Climate has dominated the ESG agenda for the past decade. Carbon footprint, net zero, Scope 1-2-3: concepts that entered business vocabulary gradually but are now firmly established as standard criteria for banks and large clients. The same shift is now happening with a different topic — equally strategic, and far less explored.
Biodiversity is entering ESG frameworks, supply chain requirements, bank lending criteria and European reporting obligations. Not as an abstract environmental concern, but as a concrete business variable: natural resources, operational stability, access to finance, supply chain continuity.
The World Economic Forum has estimated that over half of global GDP — approximately 44 trillion dollars of economic value — depends moderately or highly on nature and the services that ecosystems provide. For businesses, nature is not a backdrop: it is a productive factor that rarely appears in financial statements, but whose degradation produces very real effects on costs, supplies and market access.
This article explains what all this means for an SME: which concepts are worth understanding, what is changing in the regulatory and market environment, and where to start.
Why biodiversity is harder to manage than climate
Before thinking about the implications for businesses, a distinction that is often overlooked is worth making. "Biodiversity" and "nature" are used interchangeably, but they are not the same — and the difference matters when it comes to identifying where a company is exposed.
According to the framework developed by the TNFD — the Taskforce on Nature-related Financial Disclosures, the main international body developing standards for nature-related risk disclosure — nature encompasses four broad realms: land, ocean, freshwater and atmosphere. Biodiversity is the variety of living organisms within these realms: animal and plant species, micro-organisms, habitats, soils and ecosystems. It is what makes nature productive, resilient and capable of adapting to change.
When biodiversity declines, ecosystems progressively lose their ability to provide resources in a stable way. Fewer pollinators means lower agricultural yields. Degraded soils mean lower-quality raw materials or higher production costs. Each local loss has cascade effects along the supply chain, difficult to isolate and often difficult to attribute to a single cause — but no less real for that.
Perché la biodiversità è più complessa da gestire rispetto al clima
There is one aspect that makes biodiversity structurally more difficult to address than carbon footprint, and it is worth stating upfront to avoid starting with the wrong expectations: there is no single universal metric, comparable to the tonne of CO₂, capable of summarising all impacts in one number.
With climate, the reference is clear: greenhouse gas emissions measured in CO₂ equivalent. With biodiversity it does not work like that. An impact on soil, one on water resources, one on habitats and one on pollinators are not directly comparable.
What makes the picture even more complex is the geographic factor. Using water in a water-rich area does not carry the same significance as using it in a territory already exposed to water stress. Occupying land in an already-compromised industrial zone is not equivalent to doing so next to a sensitive habitat. The same impact, in different contexts, can have very different consequences.
It is not just about how much you impact. It is about where. Biodiversity requires localised assessments, linked to specific territories, supply chains and ecosystems.
For an SME, this does not mean having to measure everything immediately. It means starting methodically: identifying the most relevant points, understanding where business and nature intersect, and progressively building a data foundation useful for decisions — before someone formally asks for it.
Why biodiversity is the next ESG frontier: four reasons
For years, biodiversity remained confined to conservation projects or corporate philanthropy. That is changing, and the pace of change is comparable to what brought carbon footprint from a niche topic to a standard evaluation criterion for banks and large clients.
The European Nature Restoration Law. Regulation (EU) 2024/1991 on nature restoration sets binding ecosystem restoration targets for EU member states. The law does not knock directly at SME doors with immediate penalties, but it will act as an accelerator on the environment in which companies operate: stricter criteria for permits, new limitations on water resource use, tougher requirements for industrial concessions in ecologically degraded areas.
CSRD reporting and the ESRS E4 standard. Under the CSRD and the ESRS E4 standard — dedicated specifically to biodiversity and ecosystems — large companies under reporting obligation must disclose impacts, risks and dependencies related to nature. And as already happened with Scope 3, this creates a cascade effect: to report correctly, large companies will need data from their suppliers.
TNFD as the language of the market. Even if an SME does not immediately adopt these standards in full, understanding their logic is essential for dialogue with banks and large groups. The TNFD framework — adopted in September 2023 and already used by hundreds of organisations globally — helps map the relationship between nature and business through the lens of dependencies and risks, providing solid data for transparency requests from investors.
Operational risk management. Depending on degraded natural resources means exposure to raw material scarcity, cost volatility, operational disruption and more difficult permits. This is particularly relevant in food and beverage, fashion, construction and manufacturing — where the link to ecosystems is direct and often underestimated.
>50%
of global GDP depends moderately or highly on nature
$44 trilioni
of economic value at risk from ecosystem degradation
source: World Economic Forum — Nature Risk Rising, 2020
The four concepts needed to navigate the topic
To understand the relationship between business and nature, the TNFD framework uses four questions that translate biodiversity into concrete business language.
Dependencies: What does the business depend on?
Which elements of nature does the company's activity depend on to function? A food company depends on pollinators, fertile soils, regular rainfall. A manufacturer depends on raw materials whose production is rooted in specific ecosystems. Dependencies can be direct — in day-to-day operations — or mediated through the supply chain, in which case they are often less visible but no less real.
Impacts: What does the activity change?
How do the company's activities modify the state of nature? Land use, water extraction, discharges, emissions, waste, habitat transformation: every production process leaves a trace. Impacts can be negative — most are, at least in part — but can also be positive, when a company restores degraded land, reduces soil sealing or adopts regenerative supply chain practices.
Risks: What problems can result?
