#03 - Ecosystem condition: the indicator to watch for corporate biodiversity performance

This third issue of The Nature Intelligence Newsletter delves into one of the two indicators that are establishing themselves as critical to track how corporate manage biodiversity state and biodiversity impacts. It covers:

1. The definition of Ecosystem condition and its main metrics
2. Its integration into frameworks such as the CSRD, GRI, SBTN and TNFD
3. Its role for biodiversity credits

This issue is built as a detailed article you can go back to whenever you need. For a shorter introduction, you can focus on the first post displayed below. Now, make yourself comfortable, grab a cup of coffee and let's deep-dive into everything you need to know about Ecosystem condition.

What is ecosystem condition?

The definition

Ecosystem condition describes the overall quality of an ecosystem measured in terms of its biotic (living) and abiotic (physical rather than biological) characteristics

This definition comes from the Measuring Ecosystem Condition- a primer for business from the Align project:

Ecosystem condition is usually measured against an undisturbed state (which is sometimes, or even often, theoretical).

Hint: if you are unclear about reference state, baseline and undisturbed state, please have a look at my post on the topic.

Where does Ecosystem condition fit compared to other elements of biodiversity?

UN Biodiversity (the Convention on Biological Diversity or CBD) distinguishes three aspects of biodiversity:

1. Ecosystems
2. Species
3. Genes

"Goal A of the recently adopted Kunming-Montreal Global Biodiversity Framework (KM-GBF) explicitly [refers] to the integrity, connectivity, resilience, and area of ecosystems"

As noted by the same Align project, "condition and integrity are often used interchangeably in differing initiatives to describe the ‘quality’ of ecosystems, with integrity being a useful way of framing the measurement of ecosystem condition".

Ecosystem condition should be used in combination with other indicators measuring Species, such as Species extinction risk, and measuring biodiversity significance, e.g. through measures of overlaps with Protected areas.

The three biotic components of Ecosystem condition

Three main elements of ecosystem condition can be distinguished. This distinction is not that critical to understand for most businesses but it may gain in importance over time, as metrics and more refined business applications emerge. Again, quoting from Align's Ecosystem condition primer, the three elements are:

• Composition: "Indicators measure what species are present in the species assemblage as a whole and their relative abundances (rather than the number of individuals within a single species) within an ecosystem."
• Structure: "Indicators reflect aggregate biophysical properties of ecosystems, irrespective of specific species composition such as vegetation heights or seabed habitat complexity. At a landscape scale, structure also includes levels of fragmentation and connectivity (i.e., how linked one patch of habitat is to another)."
• Function: "Indicators measure a process that the ecosystem completes or reflects the ability to undertake these processes, e.g., net primary production, water filtration."

The main Ecosystem condition metrics

With the stage set with definitions from Align and the GBF, I will share some of my opinion on the main metrics.

Ecosystem-specific metrics are extremly diverse (see chart above in the Definition section).

Realm-specific metrics are less numerous and here is my opinion on the main ones used by businesses are:

• Mean Species Abundance (MSA): see my previous newsletter for an in-depth analysis of this metric. In short: the most used and recognised metric at this stage and focusing on composition.
• Potentially Disappeared Fraction (PDF): though not exactly an Ecosystem condition metric, it has so far been mostly considered as such because most pressure-impact models deriving PDF makes it behave like the MSA. It is used by many Life Cycle Impact Assessment (LCIA) methods (see mapping of tools in my previous newsletter).
• Ecosystem Integrity Index (EII): a more recent metric, has the advantage of covering all three aspects of composition, function and structure. But suffers from a total absence of published case studies and very limited uptake by the market, as well as a lack of public pressure-impact relationships to increase its use beyond buyers of the S&P Sustainable1 database.
• Biodiversity Intactness Index (BII): to some extent, the ancestor of the EII (which partly includes it). Suffers from the same limitations in terms of market uptake and usable pressure-impact relationships. Supported by the British Natural History Museum, including through a recent partnership with Bloomberg. Focuses on composition.

Integration into existing frameworks

All the major biodiversity and nature frameworks reference Ecosystem condition.

The one updated most recently, the Global Reporting Initiative (GRI) 's GRI101 biodiversity standard gives it the most prominent role, making it the lead indicator for biodiversity impacts:

But Ecosystem condition is also one of only two Global Core Disclosure Metrics on biodiversity state of the Taskforce on Nature-related Financial Disclosures (TNFD) . The other one being Species extinction risk. At this stage, both are placeholder metrics though, but that is likely to change in the short to medium term as standardisation gathers pace.

Ecosystem condition is also a disclosure requirement of the Corporate Sustainability Reporting Directive (CSRD). More exactly, it is paragraph 41 b of Disclosure requirement E4-5 Impact metrics related to biodiversity and ecosystems change of the European Sustainability Reporting Standards ESRS-E4 (some useful links: ESRS adopted versions, datapoints, datapoint methodology).

And finally, Ecosystem condition is also a indicator for the Science Based Targets Network (SBTN) 's step 3 on Land.

What role in biodiversity credits?

Ecosystem condition is an indicator used in many biodiversity credit schemes and methodologies currently being developed. Often combined with other metrics of biodiversity state or biodiversity significance, it helps to measure and demonstrate the biodiversity uplift justifying the release of biodiversity credits.

In this map from Simas Gradeckas , "habitat" can broadly be understood as "Ecosystem condition" (even though the match is not perfect):

One of the leading scheme uses Ecosystem condition as its main indicator:

Conclusion

Ecosystem condition is certainly a key indicator to watch. Combined with species extinction risk, I expect it to be the main indicator used by businesses (inlcluding financial institutions). It is already and will increasingly be used to measure (negative and positive) impacts, set targets and measure progress and report on it. The use of Ecosystem condition in Verra's Nature Framework is certainly indicative of how the indicator will establish itself in the near future.

Some of the key questions will thus be the cost (see my post) and accuracy of measurement, how to attribute changes in biodiversity state to corporate actions and the question of ecological equivalency (read The Biodiversity Footprint Intelligence Company (BioInt)'s Biodiversity Brief on the topic).

Happy to get your thoughts in comments! Please let me know if there is a topic you'd like me to cover in the future!

And if you found this issue of the newsletter useful, please remember to subscribe and feel free to spread it by liking, commenting or sharing it (for subscribers receiving it in their inbox, please click on the blue button below to be able to like)!

Disclaimer: all views are mine and do not represent any institution or initiative (such as Align)'s.

Access previous issues of the Nature Intelligence Newsletter:

#01 - Impacts on ecosystem integrity of a listed equity index assessed for the first time - STOXX600

#02 - All you ever wanted to know about the MSA