Measurable Corporate Actions on Nature
SBTN Executive Director Erin Billman explains how institutional investors can use companies’ science-based nature targets to assess portfolio impacts and dependencies.
Science-based targets for nature are an important mechanism for driving business resilience and helping companies contribute to the Kunming-Montreal Global Biodiversity Framework, according to Erin Billman, Executive Director at the Science Based Targets Network (SBTN).
“The targets indicate whether a company is taking enough of the right actions in the right places at the right time to do its part to halt and reverse nature loss,” she told ESG Investor. “It’s a consistent, credible and measurable approach, making it possible for apples-to-apples comparisons across companies.”
At COP16 in Colombia, three companies – biopharma company GSK, building materials and solutions business Holcim, and luxury group Kering – publicly announced their validated science-based targets for nature, including fresh water and land pledges.
“This is a significant milestone in advancing ambitious corporate action on nature,” said Billman. “Without that adoption, we’re missing the step where stakeholders – including the financial sector – can identify who has and hasn’t set science-based targets and how much by when.”
The companies recently completed a year-long SBTN pilot programme with 14 others from a range of sectors, jurisdictions and supply chain positions. A summary of the pilot, published in September, reported that the majority (60%) of the participating companies received validation for some or all of their targets. The companies have until 10 January 2025 to decide whether they’re going to publicly adopt the targets or not.
“Significantly, the three companies decided to take the lead in Cali and make their commitments public [ahead of the deadline],” Billman added. “We anticipate that others from the first cohort will follow suit.”
Supply chain engagement
The SBTN target-setting process is divided into five steps: assess, prioritise, target-setting, act and track. During step one, many pilot companies reported that using the SBTN’s materiality screening tool and the high-impact commodity list (HICL) ensured that their materiality assessment was quick, rigorous, holistic and, therefore, credible.
Following comprehensive assessments, the pilot companies then began measuring their biggest impacts on nature and setting targets to address the key drivers of nature loss in ecosystems where they and their suppliers operate.
However, across the cohort there arose several common issues, which affected progress, and some were only able to provide partial submissions. Importantly, the summary report is transparent about those challenges, according to Billman.
“We’re at the early stages in a journey and have much to learn,” she said. “It is important to manage both rigour and feasibility as we advance – adhering to the rigour of science, as well as ensuring that companies can implement these targets, as they will only make a difference if they are adopted.”
The main obstacles include resource limitations and lack of traceability upstream. Supply chains haven’t been designed to fully identify where goods originate from, particularly by those positioned further down the value chain, according to Billman. “We are looking at different ways to tackle traceability issues, however it is a challenge writ large across this space,” she said.
The pilot participants reported that the prescriptive and rigorous approach developed by the SBTN helped to surface the data required to understand the entire supply chain. “Essentially, we provide an instruction manual that companies can follow and have confidence in,” she added.
There were also unexpected benefits along the way. For example, as a result of consulting upstream analysis, a company discovered that a high-risk pesticide was being used at one of its sourcing locations. This meant it could eradicate the pesticide from its supply chain.
Driving adoption
With a vetted proof of concept, the SBTN is expecting that the more than 150 companies participating in its corporate engagement programme will prepare science-based targets for nature.
“We already have a cohort that want to be part of the next wave of target validation when it opens up towards the end of this year,” reported Billman.
Being the ‘gold standard’ in target setting comes with its own set of challenges, which has led the SBTN to explore ways that it can better engage the wider market, she said.
“We have set a high bar for how much is enough. But we recognise that beyond the leading cohort of companies, there will need to be progression levels before reaching the gold standard,” she explained. “We’re in active dialogue with our stakeholders about what form that can take.”
While the SBTN tries to simplify its approach as much as possible to be inclusive, this has limits. It’s difficult to have resilience without complexity, argued Billman.
“The biggest challenge is determining how to manage that tension, so that we streamline as much as possible to make it digestible and meet where companies are at, but not oversimplify,” she explained.
