The TNFD Framework Final Recommendations – What to look out for

This article was jointly authored by Louise Quarrell, Charlie Holmes, and Vicki Ling ?with contributions from Barnabas Harrison, Swasti Saraogi.

What is TNFD and why is it important?

Back in March, we wrote an article highlighting the nature imperative and how the TNFD (Taskforce on Nature-related Financial Disclosures) framework would help companies address it. Now, almost 6 months later, the TNFD has published its final recommendations, having completed pilot testing with over 200 companies and consultations across 4 continents.

Whilst engagement around nature is on the rise, humans continue to damage and disrupt its productivity and resilience. As crucial ecosystems near tipping points, the landscape we face looks bleak – in every sense.

Nature’s intrinsic link to climate change has propelled it forward as the new frontier of corporate sustainability action. Organisations are starting to appreciate that their interactions with nature result in both corporate risks, and opportunities, which can affect long-term enterprise value. This is where the TNFD can help.

Like its climate twin the TCFD (Taskforce on Climate-related Financial Disclosures), the TNFD is an international, market-led initiative aiming to deliver a risk management and disclosure framework to help organisations respond to nature-related (rather than climate-related) risks and opportunities.

It was developed to provide a robust and consistent framework, which businesses can use to disclose key information regarding their relationship with nature, allowing their investors to make informed decisions, and the businesses themselves to take appropriately targeted action.

How does it fit into emerging nature-related regulation and voluntary disclosures?

The TNFD is part of, and arguably leading, a continued raft of nature-related legislation, voluntary disclosures, and target-setting frameworks.

With regards to nature-related legislation, 2023 has been an important year, particularly in the EU, with the Regulation on deforestation-free products entering into force in June. Under this, any operator or trader of ‘high impact’ commodities (e.g., soy, beef, palm oil) and some of their derived products must prove that said products do not originate from recently deforested land or have contributed to forest degradation. To strengthen the implementation of this, the EU Commission has also set up its own joint taskforce with counterparts in Malaysia and Indonesia to address deforestation relating to palm oil production in particular. Looking internally, the Commission is also producing a directive on soil health, which would lay out rules for monitoring and advocating sustainable soil use and restoration, all with the aim of bolstering its ambitious Biodiversity strategy for 2030.

In July, another critical milestone arrived with the EU Commission’s adoption of the European Sustainability Reporting Standards (ESRS), which requires all companies subject to the Corporate Sustainability Reporting Directive (CSRD) (around 55,000 of the EU’s largest businesses) to report on a full range of environmental, social and governance issues. The ESRS includes specific requirements relating to Biodiversity and ecosystems (ESRS E4) and Water and marine resources (ESRS E3), alongside disclosures indirectly related to nature (E1 Climate change, E2 Pollution, E5 Resource use and circularity). To ease the expectation on companies, each requirement has accompanying guidance, and ESRS E4 has been produced to closely align with that of the TNFD.

Nature-related voluntary disclosures have continued to be advanced by the CDP, with over 1,000 companies reporting on their management of deforestation and almost 4,000 submitting a corresponding water disclosure in 2022. Yet nearly 70% of companies disclosing data through CDP did not assess the impact of their value chain on biodiversity in 2022. We expect this to continue to evolve as organisations begin to align with TNFD guidance.

Though TNFD provides draft target-setting guidance (e.g., key design considerations and relation to wider risk management objectives), it highlights that any targets set should be science-based, for which companies can use its partner framework from the Science Based Targets Network (SBTN). SBTN has expanded its hugely successful climate initiative with focused guidance on setting science-based targets for nature. Initial releases include technical guidance on setting freshwater targets alongside draft guidance for those relating to land, with an expanded release expected in early 2024. Keep an eye out for an upcoming article by our colleague Nathalie Gr?fke on how companies can self-assess their maturity in setting science-based targets for nature, and how best they can draw on synergies with TNFD.

Whilst TNFD positions itself as a voluntary disclosure framework and not a standard, with so few nature-related frameworks built on equivalent levels of rigour and industry backing, we expect some governments to make TNFD a mandatory reporting requirement, as has been the case with TCFD in certain jurisdictions.

What are the key things to look out for in the finalised framework?

