Alliance hopes nature benchmark will “incentivise” adoption of the final recommendations of the Task Force for Nature-related Financial Disclosures.
Research by the World Benchmarking Alliance (WBA) has highlighted that the agri-food industry is falling short on sustainable farming and ensuring access to healthy food, partly due to a lack of understanding of nature impacts and dependencies.
Jenni Black, Nature Transformation Lead at the WBA, told ESG Investor that its updated food and agriculture, and nature benchmarks can help “incentivise and track” market adoption of the recommendations of the Task Force for Nature-related Financial Disclosures, describing it as “fundamental to credible action on nature”.
WBA analysed the 350 global agri-food companies, including Bayer, Unilever and Walmart, ranking them on how they are managing their impact on nature and the environment, improving the healthiness of their food products, and providing decent working conditions.
Despite food systems being responsible for a one-third of global greenhouse gas (GHG) emissions, and agricultural expansion driving nearly 90% of global deforestation, analysis by the WBA revealed that just 2% of companies demonstrate an understanding of their broader impact on nature.
“The lack of understanding of their dependence on nature was quite surprising,” said Black, noting that the agri-food industry, along with the construction sector, are the largest highly nature-dependent industries, with an economic value roughly twice the size of Germany.
According to Black, agri-food companies appear to expect “business as usual” from nature in terms of the underlying services it provides them, labelling this as a “huge blind spot”.
“It poses a massive threat to ongoing business resilience, especially considering the increasing instability in many regions, including the rise in natural disasters and extreme weather events,” she said.
“If a business depended on anything else as much as these businesses depend on nature, they would be closely monitoring it, assessing its status, and understanding how any changes might affect their operations.”
In September, an international team of scientists found that six of the nine planetary boundaries have been crossed, suggesting that Earth is now well outside of the safe operating space for humanity.
“While we haven’t reached tipping points for most of these boundaries yet, there’s still an opportunity to address and mitigate many of the issues we’re currently facing,” said Black.
“However, if we continue down the current path and reach some of those tipping points, it won’t just be significantly more costly to address these threats, but it might even become infeasible.”
The TNFD published its final recommendations for nature-related risk management and disclosure in September, which will serve as a tool to “operationalise” the achievement of Target 15 of the Kunming-Montreal Global Biodiversity Framework.
The TNFD is also developing a global nature-related public data facility that aims to aid investors and companies that are struggling to access “reliable and comparable” nature-related data.
Focus on nature
In September, the global investor initiative Nature Action 100 (NA100) entered its engagement phase sending letters to 100 focus list companies calling for “urgent and necessary action” to protect and restore nature and to mitigate financial risks.
The initiative’s Investor Expectations for Companies outlined actions that investors can encourage companies to take, covering ambition, assessment, targets, implementation, governance, and engagement.
Black welcomed the announcement, noting that the NA100’s focus list and the WBA’s nature benchmark share more than 90 companies, with the organisation planning to evaluate whether to “fully align” with the investor initiative.
The WBA operates its own engagement initiative – Collective Impact Coalition (CIC) – which brings together investors, academia and other stakeholders to collaboratively engage with companies and bring about systems change.
Black added that the six investor expectations that NA100 has outlined appear “robust” and “align well” with what the WBA measures in its own nature benchmark.
“It’s ultimately up to investors to map their exposure to these companies and determine what actions make the most sense for them to undertake,” she said.
NA100 member signatories collectively manage approximately US$23.6 trillion in AUM.
Black said that action on nature must be “driven from the top”, with the WBA often engaging with agri-food companies sustainability departments rather than the C-suite.
“Action on nature needs to move beyond projects or siloed and into the realm of business strategy,” said Black. “Across the board, we do see that companies that have a sound sustainability strategy, backed by high-level accountability for that strategy, tend to score much better.”
Analysis by the WBA found that Only 15% of the assessed companies have committed to zero ecosystem conversion, and a mere 6% have established time-bound goals to eliminate deforestation completely.
“The specifics will vary by sector and by company, and it’s not quite the same as the climate debate where everybody knows exactly what they need to be aiming for,” said Black, adding that action on nature is more “disparate” in terms of what the specific impact might be.
“For some companies, they might need to focus on ecosystem conversion, while for others, it will be water use or other unique aspects.”
The WBA found some improvements within the agri-food sector, with nearly 50% of companies now having some form of climate commitment in 2023. This includes 46 companies with Scope 1 and 2 greenhouse gas (GHG) reduction targets aligned with limiting global warming to 1.5°C, showing progress from the 27 companies in 2021. Additionally, 13 companies are now making advancements against science-based targets for Scope 3 emissions, up from seven in 2021.
“To achieve net zero emissions by 2050, we must halt deforestation by 2025,” said Black, noting that agri-food companies have a “tremendous opportunity” to address both climate change and biodiversity loss by eliminating deforestation.
“However, our benchmark results underscore that there is still a long way to go.”
The 350 companies assessed by the WBA source food commodities from approximately 75 million small-scale producers in 40 low- and middle-income countries, many of which grapple with persistent poverty.
The research showed that 27% of companies support farmers’ income stability through procurement and pricing practices. However, a mere 4% identify living income benchmarks or calculate living income gaps.
“Companies are improving farmer livelihoods but not at a level that lifts them out of poverty,” said WBA’s Food and Agriculture Transformation Lead Viktoria de Bourbon de Parme.
“The food and agriculture sector must urgently prioritise people, starting with the farmers their business depends on and the consumers they serve.”
Further, Indigenous communities, who oversee 20% of the world’s land and 80% of its biodiversity, remain largely overlooked, with only 1% of companies demonstrating a commitment to securing free, prior, and informed consent (FPIC) from these communities before conducting projects on Indigenous territories.
Black noted that one of the significant misconceptions prevailing with regards to conducting projects on Indigenous lands is the distinction between consultation and consent.
“Engaging with communities and discussing what is going to happen is one aspect, but if these communities lack the right to say no, it doesn’t genuinely represent consent,” she explained, adding that companies must take steps to address the issue.
Black said that it is crucial to engage with key segments of Indigenous communities, including women and young people, to ensure that the process is inclusive. This might involve conducting dedicated sessions for these groups to participate and provide their perspectives.
She acknowledges that such steps may be challenging to take but are not impossible to coordinate and play a vital role in “bridging the gap” between mere consultation and genuine, informed consent.
Black told ESG Investor that there’s a real recognition in the nature space that a lot of what was done in the name of conservation in the 20th century and beyond has created an “artificial divide” between nature and the people who live in and around those areas.
“Undoubtedly, this has caused massive harm to many communities – it’s time that the two are knitted together.”