10 Reasons to Track a Corporate Carbon Footprint
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In this article, we’ll explain what a corporate carbon footprint is, why it’s important, how it is measured, and reasons why your company should track it too.
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The Taskforce on Nature-related Financial Disclosures (TNFD)
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The Taskforce on Nature-related Financial Disclosures (TNFD) is an international initiative that builds upon the approach developed by the Taskforce on Climate-related Financial Disclosures (TCFD). Essentially, the TNFD adapts and extends the TCFD's method of integrating climate data into financial reporting, but with a focus on nature-related information. It offers a structured framework that allows companies to identify and manage environmental risks and opportunities, helping to steer investments and business activities towards actions that have a positive impact on the environment.
In September 2023, the final framework was published, representing a significant step forward in integrating nature-related considerations into financial practices and risk management processes.
What is the Taskforce on Nature-related Financial Disclosures (TNFD)? Why was it created and what does it aim to achieve?
What is TNFD?
What does TNFD mean?
“ TNFD stands for "Taskforce on Nature-related Financial Disclosures". In a nutshell, the TNFD is a global initiative that aims to provide financial organisations and companies with a complete picture of their environmental risks and opportunities. ”
The Taskforce has developed a risk management and disclosure framework for organisations to report and act on issues relating to nature, with the ultimate aim of redirecting global financial flows away from negative nature-linked outcomes towards more environmentally positive ones
The Taskforce is made up of 40 different members. Each member represents a financial institution, corporation or market service provider.
In addition to the expertise that the Taskforce Members bring, the TNFD also receives support from an impressive team of experts, including:
- The TNFD Forum - providing consultation from over 800 institutional supporters
- The TNFD Knowledge Partners - a collective of 18 leading scientific bodies and standard-setting organisations
- TNFD Consultation Groups - informal bodies based in select countries with the aim of expanding outreach and engagement
- The TNFD Stewardship Council - representatives of the founders and those funding the work of the TNFD
- The TNFD Secretariat - manages and coordinates the Taskforce, the Forum and the Knowledge Partners
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Why was the TNFD created?
In July 2020, it was announced that a task force on Nature-related Financial Disclosures would be created. This was in response to the growing call to consider the impact of nature on financial and business decisions.
After this initial announcement, what followed was a preparatory phase involving a working group made up of 75 members, including financial institutions and corporate organisations, 8 governments, and 18 different consortiums. Together, and with the support of a technical expert group, they worked to define the scope and work plan of the TNFD.
“ The TNFD's mission in their own words is “to develop and deliver a risk management and disclosure framework for organisations to report and act on evolving nature-related issues and opportunities, with the ultimate aim of supporting a shift in global financial flows away from nature-negative outcomes and toward nature-positive outcomes.” ”
When the TNFD was formally launched one year later in 2021, it was met with support from market participants as well as political endorsement from the G7 Finance Ministers and the G20 Sustainable Finance Roadmap.
What challenges are they trying to address?
Nature loss and damage to our ecosystems represent both risk and opportunity for businesses.
“ According to the World Economic Forum: “More than half of the world's economic output - with an economic value of $44 trillion - is moderately or highly dependent on nature. The world economy's high dependence on nature means that the loss of nature - for example, 83% of wild mammals and 50% of plants are now recorded extinct - poses a serious threat to business stability and financial stability. A positive environmental transformation effort can generate up to $10.1 trillion in business value annually and create 395 million jobs by 2030.” ”
Stopping and reversing the decline of natural capital and mitigating and managing nature-based risks is only possible where businesses of all sizes and financial organisations across the board work to identify, assess, manage, and disclose nature-related dependencies, impacts, risks, and opportunities.
Unfortunately, as it stands, companies and financial bodies don't always have the necessary information to allow them to understand how nature impacts their financial performance, and existing risk management approaches often fall short of identifying nature-related factors. The issue is that by failing to assess nature-related issues, companies, and financial firms make themselves vulnerable to material risks.
The TNFD wants to address this information gap. It believes that by providing information to these companies and financial bodies, they will be able to better consider evolving nature-related dependencies, risks, and opportunities as part of their strategy and resource allocation processes.
👉 Discover why biodiversity loss is bad news for humankind over on our blog.
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Who is impacted by the TNFD?
The TNFD will impact a wide range of market participants. For example investors and financial institutions, analysts, corporations, regulators, stock exchanges, accounting firms, credit rating agencies, and financial service providers.
Although the framework is voluntary, it's likely that its recommendations will be adopted by regulators across a growing number of countries. Just as we've seen with the TCFD Framework.
What are the TNFD's 7 principles?
There are seven founding principles that are central to the TNFD's work and that have shaped the content of the framework. These are outlined as:
- Market usability - the TNFD aimed to develop a framework that is easy to use and valuable to market participants such as corporations and financial organisations.
- Science-based - the TNFD adopted a science-based approach and used well-established and emerging scientific evidence as a grounding for their work.
- Nature-related risks - the framework embraces nature-linked risks including financial risks, nature dependencies and impacts, and organisational and societal risks.
- Purpose driven - the TNFD's purpose is to reduce risks and increase nature-positive action.
- Integrated and adaptive - the framework's measurement and reporting can be easily integrated and also complement already existing disclosures and standards.
- Climate-nature nexus - the framework adopts an integrated approach to nature-related risks, scaling up finance for solutions.
- Globally inclusive - the framework is intended to be valuable and relevant across the globe, regardless of territory.
