Biodiversity, a cornerstone of ecosystems, has emerged as a critical area in global sustainability discussions, particularly within Environmental, Social, and Governance (ESG) frameworks. As organizations increasingly prioritize sustainability, biodiversity reporting has gained prominence. Recognizing the need for structured and transparent biodiversity reporting, two leading entities—the European Financial Reporting Advisory Group (EFRAG) and the Global Reporting Initiative (GRI)—have formed a partnership to co-construct comprehensive biodiversity reporting standards.
In this blog, we explore the collaboration between EFRAG and GRI, the importance of biodiversity reporting standards, and how businesses can contribute to biodiversity conservation efforts. Additionally, we’ll discuss the potential for leveraging eXtensible Business Reporting Language (XBRL) to facilitate digital reporting of biodiversity metrics.
The Urgency for Biodiversity Reporting Standards
The biodiversity crisis has reached a tipping point, with the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) reporting in 2019 that over one million species are at risk of extinction due to human activities such as deforestation, pollution, and climate change. This unprecedented loss threatens the stability of ecosystems, which in turn impacts industries dependent on natural resources.
Stakeholders—ranging from investors to regulators—are demanding more transparent and comparable biodiversity-related data from companies. Unlike carbon reporting, which has a more established framework, biodiversity reporting lacks universal standards, making it challenging for businesses to quantify and communicate their biodiversity impact effectively. This gap has driven the need for structured biodiversity reporting standards, which will provide clarity for organizations in disclosing their biodiversity risks and contributions to conservation efforts.
EFRAG: Spearheading Sustainability Reporting in the EU
The European Financial Reporting Advisory Group (EFRAG) has emerged as a pivotal player in the sustainability reporting space, particularly through its leadership in developing the European Sustainability Reporting Standards (ESRS) under the EU’s Corporate Sustainability Reporting Directive (CSRD). Encompassing ESG aspects, the ESRS mandates extensive reporting for around 50,000 companies in the EU, ensuring that biodiversity is a significant component of corporate sustainability disclosures.
EFRAG’s involvement in biodiversity reporting is part of the broader EU Green Deal objectives, aligning corporate transparency with the region’s climate and biodiversity goals. The organization’s contribution to biodiversity standards aims to strengthen corporate accountability and enhance the effectiveness of biodiversity conservation.
GRI: Pioneering Global Sustainability Reporting
The Global Reporting Initiative (GRI) has a longstanding history of advocating for sustainability transparency on a global scale. With its widely adopted GRI Standards, covering a broad range of ESG aspects—including biodiversity—GRI provides a comprehensive framework for organizations to disclose their sustainability impacts.
GRI’s recognition of biodiversity as a critical reporting area reflects the growing need for reliable biodiversity data. By collaborating with EFRAG, GRI will co-construct biodiversity standards that serve the dual purpose of improving biodiversity-related disclosures and aligning them with global ESG goals.
EFRAG-GRI Collaboration: Co-Constructing Biodiversity Reporting Standards
The partnership between EFRAG and GRI marks a significant milestone in the development of biodiversity reporting standards. Leveraging their combined expertise in sustainability reporting, both organizations aim to create a framework that companies worldwide can use to report on biodiversity impacts in a standardized and consistent manner.
1. Objectives of the Collaboration
The primary goal of the EFRAG-GRI collaboration is to develop globally applicable biodiversity reporting standards. These standards will provide organizations with a consistent method to disclose biodiversity-related risks, opportunities, and performance indicators, allowing for better transparency and comparability across sectors and regions.
EFRAG and GRI aim to ensure that biodiversity metrics align with other existing global frameworks such as the Taskforce on Nature-related Financial Disclosures (TNFD) and the United Nations Sustainable Development Goals (SDGs), particularly SDG 15 (Life on Land). The development process will also be informed by EU regulations, such as the CSRD.
