Water risk in North American pulp forests, soil organic carbon in Australia, untreated wastewater in China, and air pollution and carbon emissions in Russia are just some of the nature risks facing a major chemicals and cosmetics corporation that released a first-of-its-kind report on its biodiversity challenges Monday.

Tokyo-based Kao, which employs over 35,000 people, on Monday published its biodiversity risks and opportunities analysis as recommended by the Taskforce on Nature-related Financial Disclosures (TNFD), which it prepared in cooperation with consultants Accenture.

Dividing the planet’s land areas into 96,000 cells, each representing a half degree latitude and longitude, it found that Kao’s supply-chain from production of raw materials to the products hit the shelves might interface with as many as 15,000 of them – more than 15%.

Of those, 28% had nature that according to TNFD criteria are especially important for biodiversity, and warrant further detailed assessment.

The report illustrates the challenges awaiting multinationals and other large corporations that are coming under increased pressure to report their risks and dependencies on nature as the global biodiversity crisis worsens.

It found that given the level of biodiversity degradation that has already taken place, impacts on business activities will be significant whether or not the international community manages to find an effective response.

“It is not easy to fully prepare for these impacts, but to understand the contact point with nature and to evaluate how your business is dependent or has impacts towards nature would be the very first step to take,” Kao concluded.

“We believe it would lead to further significant steps to reduce society’s impact on nature and generate opportunities for business.”

LEAP OF FAITH

The analysis used the LEAP (Locate, Evaluate, Assess, Prepare) approach recommended by the TNFD when it released its v3.0 last November.

TNFD recently put out a fourth and last draft before a final version will appear later this year, but Kao said it specifically covered the perceived complicated LEAP analysis procedure in order to help other companies get going, becoming the first company to do so.

“We are disclosing the survey results with the purpose of accelerating biodiversity initiatives in the industrial world,” the report said.

In managing the risks from its supply-chain’s potentially wide-reaching impacts on nature, Kao said it was crucial to consider options in the context of wider economic and political developments.

Kao and Accenture created three potential future scenarios – two under which global and national climate and biodiversity regulations are strengthened and the challenges handled well, albeit with differing degrees of public awareness, and one where the global environment and economy collapses and international trade suffers under the weight of global conflict.

The company advised other firms to prioritise risks that are present across several different scenarios – in its own case primarily limited to raw materials, with prices likely to go up under the first two scenarios because there would be fewer, higher-quality producers, while under the third scenario raw material availability would fall away entirely.

Meanwhile, it also noted as priority risks those with a high probability of emerging, which under the two first scenarios were more stringent regulation and reporting requirements as well as the possibility of a decline in brand value due to changing consumer preferences, while under the catastrophic scenario, risks primarily related to the disappearance of nature as protection against natural hazards.

OPPORTUNITIES

Having defined those risks, the report went on to define 17 business opportunities related to them, as per the TNFD instructions, while stressing that this did not mean the company would necessarily act on any of those.

Those opportunities ranged from investing in agricultural robots that can improve efficiency to buying green bonds, but the report found that financing suppliers and investing in raw material reuse technology were the options that had the highest value for both nature and the company.

TNFD’s LEAP analysis is meant to put companies in a position where they can define specific metrics to report on in the future as well as help with target-setting.

Kao’s report stopped short of going through with those, but stressed the importance for companies to carry out similar risk/opportunity analysis.

“The time where we can no longer say that we know nothing about biodiversity, is approaching,” Accenture Japan’s managing director of sustainability practice, Joichi Ebihara, said in the report’s preface.

By Stian Reklev – stian@carbon-pulse.com

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