loss and restoration, while others are developing and updating legislation. This legislation creates a significant data and compliance burden as well as a risk of fines, penalties and potential reputational damage.
A double materiality approach to biodiversity reporting is becoming the standard. Double materiality recognises the impact a business has on the planet, and the financial impact this could have on the company if not managed properly.
Faced with this new reality, many businesses are struggling to understand how they need to respond and how their responsibilities might evolve in a changing climate. In this article, we look at some emerging nature-related disclosure requirements and what you can do to keep on top of them.
01
Reporting impact on biodiversity will become mandatory under the CSRD which aims to support sustainable practices and investments. The CSRD covers EU based companies and those in the European Economic Area (EEA) (Norway, Iceland and Liechtenstein). It will also have a significant impact on non-EU and EEA companies with significant operations in the EU and EEA.
The CSRD is underpinned by the concept of double materiality. Companies that are required to meet CSRD requirements must disclose, track and measure various environmental, social and governance (ESG) metrics. When CSRD reporting will apply depends on the size and type of businesses:
2024 financial year: Listed companies and consolidated groups with more than 500 employees.[1]
2025 financial year: Large listed and private companies and consolidated groups that meet two of these criteria:
2026 financial year: Listed small and medium sized enterprises (SME), not including micro-companies.
From 2028 financial year: Listed large subsidiary third-country companies and listed SME subsidiary third-country companies with a turnover of €150m for the last two consecutive years.
Also, third-country companies with non-subsidiary branches that have generated more than €40m in the previous year.
02
TNFD standards are being adopted by many countries. The TNFD provides a framework and guidance on how to measure, manage and report exposure to nature-related risks, such as biodiversity loss, in a consistent way to help investors, financial institutions and other stakeholders understand how nature impacts on a company’s financial performance.[2]
03
Some countries have legislation requiring building projects to show a net gain in biodiversity at the end of the build. The aim is to balance ecological protection with economic growth by mandating that the loss of biodiversity on a site is restored, enhanced or offset by buying biodiversity gains at another location.[3]
Prosecution and claims from biodiversity damage: A business’ activities, such as the misuse of groundwater or vehicles driving over rare plant life in a protected area, can drastically change the local environment, which in turn can cause biodiversity damage. Any biodiversity damage leaves companies open to prosecution and claims.
Redirection of the flow of finance: As financial institutions and investors recognise the risks from the degradation of ecosystems, they are redirecting finance away from projects that damage nature to those with a more nature-positive focus.[4]
Lack of finance for nature restoration projects: Financial institutions and investors can be reluctant to provide backing for nature restoration projects due to unpredictable risks such as fire and flood that can affect these projects.[5]
Supply chain pressures: Biodiversity damage can lead to a decline in soil health and water scarcity which in turn cause shortages and increase supply chain pressure.
Natural disasters: Biodiversity loss can exacerbate natural disasters. For example, deforestation can increase flood risk.
Ecosystem service loss: Reduced productivity and increased costs can arise when ecosystems are degraded. Examples include reduced pollination impacting crop yields, reduced water infiltration leading to increased risks of flooding, soil erosion reducing plant health, and decreases in groundwater quality.
Gather data and quantify the risks: The first step toward meeting reporting requirements is to gather data and quantify the risks involved and whether they are material to your business. Risk consultancy, data analytics and modelling can help you understand and quantify biodiversity impacts and risks and how they are likely to evolve over time.
Put a biodiversity management plan in place: The plan will help make sure protected plant and animal species are not harmed by your activities. The plan should include ecological reports and the monitoring of protected species both on-site and in the surrounding areas.
Make sure your insurance covers biodiversity damage: Cover for biodiversity damage and restoration are often excluded from general liability policies. Having environmental impairment liability (EIL) insurance in place can help you understand and report on your biodiversity risks as well as demonstrating that you’re managing your ESG exposures effectively.
WTW’s specialists can help you assess your biodiversity footprint, mitigate your impact and transfer risks where necessary. Our consultancy and analytical solutions can help you identify and quantify exposures, and provide data to inform and meet new and evolving reporting and compliance requirements.
We have deep expertise in arranging EIL insurance, helping businesses cover the costs of biodiversity damage and restoration and filling the gaps in general liability and property insurance policies. We also offer a Restore product from global reinsurer SCOR, which covers the cost of getting nature restoration projects back on track if they are affected by natural catastrophes.
Mandatory requirements for businesses to report on their impact on the environment and the actions they’re taking to address biodiversity loss and restoration are increasing and evolving. By understanding and quantifying the risks, businesses can take steps to mitigate them and ensure they have the data they need to meet disclosure requirements.
On February 26, 2025, the European Commission adopted the Omnibus Directive, a set of proposals designed to streamline sustainability reporting, including the CSRD. While the information above remains valid, it may become outdated if the relevant authorities fully or partially implement the directive's recommendations.[6]
