Businesses Can Turn Nature-Related Risk Management Into Competitive Advantage, Study Finds

Businesses that recognize their exposure to nature-related risks early could gain a strategic advantage over competitors that continue to treat biodiversity and ecosystem loss as peripheral sustainability issues, according to a new study reported by BusinessGreen.

The research warns that boards failing to account for the financial and operational costs linked to nature degradation may be leaving their organisations exposed to physical, regulatory, reputational, and strategic risks.

For companies, nature-related risk can include water scarcity, flooding, soil degradation, pollinator loss, deforestation exposure, raw material instability, and ecosystem decline across supply chains. These issues can affect production costs, asset values, insurance availability, procurement resilience, financing conditions, and market access.

The findings reflect a wider shift in corporate sustainability. Nature is increasingly being treated as a business resilience issue, not only an environmental or conservation concern.

Why Nature Loss is Becoming Financially Material

The financial relevance of nature loss is becoming clearer as companies face rising disruption linked to ecosystem degradation. A business may depend on clean water, fertile soils, stable weather patterns, forests, fisheries, or pollinators without fully recognising those dependencies in its risk management systems.

When those natural systems are degraded, the commercial consequences can be significant. Water stress can affect manufacturing, mining, energy production, agriculture, textiles, food processing, and pharmaceuticals. Soil degradation can reduce agricultural yields and increase input costs. Deforestation and land-use change can expose companies to legal, reputational, and sourcing risks. Flooding and heat stress can damage assets, interrupt operations, and raise insurance costs.

These risks are especially relevant for companies with complex supply chains. A business may have low direct environmental exposure at its headquarters or production facilities, while still depending on suppliers operating in water-stressed regions, deforestation-risk areas, or ecosystems vulnerable to climate change.

The Link Between Nature and Net-Zero

Nature-related risk is closely connected to climate strategy. Many climate risks are intensified by degraded ecosystems. Wetlands, forests, soils, grasslands, and coastal ecosystems can help regulate water flows, store carbon, protect communities from extreme weather, and support agricultural productivity.

If those systems are weakened, companies may face higher climate adaptation costs and greater operational instability. For example, the loss of wetlands can increase flood exposure. Poor soil health can reduce resilience to drought. Forest degradation can undermine carbon storage and disrupt local weather and rainfall patterns.

This matters for companies working toward net-zero because emissions reduction alone may not be enough to protect long-term business value. A company can cut operational emissions while remaining exposed to nature-related risks in its supply chain. Conversely, investments in watershed protection, regenerative agriculture, sustainable sourcing, biodiversity restoration, and nature-based solutions can support both climate and resilience goals.

First Movers May Gain an Advantage

The study’s central argument is that companies that act early may be better positioned than those that wait for regulation, investor pressure, or physical disruption to force action.

First movers can begin by mapping where their operations and supply chains depend on nature. This may include identifying key commodities, production sites, suppliers, watersheds, land-use exposure, and ecosystem services that are critical to business continuity.

From there, companies can assess which risks are most material. A food company may prioritise soil health, water availability, and pollinator dependence. A real estate developer may focus on flood exposure, drainage, biodiversity requirements, and planning rules. A mining or industrial company may assess water use, land disturbance, permitting, and restoration obligations. A financial institution may examine portfolio exposure to nature-dependent sectors.

Companies that develop these capabilities early may be able to reduce costs, avoid disruption, improve supplier relationships, strengthen investor confidence, and identify new business opportunities linked to nature-positive markets.

Reporting Expectations are Increasing

Investor and reporting expectations are also rising. The Taskforce on Nature-related Financial Disclosures, known as TNFD, has become one of the main frameworks used by companies and financial institutions to assess and disclose nature-related dependencies, impacts, risks, and opportunities.

The growing uptake of nature-related disclosure reflects a broader trend in sustainable finance. Investors increasingly want to understand whether companies are exposed to ecosystem degradation, water stress, deforestation, biodiversity loss, or regulatory changes linked to land and resource use.

However, many businesses still face practical challenges. Nature data is often location-specific, fragmented, and harder to standardise than greenhouse gas emissions data. Companies may not have full visibility into supplier practices or ecosystem conditions in upstream value chains. They may also lack internal processes for translating ecological risks into financial terms.

This creates a gap between exposure and management. Companies may be materially exposed to nature-related risks without yet having the systems to measure, disclose, or manage them effectively.

Sector Implications

The implications differ by sector.

For food and agriculture companies, nature risk is directly linked to productivity, sourcing stability, water availability, soil health, and commodity prices. These companies may face growing pressure to support regenerative agriculture, reduce deforestation exposure, and improve traceability.

For real estate and infrastructure firms, nature is increasingly relevant to planning, permitting, asset resilience, and adaptation. Flood risk, urban heat, biodiversity net gain requirements, and drainage capacity can all affect project design and long-term asset value.

For utilities and industrial companies, water availability, pollution controls, land-use impacts, and ecosystem permitting can affect operations and expansion plans. Companies with large physical assets may need to assess how nature degradation and climate change interact at the site level.

For financial institutions, nature-related risk can appear through lending, underwriting, investment portfolios, and insured assets. Banks, asset managers, and insurers may face growing pressure to assess whether clients and portfolio companies are exposed to nature loss or contributing to it.

From ESG Issue to Board-Level Risk

The study reinforces the need to move nature from sustainability teams into enterprise risk management. For boards, the question is no longer only whether the company has a biodiversity policy. It is whether the company understands where it depends on nature, where it affects nature, and how those dependencies and impacts could affect long-term value.

Procurement teams may need to improve supplier traceability and commodity risk mapping. Finance teams may need to consider whether nature-related risks could affect asset valuations, cost of capital, insurance costs, or capital allocation. Legal and compliance teams may need to monitor emerging rules on deforestation, environmental claims, biodiversity protection, and land-use impacts.

For sustainability teams, the challenge is to connect nature with climate, water, circular economy, supply chain due diligence, and disclosure. Treating each topic separately may leave companies with incomplete risk assessments and fragmented strategies.

Practical Steps for Companies

The practical next step for many businesses is not to produce a perfect biodiversity strategy immediately. A more realistic starting point is to identify the most material nature-related dependencies, impacts, risks, and opportunities.

Companies can begin by mapping priority sites, suppliers, commodities, and markets. They can then assess exposure to water stress, ecosystem degradation, land-use change, deforestation, pollution, and biodiversity-sensitive areas.

Once priority risks are identified, companies can integrate nature into procurement standards, supplier engagement, site management, investment decisions, climate transition plans, and corporate reporting. They can also set measurable targets where the evidence base is strong enough, while improving data quality over time.

The most effective approaches are likely to be those that connect nature action with business value. This could include reducing water use, improving resource efficiency, protecting critical supply chains, lowering exposure to regulatory risk, or developing new products and services that support nature-positive outcomes.

Nature as a Competitiveness Issue

The BusinessGreen-reported study adds to a growing consensus: nature loss is no longer only a conservation issue. It is becoming a business resilience, capital markets, and competitiveness issue.

Companies that understand this earlier may be better placed to manage disruption, meet stakeholder expectations, and identify new sources of value in the transition to a nature-positive economy.

For businesses working toward net-zero, the message is especially important. Climate strategies that ignore nature may overlook key physical and supply chain risks. Nature strategies that are integrated with climate, finance, procurement, and risk management may provide a stronger foundation for long-term resilience.

Source: www.businessgreen.com