We've already talked about how the goal of the TNFD is to provide a framework for organisations to report on nature-related risks and opportunities. Which will in turn improve the availability of data and allow organisations to consider nature-based risks and opportunities more effectively. But how exactly will this be achieved?
The TNFD hasn't created a new standard, it's simply built on existing ones. In order to develop its integrated framework, it adopted what it calls an “open innovation approach”. This means that they welcomed the participation of market participants, leading scientists, and data bodies.
“ The TNFD believes that by encouraging participation and constructive feedback they can improve the framework's relevance, usefulness, and ultimately, its effectiveness. It also means that their work is scientifically supported and ready to be implemented by companies and financial institutions. ”
The TNFD Framework
In March 2023, the TNFD released the fourth iteration of its beta framework. This was followed by the release of the final version of the framework on September 18th, 2023.
The framework is designed for use across sectors, by companies and financial bodies of different sizes, and in any country across the world. The main aims of the framework are identified as:
The aims of the TNFD framework
Alignment
The framework is designed to support the alignment of the global baseline of sustainability disclosures currently being created by the ISSB (International Sustainability Standards Board) with best practice standards and tools.
It also builds on and aligns with the disclosure requirements created by the Taskforce on Climate-related Financial Disclosures (TCFD), which formed the basis of globally aligned environmental disclosure standards.
Hold up, you're probably wondering what the difference between the TNFD and the TCFD framework is. Well, while the TNFD framework adopts the same pillars as the TCFD and they both aim to provide financially relevant, decision-useful data, the TNFD focuses on nature-based risks and opportunities, while the TCFD focuses on climate-related disclosures.
Climate vs nature - what exactly do we mean by climate-related risk and nature-related risk? Well, risks relating to nature encompass biodiversity loss and ecosystem degradation, for example, soil fertility, pollution, and pathogens. Climate-related risks are those related to the physical impacts of climate change such as extreme weather, heat waves, rising sea levels etc.
To learn more about the TCFD standards head over to our article.
Adaptability
The TNFD's framework is designed for use regardless of jurisdiction. It's flexible in order to accommodate the varying regulatory requirements in different countries across the world.
Action
The TNFD's framework encourages companies and financial organisations to take action by reporting on nature-related dependencies, impacts, risks, and opportunities.
Ambition
The framework recognises that the consideration of nature-related issues may be new to a lot of organisations, and so it aims to encourage disclosure ambition within these organisations over time.
The four pillars of the TCFD Framework
The recommended disclosures are structured around four pillars:
- Governance: The governance processes, controls and procedures the organisation uses to monitor and manage nature-related issues;
- Strategy: The approach the organisation uses to manage nature-related issues;
- Risk and impact management: The processes the organisation uses to identify, assess, prioritise and monitor nature-related issues; and
- Metrics and targets: The organisation’s performance in relation to nature-related issues, including progress towards any targets the organisation has set or is required to meet by law or regulation.
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Overview of the TNFD Framework
- Tools and guidance - The framework lays out the foundations for an understanding of the interplay between nature and business, including how a business relies on and affects nature, as well as the potential risks and opportunities. To facilitate this understanding the TNFD has developed a suite of tools and guidance to support the rollout of disclosures.
- Integration of TCFD Framework and additional disclosures - The TNFD framework outlines comprehensive recommendations and guidance, encompassing the basic principles of nature-related disclosures and the general criteria for preparing such disclosures. The framework proposes 14 disclosures in total: 11 that mirror those recommended by the TCFD, as well as 3 unique additions associated with nature. The additional disclosures focus on stakeholder rights and engagement, priority locations, and value-chain risk and impact management. These disclosures are applicable across all sectors and are designed to be included alongside a company's annual financial statements.
- Core and sector nature-related metrics - The TNFD provides considerable detail on both core global metrics and sector-specific metrics to be used to assess and manage material nature-related dependencies, impacts, risks, and opportunities. Organisations are encouraged to report on all of the core metrics on a 'comply or explain' basis, as well as any relevant sector-specific metrics.
Note: metrics are the specific measures or indicators used to assess and communicate the impact of a business on nature, and the associated risks and opportunities. - Alignment with other standards - The TNFD disclosures are designed to align with the newly released standards of the International Sustainability Standards Board (ISSB). They have also been developed to ensure consistency with the TCFD recommendations in an effort to merge nature-related and climate-related reporting. This is why the two frameworks align in terms of terminology, structure, and methodology. The TNFD has also been organised around the TCFD's 4 pillars, namely: Governance; Strategy; Risk and impact management; and Metrics and targets.
The LEAP Process
Another crucial component of the TNFD Framework is what's referred to as the LEAP process. The LEAP process introduces a practical ‘step-by-step' nature-related risk and opportunity assessment process. The LEAP guidance isn't a disclosure recommendation or mandated process, it's voluntary guidance designed to help organisations on a practical level as they begin to evaluate their nature-based risks and opportunities.
The LEAP process has four main components:
- Locate - companies should locate their interactions with nature
- Evaluate - companies should evaluate their dependencies and impacts on nature
- Assess - companies should assess their risks and opportunities
- Prepare - companies should prepare to respond to these risks and opportunities
Each of the four components is also supplemented by further sub-guidance that can be found on the TNFD's website.
What about Greenly?
At Greenly we can help you to assess your company’s carbon footprint, and then give you the tools you need to cut down on emissions. Why not request a free demo with one of our experts - no obligation or commitment required.
If you enjoyed this article, check out our legislation tracker to discover what frameworks, regulations and guidelines apply to your business and industry.
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