These can be physical risks — water scarcity in a supply area, ecosystem degradation affecting a raw material, crop failure due to pollinator decline — or transition risks: new regulations, harder-to-obtain permits, increasingly strict requirements from clients and banks, reputational pressure. Both categories are already present in the economic system, even if not yet in most company accounts.
Opportunities: What advantages can be built?
The biodiversity crisis is not only a source of risks. Companies that reduce their impact on nature, adopt more traceable supply chain practices and develop products with a lower ecosystem footprint gain real competitive advantages: preferential access to green finance, positioning in public tenders, market differentiation, stronger relationships with clients and investors increasingly attentive to these issues.
Want to understand where your company depends on nature and which risks it can anticipate?
Where to start: the LEAP approach
"Understood the topic. But where does one actually begin?"
The right question. With biodiversity, the risk is the same that many companies already experienced with Scope 3: trying to measure everything immediately, then stalling in front of a perimeter that is too wide, incomplete data and supply chains that are difficult to reconstruct. The most useful answer is not to immediately commission a complex study. It is to start with a structured analysis, proportionate to the size of the company and focused on the genuinely relevant points.
This is what the LEAP approach developed by the TNFD is for — a practical four-step method for bringing order: understanding where the company intersects with nature, which dependencies and impacts matter most, which risks and opportunities emerge, and how to build a credible response.
L Locate — Where do the company's activities intersect with nature? Plants, warehouses, land, critical suppliers. Are there sites near protected areas, vulnerable water basins, drought-risk zones, sensitive habitats? For an SME, this phase can start from a simple map: direct sites, main suppliers, most relevant raw materials.
E Evaluate dependencies and impacts — What does the company depend on? Does it use water? Does it depend on agricultural raw materials, timber, natural fibres, biological ingredients? Does it generate discharges, waste, land consumption, pressure on packaging or high-environmental-intensity supply chains? This step translates daily operations into terms of relationship with nature.
A Assess risks and opportunities — The identified dependencies and impacts are translated into business language: which physical or transition risks emerge? Which opportunities open up by reducing impacts or improving supply chain resilience?
P Prepare the response — Define what to do, which data to collect, which objectives to set and how to communicate results — in a credible, proportionate and verifiable way. Even a simplified first application, focused on the most relevant processes and supply chains, provides a picture that many SMEs do not currently have.
The value of the LEAP approach is not in producing a perfect disclosure immediately. It lies in building awareness and order. In a market that will increasingly ask for data on nature and biodiversity, having already done this work can make a substantial difference.
Where biodiversity becomes a business issue: three concrete examples
Biodiversity is not an abstract topic for companies operating in sectors with a direct link to natural resources.
Food and beverage: direct dependence on pollinators, soil fertility, water availability and climatic stability throughout the agricultural supply chain. A drought in a sourcing area, the decline of pollinators in a production zone, or the degradation of a supplier's soils translate quickly into reduced volumes, lower quality and higher costs. The exposure is not future — it is already reflected in commodity prices.
Manufacturing and industrial production: raw materials come from specific ecosystems — timber, plant fibres, minerals, natural pigments, bio-based solvents. Traceability of these supply chains is becoming an increasingly common requirement from structured clients, banks and public tenders. Being unable to respond to these requests means losing competitive positioning.
Construction, real estate and infrastructure: land consumption, soil sealing, stormwater management, proximity to protected natural areas. The Nature Restoration Law and local regulations are tightening the rules on permits for new projects in ecologically sensitive areas. Companies that have not mapped their exposure may face unexpected delays and costs.
How Kyklos Carbon can help
The starting point is the same that makes any ESG strategy solid: measurable data, recognised methodologies, verifiable processes.
The object of analysis changes — from CO₂ to the relationship between business, nature and biodiversity — but the logic is the same.
- Analysis of the company-nature relationship: we map sites, supply chains, dependencies, impacts and risks using the LEAP approach — calibrated to the size and operational complexity of the company.
- Strategy and concrete actions: we identify operational priorities — reducing water consumption, raw material traceability, green area management, packaging, critical suppliers — and support the definition of measurable objectives.
- • ESG reporting support: we integrate biodiversity into the sustainability report with metrics consistent with TNFD, GRI 101 Biodiversity and ESRS E4 frameworks, adapted to the company's maturity level.
- Verifiable environmental communication: we translate data and results into clear, documented and credible messages — avoiding generic claims that are difficult to substantiate, in line with what the ECGT Directive requires.
Let's build together the first analysis of your company's relationship with nature
Conclusion
Biodiversity is not a future topic. It is the topic of this decade — and it is already on the agenda of European regulators, institutional investors and the most forward-thinking corporate clients.
The trajectory is the same as climate: voluntary frameworks that become market standards, market standards that become regulatory obligations, obligations that cascade through supply chains. Anyone who lived through the Scope 3 cycle recognises the pattern.
The starting point does not need to be perfection. It needs to be awareness: understanding where your company depends on nature, where it impacts it, where it might be exposed to risks it does not yet see. From there, everything else can be built — progressively, proportionately, credibly.
Companies that prepare in advance — structuring data and processes before they become a formal requirement — do not just reduce a compliance risk. They strengthen their competitive position with clients, banks and stakeholders.
Fonti
TNFD — Recommendations of the Taskforce on Nature-related Financial Disclosures (settembre 2023)
Regulation (EU) 2024/1991 — Nature Restoration
After climate, comes biodiversity. And the SMEs that think it doesn't concern them are making a costly miscalculation.