How to manage biodiversity-related risks and opportunities
You've identified what your business depends on from nature and how your operations impact biodiversity. Now comes the crucial translation: What do these dependencies and impacts mean for your business performance, financial health and strategic future? ISO 17298 requires organisations to identify and assess biodiversity-related risks and opportunities stemming from their material dependencies and impacts.
This isn't environmental altruism – it's sophisticated risk management and opportunity identification. Companies that understand and act on biodiversity-related risks and opportunities position themselves for resilience and competitive advantage in an increasingly nature-conscious economy.
Understanding biodiversity-related risks
The standard defines biodiversity-related risk as "potential threat (effect of uncertainty) to an organisation that arises from its and the wider society's dependencies and impacts on biodiversity." Note the dual source: risks emerge both from your own dependencies and impacts and from society's collective biodiversity crisis.
ISO 17298 categorises biodiversity-related risks into three types:
Physical Risks result from biodiversity degradation and ecosystem service loss. These can be chronic or acute. Chronic physical risks develop gradually – water scarcity intensifying over years, pollinator populations steadily declining, soil degradation progressively reducing productivity, coastal erosion slowly threatening infrastructure. Acute physical risks strike suddenly – floods, wildfires, pest outbreaks, disease emergence or ecological collapse events. Both threaten operational continuity, supply chain reliability and asset values.
Transition Risks arise from economic shifts toward biodiversity protection and away from harmful practices. Policy transition risks include new regulations, protected area designations or loss of permits. Market transition risks emerge as customer preferences shift toward nature-positive products or as markets develop for ecosystem services. Technology transition risks occur when innovations enable more biodiversity-friendly alternatives, making your current processes obsolete. Reputational transition risks develop when stakeholders perceive your biodiversity performance as inadequate. Liability transition risks materialise through litigation over biodiversity damage.
Systemic Risks result from the breakdown of interconnected ecological and economic systems. Biodiversity loss doesn't occur in isolation – it interacts with climate change, social instability and economic disruption in complex ways. Systemic risks are particularly challenging because they involve cascading failures across multiple systems simultaneously, potentially overwhelming individual risk management strategies.
Identifying your specific risks
Start with your material dependencies identified in Article 2. For each significant dependency, ask: What happens if this ecosystem service degrades or disappears? A brewery dependent on clean groundwater faces operational risk if aquifer contamination or depletion occurs. An agricultural company relying on pollination faces production risk if pollinator populations collapse. A tourism operator dependent on coral reefs faces revenue risk if reefs bleach and die.
Next, examine your material impacts identified in Article 3. For each significant impact, ask: What business consequences might this impact create? Habitat destruction might trigger regulatory restrictions or legal liability. Pollution affecting communities' water access might spark social conflict and reputational damage. Contributions to species endangerment might lead to supply chain disruption if that species becomes protected.
Consider geographic concentration. Organisations with operations or supply chains concentrated in biodiversity hotspots, water-stressed regions or areas vulnerable to climate change face heightened physical risks. Those operating in jurisdictions with active environmental regulation face elevated transition risks.
Assessing risk magnitude and likelihood
ISO 17298 requires assessing at minimum two dimensions of each risk:
Magnitude reflects the risk's significance to your organisation. This should be measured through established risk assessment methods, whether qualitative (high/medium/low), semi-quantitative (scoring systems) or quantitative (financial modeling). Consider potential impacts on revenue streams, cost structures, asset valuations and capital costs. A risk threatening 30% of revenue clearly has greater magnitude than one affecting 3%.
Likelihood estimates the probability that the risk will materialise. Some biodiversity-related risks are already occurring (100% likelihood), while others remain potential future scenarios. Base likelihood assessments on scientific projections, trend analysis and expert consultation rather than wishful thinking.
Additional dimensions enhance risk assessment. Timing indicates whether risks are immediate, near-term (within one year), medium-term (one to ten years) or long-term (beyond ten years). Vulnerability assesses how exposed your organisation is and how difficult mitigation would be. Severity of underlying impacts considers how your actions are contributing to the biodiversity changes creating risk – this ethical dimension increasingly matters to stakeholders.
Recognising biodiversity-related opportunities
While risk identification often dominates, ISO 17298 also requires identifying opportunities –activities creating positive outcomes for both organisations and biodiversity. Opportunities fall into two categories:
Business performance opportunities improve your commercial position while benefiting biodiversity. These include risk mitigation that protects existing value, efficiency improvements that reduce resource consumption and biodiversity impacts simultaneously, market advantages from nature-positive products and enhanced reputation attracting customers and investors.
Sustainability performance opportunities deliver biodiversity benefits that may or may not provide direct business return but strengthen license to operate, stakeholder relationships and long-term viability. These include conservation programs, restoration investments, support for protected areas and innovations in nature-based solutions.
Often the best opportunities deliver both business and sustainability benefits. A food company investing in regenerative agriculture might reduce supply chain risk, improve soil health, enhance carbon sequestration, support biodiversity and create market differentiation simultaneously.
Integrating financial analysis
The standard encourages estimating financial implications of risks and opportunities. This quantification translates biodiversity concerns into language that boards and investors understand.
For risks, estimate potential financial impacts. What would operational disruption from water scarcity cost? What market share might you lose if competitors offer more nature-positive alternatives? What would new biodiversity regulations cost to comply with? What's the potential liability exposure from your impacts?
For opportunities, estimate potential financial benefits. What's the market sise for nature-positive products? How much could efficiency improvements save? What's the value of reduced regulatory or reputational risk? What's the cost of inaction compared to proactive investment?
These estimates need not be precise – even order-of-magnitude analysis ("this risk could impact $10-50 million in revenue") helps prioritisation and resource allocation.
Geographic precision matters
Like impact assessment, risk and opportunity analysis requires geographic specificity. Water risk is location-specific. Regulatory risk varies by jurisdiction. Market opportunities differ across regions. Restoration potential depends on local ecosystem conditions.
Use the best available data to identify where your material impacts occur and where you depend on vulnerable ecosystems. Tools like the World Resources Institute's Aqueduct platform assess water risk by location. The ENCORE database combines biodiversity and financial data. Regional environmental assessments identify conservation priorities and regulatory trends.
Connecting to enterprise risk management
ISO 17298 requires integrating biodiversity-related risks into existing risk management processes. Don't treat biodiversity as a separate, siloed concern – incorporate it into the enterprise risk framework alongside financial, operational, strategic and compliance risks.
Use established risk management standards like ISO 31000 or the COSO Enterprise Risk Management Framework. Assign clear ownership within your risk management structure. Report biodiversity-related risks to the board alongside other material risks. Include them in business planning, investment decisions and strategic reviews.
Moving from assessment to action
Risk and opportunity assessment isn't a static, one-time exercise. Biodiversity conditions change, regulations evolve, markets shift and scientific understanding advances. Build regular reassessment into your biodiversity approach.
Most importantly, use this assessment to drive action. Risks warrant mitigation strategies. Opportunities deserve investment. The next articles in this series will explore how to translate your risk and opportunity understanding into concrete objectives and action plans that protect your business while contributing to biodiversity recovery.
