By Myriam Rapior

Biodiversity – the variety of life on Earth across genes, species, and ecosystems – is not just a concern for environmentalists; it is a cornerstone of business sustainability and resilience. The ongoing loss of biodiversity, driven by habitat destruction, overexploitation, pollution, climate change, and the spread of invasive species (UN Environment Programme, 2022), presents significant risks to companies worldwide. More than half of global GDP is endangered when biodiversity and related ecosystem services decline (World Economic Forum, 2023). 

Since companies are both contributing to and affected by biodiversity loss, they must take an active role in its protection – not only to meet regulatory demands but also to safeguard their own long-term viability. 

Why it matters

Companies rely on ecosystems for essential resources like clean water, fertile soil, and pollination. Industries such as agrifood, pharmaceuticals, textiles, and construction are particularly dependent on these ecosystem services and natural resources. The loss of biodiversity can disrupt supply chains, reduce resource availability, and increase costs. For example, impaired soil health undermines food production, and species extinction may eliminate potential medicinal sources.

As ecosystems weaken due to biodiversity loss and climate change, natural disasters like floods or droughts become more frequent and severe. This heightens operational risks for businesses, including disrupted logistics and damaged infrastructure. Companies located in areas vulnerable to such natural calamities must factor these risks into their business continuity planning.

Governments and international bodies are increasingly introducing regulations that mandate companies to assess, disclose, and mitigate their impact on biodiversity. The European Union’s Corporate Sustainability Reporting Directive (CSRD) includes specific reporting standards (ESRS E4) on biodiversity and ecosystems. Additionally, biodiversity-related laws like the EU Deforestation Regulation (EUDR) are imposing stricter controls on companies that are linked to biodiversity destruction through their supply chains. Companies that fail to comply with these regulations risk legal penalties, reputational damage, and loss of investor confidence.

Today’s consumers and investors are more aware of environmental issues and expect businesses to operate responsibly. Companies that fail to engage in biodiversity management risk reputational damage, losing brand loyalty and destroying customer trust. In contrast, businesses that actively protect biodiversity strengthen their reputation as sustainable leaders, gaining a competitive edge in markets where environmental, social, and governance (ESG) factors grow in importance.

Investors are increasingly favoring companies with strong ESG credentials, viewing companies that actively protect ecosystems as more future-proof. A company’s stance on environmental issues, including biodiversity, also influences its ability to attract top talent. Especially younger generations prefer employers who demonstrate a commitment to sustainability.

What businesses can do

Understanding the importance of biodiversity is just the first step. Companies need clear strategies and action plans to effectively manage their impact on biodiversity and ecosystems. Biodiversity management should focus on four key areas: governance, business model resilience, operational sites, and supply chains.

A robust biodiversity strategy should be embedded within the company’s overall governance framework. Clear responsibilities should be defined at all levels, from top management to operational teams. The board and senior management must regularly engage with biodiversity topics, ensuring that policies and strategies are in place to guide decision-making. Companies should establish biodiversity policies that are aligned with their sustainability goals and monitor progress through measurable targets.

Biodiversity loss threatens the resilience of business models, especially for companies dependent on natural resources. Companies must evaluate how their business activities affect and are affected by declining ecosystems. Building resilience requires adapting business models to be less reliant on ecosystem services at risk, such as clean water, healthy soil, and pollination. This is particularly important for sectors like agriculture, forestry, and manufacturing, which are directly linked to biodiversity.

Corporate sites – whether production facilities, offices, or distribution centers – can have a direct impact on local biodiversity. Companies should assess their ecological footprint, mitigate negative impacts, and restore or protect natural habitats. By conducting such environmental impact assessments, companies can better understand how their operations affect surrounding ecosystems, enabling targeted mitigation strategies.

Biodiversity risks extend beyond a company’s immediate operations, reaching deep into its supply chain. Raw material extraction, sourcing practices, and supplier relationships all play a role in biodiversity conservation. Companies should evaluate how their supply chains contribute to biodiversity loss and implement responsible sourcing strategies. Working closely with suppliers to ensure biodiversity-friendly practices is essential, as is understanding the broader ecological implications of resource use.

Biodiversity is not just an environmental issue – it is a business imperative. Companies that fail to manage their impact on biodiversity risk supply chain disruptions, regulatory penalties, and reputational harm. On the other hand, those that embrace biodiversity management can unlock new opportunities, from improved business resilience to stronger stakeholder relationships. For businesses, protecting biodiversity is not just about doing the right thing – it is essential for ensuring long-term profitability and sustainability in an increasingly uncertain world.

Myriam Rapior
Biodiversity Manager, University of Hamburg
Vice President, Friends of the Earth Germany / Bund für Umwelt und Naturschutz Deutschland (BUND)
Council Member, German Council for Sustainable Development (RNE)

This article was originally published in ESMT Update Winter 2024 (PDF).