Based on our experience conducting TNFD assessments, here are the five key things we think are most useful in the finalised framework:

1. Case studies & lessons learnt: One of the key outcomes from collating feedback on over 200 TNFD pilots has been the opportunity to put some flesh on the bones - or leaves on the branches – of the framework, with tangible examples, insights and considerations that participants can use when conducting their own assessments. You can now see our own pilot case study, conducted on Accenture’s UK and Ireland operations and upstream supply chain, in TNFD’s published guidance on the LEAP (Locate, Evaluate, Assess, Prepare) approach here.
2. Additional sector & biome guidance: Given the critical role the financial sector plays in directing capital towards nature restoration, the TNFD has released updated detailed guidance for financial institutions, in addition to draft sector-specific disclosure metrics for 8 other sectors. To help organisations assess their interfaces with specific ecosystems, the TNFD has also expanded its biome guidance from its beta v0.4 release to include 2 additional biomes: intensive land-use systems – urban and industrial systems, and savannas and grasslands.
3. Updated scenario analysis and target-setting guidance: Aligning with, and building on, existing climate-related approaches widely adopted by businesses, the TNFD’s final framework includes updated guidance to help organisations navigate the specific nature-related processes, challenges and nuances they should consider when it comes to scenario-based risk management and science-based target-setting on nature.
4. Strengthened data guidance: Data sits at the heart of the TNFD, and to support this the Taskforce has collated an expansive library of over 135 data providers via its Nature-related Data Catalyst. However, as documented in our previous article, nature-related data and tools are often not only limited in granularity or breadth of insights, but also in their application for non-technical users. Based on the experience of pilot testers, the TNFD has recommended the best datasets and tools to support companies throughout its LEAP process.
5. Engagement with Indigenous Peoples, Local Communities and affected stakeholders: With the global call to involve perspectives of indigenous people and local communities in nature conservation, the TNFD’s updated guidance will help companies prepare for, design, conduct, and incorporate feedback from stakeholder engagement in an inclusive and meaningful way.

What’s next and how to get started?

TNFD provides a “getting started” guide to help organisations at the beginning of their journey, as well as detailed guidance on using its ‘LEAP’ approach (Locate, Evaluate, Assess and Prepare) to conduct a full assessment of nature-related risks and opportunities. However, before getting stuck into this, here’s four snippets of advice - in addition to those mentioned in our previous article:

1. Appreciate what’s material: Undertaking a nature materiality assessment is a simple and great way to understand your nature footprint, before investing resources to evaluate the full size and scale of your impacts and dependencies. Given the extensive data required, this can also be a useful approach for testing which areas of the business are in fact ready to be assessed. TNFD’s final guidance is designed to accommodate the different approaches to materiality now being applied in jurisdictions around the world.
2. Take a piecemeal approach: Gaining enough internal buy-in for a complete TNFD assessment for your entire footprint can be challenging. However, taking the learnings from #1, conducting focused small-scale assessments on select material business units, or conducting only the initial steps of the LEAP approach, can help prevent this becoming an excuse for inaction.
3. Respect the process: There is often a tendency to rush disclosures and jump to the Prepare stage of LEAP. It’s critical to conduct the steps in order – with equal levels of diligence throughout. The LEAP approach is designed to support organisations in prioritising where best to focus resources – you should trust it.
4. Collaboration is key: For many businesses, the greatest nature impacts and dependencies are likely to be in their supply chain (agriculture and extractives industries naturally being somewhat different); for the majority, understanding procurement data will be critical. Engaging with your procurement team early, and in turn, directly engaging with your key suppliers wherever possible, will expediate what can be a significant effort in many TNFD assessments. Likewise, a willingness to work with experts in fields such as geospatial analysis or biodiversity literature will yield similar accelerated progress when dealing with nature-related data.

During the development of the TNFD framework, we’ve seen awareness and engagement relating to nature emerge from a concern to a universal imperative for business. Now, through nature management frameworks like the TNFD, companies have a credible methodology to understand and act on their nature impacts and dependencies, and manage those risks and opportunities identified.

If you would like to discuss further what nature and the TNFD means for your business, feel free to get in touch. This is a topic we care deeply about and something we are always happy to share!

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