In anticipation of Europe’s growing thirst for electric vehicles (EVs), Tesla opened its first Gigafactory on the continent in 2022. Located on the outskirts of Berlin, Germany, the factory produces one thousand EVs per day. Despite requiring less water per vehicle than most competitors, the site is licenced to withdraw 1.4 million cubic meters of groundwater each year: about half of total water extractions from the area.

The region has seen regular droughts in recent years, prompting environmental campaigns and red tape which delayed Tesla’s rapid expansion plans and spooked the market into a 3.1 per cent share price drop. Environmental concerns continue to disrupt plans to grow production to over a million EVs each year: this year, the local water authority has claimed the factory ejects six times more hazardous pollutants into waterways than permitted. Residents have voted to reject Tesla’s latest expansion plans and activists belonging to the “Tesla Stoppen” caused a costly power outage with an arson attack on a nearby pylon.

As the market for electric vehicles continues to grow, the need for essential minerals, such as lithium, nickel and cobalt required for car batteries also increases. These finite natural resources come with environmental and social trade-offs that present significant challenges. In Guinea, home to the Earth’s largest bauxite reserve – a source of aluminium – huge areas of farmland and natural habitat are being bought by mining companies for their operations, with reports of little or no compensation to villagers.

Our need for natural resources exceeds supply and this disparity brings consequences for people and planet. Science points to the evidence. The planetary boundaries framework shows that six of nine critical earth systems are changing rapidly and facing catastrophic harm. In fact, we’d need about 1.6 earths to maintain our current demands on nature, to include climate, biodiversity, land and water.

Make nature your business

The collective stewardship of nature is required to turn the tide and business must play its part. The loss of nature poses physical, transition and systemic risks to businesses and financial stability, and there have already been casualties.

Last year, chemical giant 3M was hit with a US$10.3 billion fine, with other legal cases still pending, after it was tied to the release of dangerous ‘forever chemicals’, namely polyfluoroalkyl substances (PFAS), into public water systems. Over 4,000 lawsuits were filed against the firm, alongside other companies. While the business has not admitted liability, it is now required to support the treatment of public water supplies across the US that detect PFAS ‘at any level’.

The BloombergNEF report ‘When the bee stings: counting the costs of nature-related risks’ (2023) names ten companies, across a range of sectors that “incurred financial losses as a result of poorly handled interactions with nature” including billions of dollars in legal liabilities, falls in share price, loss of brand value and fines. These examples demonstrate the financial importance of a business understanding and managing its impacts and dependencies on the natural world, and the need to integrate climate-and-nature-related risks and opportunities into financial reporting.

Assess business dependencies on nature

While this is no easy task, it must be carefully considered at the corporate level and soon. There is mounting regulatory pressure on business to address nature-related dependencies and risks. The EU’s Corporate Sustainability Reporting Directive (CSRD) is the most significant legislation on the horizon and shines a light on the need for business to understand and manage its dependency on nature. Organisations in scope must consider climate and nature in one framework, assess material risks across the entire value chain and take a double-materiality approach that requires addressing the environmental, and social risks caused by business operations as well as the climate-and-nature-related risks to the bottom line. This shift in corporate attitudes to support responsible business conduct has been further strengthened by the recent European Parliament vote to adopt the Corporate Sustainability Due Diligence Directive (CSDDD) in April this year. The message is clear – business must include climate and nature in strategic decision-making.

Build business and brand value

This change in the global business landscape also brings opportunity to advance the nature-positive agenda internally and make a compelling business case for action. Managing climate and nature-related risks means building a resilient supply chain that can reduce costs of business and enhance long-term profitability. It means access to new streams of capital and, in an era when the consequences of climate-and-nature risk are increasingly visible to and experienced by communities and consumers across the world, the opportunity to protect, enhance and grow brand and business value.

While the wins are compelling, the path to reaching the global goal of nature positive by 2030 brings many transformational and multidisciplinary challenges that will require support from all stakeholders throughout the entire value chain, including Scope 3. The size of the task means taking preparatory steps sooner rather than later and there are actions all organisations can take, now:

  • Define end goals: set the ambition from the top-down and align on a mission statement for net zero, nature positive.
  • Invest in data: this underpins every part of the challenge and it’s the single most important action to put into motion to be able to account for the nature footprint of the value chain.
  • Be context specific: organisations need to go deep and look at particular sites and sourcing regions to understand their interface with nature.

The nature space brings ambiguity and uncertainty to business because the ways to best manage the associated challenges are still nascent. But taking no action is not an option and a proactive approach will reap rewards by reducing future risk and optimising opportunity to grow value. Taking this time to understand your organisation’s interactions with nature will gain valuable business insights to inform strategic decision-making before regulation takes hold and time runs out. Businesses that pivot to position climate and nature at the centre of strategic decision-making will be best placed to become profitably sustainable.

  • Sustainable Futures: connecting climate and nature with business for better outcomes is on Wednesday 22nd May at London’s Barbican Centre. See full agenda and register here.