Explore the resources below to assist in completing this action.
Biodiversity Guidance action 4.2.2
4.2.2 Identify criteria for your materiality assessment
After identifying your potential impact and dependency pathways, these should then be prioritized by screening against set criteria to determine materiality. The criteria for assessing materiality may vary when including biodiversity. For example:
- Operational – Business operations, in particular upstream operations, may be specifically dependent on biodiversity, as well as on the non-living components of natural capital.
- Legal and regulatory – Biodiversity may be managed under a different set of regulations than the non-living components such as water resources.
- Financing – Some financial institutions are starting to quantify biodiversity impacts within their risk management processes. This means a company’s biodiversity impacts can affect their access to capital.
- Reputational and marketing – These criteria may have higher materiality weighting for biodiversity due to the intrinsic value of biodiversity to many stakeholders or customers.
- Societal – For biodiversity, societal dependencies are examined through business’s impacts that affect delivery of goods and services to society. With the importance of biodiversity being increasingly recognized, unaccounted impacts on society increase your reputational, financial, and regulatory risks and opportunities.
Examples of impact and dependency pathways specifically related to biodiversity are provided in table 4.1 along with their associated materiality criteria. Multiple impact pathways may act together to cause a change in state of biodiversity. For example, vegetation clearing and pollution may act synergistically to reduce the quantity and quality of biodiversity in an area.
Impact driver/ dependency
Changes to biodiversity
Value to business/society
Area of open cast mine
Reduction in total vegetation cover and structural complexity
Increased damage cost from flood or cost of setting artificial flood protection
Declining breeding success of protected species
Abatement costs of mitigation measures required through regulations
Legal and regulatory
Pollination of crops
Declining biodiversity in pollinator-supporting habitats
Costs of reduced yields, unpredictable upstream supply and decreased pollination of surrounding habitats (affecting livelihoods of local communities)
Building up these impact and dependency pathways allows you to map out the impacts and dependencies on biodiversity as part of your natural capital assessment.
Tools have been developed which can aid in the assessment of materiality of your business dependencies and impacts on biodiversity. At present these are restricted to understanding species and habitats and do not represent the variety of species, ecosystems, and genetic diversity, or the intrinsic value of biodiversity. For example, the ENCORE tool (Exploring Natural Capital Opportunities, Risk and Exposure) assessed the importance of the contribution an ecosystem service makes to a production process, and the materiality of the impact if this service is disrupted. Two materiality criteria were considered in the ENCORE analysis: 1) How significant is the loss of functionality in the production process if the ecosystem service is disrupted? and 2) How significant is the financial loss due to the loss of functionality in the production process?