The biodiversity crisis has moved up the international political agenda, and, driven by new legal requirements and global goals, it is having a major impact on the private sector. The role of SMEs was the focus of a theme day on October 31, organized in collaboration between IPBES in Denmark, CLEAN, DTU, and CBS.
The private sector’s role in the biodiversity crisis has come under serious scrutiny, and according to a new EU directive, companies will in the future be required to report on sustainability, including their impact on and dependence on nature and ecosystem services (Corporate Sustainability Reporting Directive, CSRD). The new EU directive is expected to be incorporated into Danish law in the summer of 2024 and will then impose entirely new requirements on companies’ ESG reporting, which covers the areas of environment and climate (E), social issues (S), and corporate governance (G). The specific reporting standards are currently in the final stages of adoption by the EU.
The adoption of the 2022 Kunming-Montreal Agreement has marked the beginning of a significant increase in international attention on private companies’ impact on—and dependence on—natural resources. The global biodiversity crisis and its consequences for private companies and financial institutions will soon be addressed by EU legal requirements regarding the documentation and reporting of impacts and dependencies, as well as full transparency, whereby documentation—including companies’ initiatives—will be made publicly available. A new IPBES methodology report on biodiversity and the private and financial sectors is currently being drafted and is expected to be released in 2025.
See also: Implementation of the COP 15 biodiversity targets is now underway
In addition to the reporting requirements set forth in the EU Directive, another reporting requirement—the EU Taxonomy Regulation—has already entered into force in 2022. Under this regulation, companies must classify all their financial activities—including revenue, investments, and operating expenses—according to six different climate and environmental objectives. Before an economic activity can be designated as sustainable, it must contribute positively to at least one of the six objectives and must not cause significant harm to the remaining climate and environmental objectives, including nature.
Both the CSRD and the EU Taxonomy will initially apply to large publicly traded companies with more than 500 employees, but since the impacts extend across the entire value and supply chain, the requirements will indirectly affect both small and medium-sized enterprises (SMEs). Furthermore, publicly traded SMEs will be subject to the law starting in 2026. SMEs were the focus of the theme day “Biodiversity and the Role of SMEs,” which took place in Copenhagen on October 31 as a collaboration between IPBES in Denmark, CLEAN—Denmark’s Environmental Cluster, CBS, and DTU.
Can you make money from biodiversity?
Hosted by CBS, more than 60 representatives from Danish SMEs and other stakeholders attended the theme day to learn more about a wide range of relevant issues, particularly the significance of the upcoming sustainability reporting (CSRD) for Danish SMEs, the requirements for meeting these standards, and whether there are business benefits to contributing positively to the biodiversity agenda.
Several experts were invited to shed light on the burning questions, including Katherine Richardson, a professor at the Center for Macroecology, Evolution, and Climate at the University of Copenhagen’s Globe Institute. There, she emphasized that the biodiversity crisis is at least as important as the climate crisis, and she urged companies, among others, to keep track—across the entire value chain—of both land use and biomass use, just as it is necessary for management to take responsibility for increasing employees’ understanding and engagement.
Only time will tell whether there is actually money to be made from biodiversity investments, concluded Katherine Richardson, but she added that, after all, we know that you can lose money by not taking it into account.
The green transition involves change
Among today’s speakers was Morten Knudsen, an associate professor at the Department of Organization at CBS, who gave the participants an introduction to the barriers to driving change, using agriculture and Danish pig farming as case studies.
Here, Morten Knudsen highlighted the potential pitfall that companies can fall into if their internal organization ends up hindering their green ambitions. Morten Knudsen argued that this is the case in Danish agriculture, where the organizational structure is geared toward continuously optimizing existing production, and where the organizational framework to support a green transition is quite limited.
One company that has embraced change is the VELUX Group, whose activities were presented by Sune Tobias Grollov, Head of Public Affairs for the Nordic region. Since its founding in 1941, the company has aimed to be a leader in society—a goal that has been translated into concrete actions. Among other things, the VELUX Group has committed to removing 4.5 million metric tonsof CO2 from the atmosphere by 2041—equivalent to the company’s historical emissions—while also embarking on a more complex effort to promote biodiversity. A partnership between the VELUX Group and WWF—the World Wildlife Fund—which includes forestry projects in Uganda, Vietnam, and Madagascar, has put them on track toward achieving this goal.
Risk of greenwashing
In addition to presentations by researchers, experts, and business representatives, the program concluded with a panel discussion featuring Karin Klitgaard from the Confederation of Danish Industry, Katherine Richardson from the University of Copenhagen, Sune Tobias Grollov from VELUX, and Isabelle Brodden from the Icelandic company Klappir. The panel discussed barriers, opportunities, and the risk of “greenwashing,” and in that context, it was emphasized that the term “sustainability” must be used with great care. Furthermore, in line with Morten Knudsen’s remarks and using the VELUX Group as an example, it was emphasized that we share a common responsibility, but that voluntary efforts, collaboration, and good intentions have had only limited impact. Consequently, the European Commission—backed by a number of companies—has embarked on a new course involving political regulation and legal requirements.
