Fossil-based business models are existentially threatened; and the world’s
largest corporations have the resources, capacity for innovation, and global
reach to address the long-term effects of these models while creating new
business opportunities. The most significant economic opportunity of our
generation is the transition to a lower-carbon,
nature-positive
and regenerative
future — and
integrating biodiversity targets based on a thorough understanding of our
impacts on the natural
world
is the missing link between ambition and effective action to help stabilize the
climate.
Over the last decade, corporate climate ambition has driven material change to
business — however, many companies are still off track to meet their 2030 goals.
Only 5 percent of companies have high-integrity climate-transition
strategies, and less
than 1 percent of companies have assessed their
dependencies on nature. Why? Corporations face inflationary factors, measurement and
verification challenges, lack of clear and consistent policy frameworks,
internal resistance to change, pressure from investors focused on short-term
profits, and the complexity of integrating sustainability initiatives across
entire supply chains.
While Climate Week conversations went beyond ‘carbon tunnel
vision’
to include water and nature, most global convenings remain too narrowly focused
on carbon. As the COP16 Biodiversity
Conference continues this week and we
head toward
COP29
in Azerbaijan next month, global corporations must begin to elevate their
level of attention to water scarcity and ecosystem
degradation
to that of climate in their sustainability strategies.
Water scarcity, biodiversity loss and climate impacts are deeply
interconnected
— companies must address them holistically, but many are unsure how to proceed.
Tackling these issues will require a new way of thinking that moves beyond
emissions targets and accounts for broader environmental and social risks.
During Climate Week, we convened a cross-sector stakeholder
group
working on issues at the climate-nature-water nexus. Through those
conversations, we learned a significant barrier to action is reputational risk
and loss of social license to operate. This risk is exceptionally high when
addressing water and nature, which are more challenging to
quantify
than carbon emissions. Without clear standards, companies fear they will be
punished for trying to do the right thing — creating a paralysis that hinders
progress.
The lack of consistent and clear national and subnational policies also stalls
corporate action. A subsidy-driven policy such as the United States’
Inflation Reduction
Act
of 2022 can spur innovation, while compliance-driven policies such as the
European Union’s Corporate Sustainability Reporting
Directive
and Regulation on Deforestation-free
products
mandate action. Companies that operate in the US and EU often are caught between
conflicting incentives and requirements. As a result, they struggle to balance
compliance with innovation. This is incredibly challenging for effective action
on water and nature, which require more nuanced
approaches
than carbon-based strategies.
3 steps to effectively addressing water, nature and climate
To overcome these barriers, corporations need a roadmap for addressing water,
nature and climate that aligns with business strategy, investment and
collaboration.
-
First, they must integrate water, nature and climate
strategies
into their core business models — ensuring these efforts align with
voluntary and compliance reporting standards and include quantifying the
environmental and social risks posed by water scarcity and ecosystem
degradation. Companies need to understand the long-term business value at
risk — including supply chain
disruptions,
resource scarcity and regulatory penalties — and take steps to address it
now. They should also explore new business opportunities that arise from
climate, water and nature — whether through market-entry strategies, new
products and services, or mergers and acquisitions. -
Next, companies should develop innovative funding and investment strategies
to drive progress. To tackle these complex challenges, non-traditional
financing models are needed. Green and blue
bonds,
impact investments and public-private partnerships are essential to
unlocking the capital required for large-scale initiatives that
simultaneously address water, nature and climate issues. -
Perhaps most importantly, corporations must lead in building catalytic
communities — networks of diverse stakeholders including NGOs, tech
companies, investors, governments and Indigenous
communities.
These pre-competitive partnerships allow companies to share resources and
knowledge — particularly in areas such as biodiversity and water
conservation, where standards and impact
measurement
are lacking. By fostering a cross-sector dialogue that challenges norms,
pre-competitive partnerships can drive the integrated, systems-level change
necessary for meaningful progress.
We’ve already seen promising solutions arise from such collaborations. For
instance, one insight we heard from our Climate Week convening was the critical
role nature-based
solutions
can play in restoring ecosystems while generating business value. However, these
efforts require careful planning — especially when working with Indigenous
People and local communities, which serve as the original stewards of natural
capital
and hold climate-critical knowledge that can help reverse biodiversity loss.
Centering their voices is essential for achieving sustainable and equitable
outcomes.
Looking ahead to COP29, it’s clear that water and nature must be elevated to the
same level of importance as carbon — corporate strategies that fail to account
for these interdependencies will not have the necessary impacts. Bold leadership
and integrated systems thinking are essential to addressing the interrelated
challenges of water, nature and climate — and creating long-term value for both
business and society.
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Garrett Kephart
Co-Founder, President & CEO
Earth Finance
Garrett Kephart is the co-founder, President and CEO of Earth Finance — specializing in climate transition strategies for corporations and nonprofits.
William Sarni
Practice Lead, Water and Nature
Earth Finance
Will Sarni is the Practice Lead for Water and Nature at Earth Finance and a globally recognized expert in water strategy, technology innovation and investment.
Kat Hunt
Managing Director
Earth Finance
As Managing Director at Earth Finance, Kat brings over ten years of experience in sustainability and finance — helping corporate clients achieve decarbonization goals and guiding climate tech firms through strategic and operational growth.
Published Oct 24, 2024 8am EDT / 5am PDT / 1pm BST / 2pm CEST