Vital connection between biodiversity and the economy: why it matters more than ever

Addressing this issue requires a concerted effort to understand the links between biodiversity, ecosystem services, and business practices. 

Why biodiversity is essential for the economy 

Biodiversity is more than just an environmental concern; it is a vital economic asset. According to the World Economic Forum, biodiversity contributes an estimated $44 trillion to the global economy, representing almost half of the world’s GDP. This immense value stems from the essential resources and services that nature provides, supporting industries across agriculture, fisheries, pharmaceuticals, tourism, and more. For example, healthy ecosystems offer raw materials, water, and food—critical inputs for many businesses. 

However, the global economy faces significant threats from biodiversity loss, driven largely by deforestation, pollution, and unsustainable resource extraction. These practices not only degrade ecosystems but also contribute to climate change, creating a vicious cycle. Climate change, in turn, exacerbates biodiversity loss by altering habitats and endangering species. Addressing biodiversity loss and climate change simultaneously is essential, as these crises are interlinked, and solutions must be integrated for effective long-term results. Without urgent action, the decline in biodiversity could destabilise the natural systems that economies rely on, leading to increased risks and costs for businesses worldwide. 

Ecosystem services: nature’s contribution to business 

One way to frame the importance of biodiversity is through ecosystem services—the benefits that nature provides. These services can be grouped into four categories: 

• Provisioning services: Tangible goods like food, raw materials, water, and medicinal resources, which are directly linked to many economic activities. 
• Regulating services: Essential environmental benefits such as climate regulation, water purification, and disease control, reducing risks for businesses and communities. 
• Cultural services: Intangible benefits like recreation, tourism, and aesthetic enjoyment, which enhance quality of life and support industries like tourism and wellness. 
• Supporting services: Foundational processes such as nutrient cycling, soil formation, and pollination, which sustain ecosystems and ensure long-term business viability. 

These ecosystem services stem from natural capital—the biodiversity and ecosystems that sustain them. Yet, one of the challenges is that the true value of these services often goes unrecognised in economic systems. This is due to externalities—costs or benefits that are not reflected in the market prices of goods and services. When the environmental impacts of production, like pollution or habitat destruction, are not accounted for, it leads to a failure in fully appreciating biodiversity’s economic value. Addressing these externalities is crucial for better aligning economic activities with ecological sustainability. 

Navigating the regulatory landscape: TNFD, ESRS E4 and more 

Integrating biodiversity into business strategies is increasingly driven by regulatory frameworks and international standards. At the forefront is the Taskforce on Nature-related Financial Disclosures (TNFD), which helps organisations identify, assess, and report on biodiversity-related risks and opportunities. The TNFD framework provides a standardised approach, aligning with both European and global sustainability goals to ensure consistency across different markets. 

In Europe, biodiversity protection is reinforced by several directives, such as those focused on safeguarding wild birds and natural habitats. The EU Biodiversity Strategy 2030 outlines ambitious goals, including the restoration of degraded ecosystems and increased conservation efforts. Additionally, the EU Deforestation Regulation targets deforestation linked to agricultural supply chains, aiming to minimise its impact on ecosystems by setting stricter controls on commodities like soy, palm oil, and cattle. 

Another key regulatory element is the Corporate Sustainability Reporting Directive (CSRD) in the EU, which requires businesses to disclose their environmental impacts. Within this directive, the European Sustainability Reporting Standard (ESRS) E4 focuses specifically on biodiversity, guiding companies on how to report their interactions with natural ecosystems, outline mitigation actions, and assess the financial implications of biodiversity-related risks. Meanwhile, on a global scale, frameworks like IFC Performance Standard 6 and the Convention on Biological Diversity (CBD) encourage sustainable resource use and set biodiversity conservation goals, such as achieving no net biodiversity loss by 2030. 

Moving forward: a call for collaboration 

The urgency to protect biodiversity is clear. Events like COP 16 continue to highlight the importance of global cooperation on biodiversity and climate goals. Safeguarding biodiversity is not just an environmental priority but a crucial economic one. Businesses, governments, and individuals must collaborate to find sustainable solutions that protect natural ecosystems while ensuring economic growth. 

By recognising the true value of biodiversity, we can move towards sustainable economic growth that benefits both nature and society. 

Author: Celine Girard

Published: 24/01/2025

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