“We must recognise and respect the fact that we need to build in more complexity and nuance over time. That’s a journey of capacity building necessary on all sides, including companies, financial institutions and the SBTN.”
State of play
One of her takeaways from COP16 was the low level of maturity across the board when it comes to understanding their relationship with nature. “Financial institutions are starting to ask the companies they work with or invest in what they are doing on biodiversity and nature, but they haven’t progressed to the ‘so what?’ question,” said Billman. “We need to help advance the discussion.”
From the SBTN’s perspective, financial institutions and institutional investors should be assessing and disclosing their portfolio impacts and dependencies, as well as encouraging and supporting clients and investees to set science-based targets for nature.
Following the five-step framework, they can start by using the SBTN’s materiality screening tool and HICL, as well as other resources such as the Exploring Natural Capital Opportunities, Risks and Exposure (ENCORE) tool, the WWF Biodiversity Risk Filter, and the Integrated Biodiversity Assessment Tool (IBAT).
“Beginning with full portfolio scans is helpful, followed by granular analysis using location data,” said Billman. “With the materiality results from step one, institutional investors can prioritise where to focus, using criteria such as exposure and influence levels, access to data, co-benefits for people and climate, considerations of various relevant stakeholders, etc.”
While the SBTN’s sector-specific guidance for financial players on setting science-based targets for nature has not yet been published, they can agree near-term targets and develop action plans for each pressure that is driving nature loss, for example land use, water use, pollution, greenhouse gas emissions, or where the financial institution has material impacts down the value chain, according to Billman.
This feeds into the fourth stage – act – in the mitigation hierarchy, which starts with avoidance and reduction, then restoration and regeneration, and lastly business and broader systems transformation.
Disclosure is the fifth step, which ensures that claims are put in context and justified, while highlighting progress and success stories. “We should celebrate progress on avoidance and reduction as much as on restoration and regeneration, because the science shows that the former is more impactful and important,” said Billman. “Even though it may not have as much of a ‘hero story’ allure to it, we have to devise ways to make it heroic.”
Institutional investors also need to impress on companies the importance of setting targets for nature, particularly in priority sectors and locations. Many are already doing so with the Science Based Targets Initiative’s climate targets, selecting companies in high-risk sectors where they have large exposures and/or spheres of influence.
For operations that have a high material impact on land, such as soy production in the Cerrado or palm oil production in the Congo Basin, companies can commit to playing their part in stopping ecosystem conversion, as well as landscape-level restoration and regeneration work. A similar approach can be taken for fresh water, for instance, cotton farming in Australia or mining in Canada.
“We have the methods for freshwater quantity and, in the case of agriculture, quality improvements today. Creating demand for these methods is a key lever that the finance sector can pull,” Billman explained.
The SBTN is planning to publish supplementary guidance for financial institutions and investors in the near future. However, Billman advised the sector not to sit and wait for the guidance to come, as there are “no-regret actions” that can be taken today.
Ramping up adoption
In Cali, Billman spent much of her time participating in engagement events with corporates and financial institutions. “It was great to hear firsthand from the pilot companies about their experience,” she said. “More than one participant said that they were going to use the information to influence their next stage of work.”
She believes that the important shift from commitments to implementation has begun. “This is when things get harder, but also when things get real,” Billman said. “The announcement by GSK, Kering and Holcin is meaningful because they’ve committed to taking action on their targets.”
At Davos in January, the SBTN intends to share the full list of companies that have publicly adopted their validated targets from the first cohort, along with a target tracker that will publish the supporting information to provide transparency to stakeholders.
The organisation also aims to release the next version of its target-setting methods in 2025, which will include the first targets for oceans, beginning with seafood value chains.
“We’ve now successfully demonstrated that setting science-based targets for nature is both feasible and valuable – and momentum is building,” said Billman. “Given nature loss is accelerating at an unprecedented rate, it is time for companies to act responsibly, urgently and with an ambition that matches the scale of the challenge.”
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