2. Scope of the Biodiversity Reporting Standards
The biodiversity reporting standards will encompass a wide range of indicators that track the direct and indirect impacts of businesses on biodiversity. Metrics may include habitat alteration, species diversity, water quality, pollution levels, and ecosystem restoration efforts. The standards will also address biodiversity risks along the supply chain, recognizing that corporate impacts on biodiversity often extend beyond direct operations.
Additionally, the standards will encourage organizations to integrate forward-looking elements, such as biodiversity-related risk assessments and strategies for conservation, into their reporting processes.
3. Incorporating Stakeholder Feedback
EFRAG and GRI are committed to ensuring that biodiversity standards are shaped by stakeholder input, engaging with businesses, investors, policymakers, and civil society to develop a practical and relevant framework. This collaborative approach will ensure that the standards are adaptable across various industries and regions.
Leveraging XBRL for Biodiversity Reporting
As biodiversity reporting standards are developed, incorporating advanced technologies like XBRL can significantly enhance the efficiency and transparency of biodiversity disclosures. XBRL, already widely adopted for financial reporting and regulatory compliance, can be instrumental in enabling standardized and digital biodiversity reporting.
1. Why XBRL?
XBRL (eXtensible Business Reporting Language) is a global standard for exchanging business information digitally. It allows data to be tagged in a consistent manner, making it easier to share, compare, and analyze across different platforms and jurisdictions. Just as XBRL is used for ESG reporting under frameworks such as the ESRS and GRI, it could be similarly applied to biodiversity reporting standards, ensuring accurate and efficient data exchange.
2. Benefits of XBRL for Biodiversity Reporting
Using XBRL for biodiversity reporting can streamline the process for companies by automating the collection, validation, and analysis of biodiversity data. This would allow businesses to report their biodiversity impacts in a more structured format, reducing manual reporting errors while ensuring compliance with global biodiversity standards. Additionally, XBRL enables real-time reporting, improving the timeliness of biodiversity data disclosures for stakeholders, including regulators and investors.
The Role of Businesses in Biodiversity Reporting
With biodiversity standards and digital tools like XBRL on the horizon, businesses need to be proactive in integrating biodiversity considerations into their operations and reporting mechanisms. Key steps include:
1. Assessing Biodiversity Impact
Businesses should begin by assessing their direct and indirect impacts on biodiversity. Conducting biodiversity risk assessments and mapping areas of operation against biodiversity hotspots will help companies understand their ecological footprint.
2. Setting Biodiversity Targets
Once biodiversity impacts are understood, companies should set specific, measurable, and time-bound biodiversity conservation targets. These targets should align with global biodiversity goals such as the SDGs.
3. Implementing Biodiversity Conservation Measures
Businesses should implement practical measures to conserve biodiversity, from habitat restoration to sustainable land-use practices. Collaborating with local communities and environmental organizations can amplify conservation efforts.
4. Monitoring and Reporting
Ongoing monitoring of biodiversity-related indicators will ensure that targets are met. Companies should leverage upcoming biodiversity standards, and XBRL, to report biodiversity impacts accurately and consistently.
The Role of Investors and Policymakers in Biodiversity Reporting
Investors and policymakers also play crucial roles in promoting biodiversity reporting standards. Investors are increasingly integrating biodiversity considerations into their investment decisions, recognizing that biodiversity loss can pose systemic financial risks. Meanwhile, policymakers can create the regulatory environment that mandates biodiversity disclosures and supports biodiversity conservation.
Key Notes
The EFRAG-GRI collaboration to co-construct biodiversity reporting standards is a crucial step in integrating biodiversity considerations into global corporate sustainability reporting. By adopting these standards, businesses will not only enhance transparency and accountability but also contribute to global efforts to halt biodiversity loss. Incorporating XBRL into biodiversity reporting could further streamline this process, enabling organizations to report in a standardized, digital format that aligns with global biodiversity goals.
Through collaboration among businesses, investors, and policymakers, the vision of a more sustainable and biodiversity-conscious future is within reach.
