Moving from L to E: How to start Evaluating your interface with nature under TNFD

As the Taskforce on Nature-related Financial Disclosures (TNFD) gains in visibility and early adopters, more firms are beginning to identify and assess nature-related issues associated with their activities.
Whilst the TNFD has developed the LEAP (Locate, Evaluate, Assess, Prepare) approach to aid in this scoping, moving beyond the initial identification of where impacts and dependencies are located into actually evaluating what this means can be overwhelming. From the mandatory location-specificity of nature disclosures, to the numerous possible impacts and dependencies, it is difficult to know where to start.
The Locate phase of the LEAP approach covers understanding where your company activities are, and how they interface with nature, for example:
- Where are your direct operations?
- What are your organisation’s activities by sector and value chain, and which of these are associated with larger dependencies or impacts on nature?
- Of these sectors, where are they located, and are they located in ecologically sensitive locations?
After understanding this information, you will be able to move into the second stage of LEAP: Evaluating your organisation’s dependencies and impacts in order to then understand the corresponding risks and opportunities associated with them.
Below is a step by step process on how to get started with Evaluate.
1. Identify Nature-Related Dependencies
Determine how your organisation relies on natural assets and ecosystem services. This can include:
- Direct dependencies: Raw materials (e.g., water, timber, minerals), land for operations, clean air.
- Indirect dependencies: Regulatory services (e.g., climate regulation, water purification), cultural services (e.g., recreation, aesthetic value), supporting services (e.g., soil formation, nutrient cycling).
- Methodology:
- Review your value chain: Upstream suppliers, your own operations, and downstream distribution and consumption.
- Conduct internal workshops with relevant departments (e.g., procurement, operations, R&D, sales) to identify critical natural inputs.
- Use industry-specific materiality matrices (e.g. ENCORE, NatureAlpha) to understand the dependencies associated with the sectors that you operate in.
2. Identify Nature-Related Impacts
Evaluate the positive and negative effects of your organization's activities on nature. Consider impacts across your value chain:
- Direct impacts: Land use change, pollution (air, water, soil), resource depletion, biodiversity loss.
- Indirect impacts: Emissions from energy consumption, waste generation by suppliers, product disposal by consumers.
- Methodology:
- Gather quantitative data on resource consumption, emissions, waste generation, and land use; or use a data provider to provide metrics on impacts for equities.
- Use tools like materiality assessments or impact pathway analyses to link your activities to specific nature impacts.
- Prioritize the most significant impacts across your value chain, this can be suppliers or locations that are most impactful, i.e. located in ecologically sensitive areas, or have a large emissions footprint.
3. Evaluate Nature-Related Dependencies and Impacts
Analyze the potential financial and strategic implications of your nature dependencies and impacts.
- Begin to understand the scale and scope of your dependencies on nature
- Are there some arms of your organisation that are more dependent than others?
- Is there one category of dependencies that makes up most of the organisation level dependency?
- Evaluate the severity of your negative impacts on nature
- Does your organisation have hotspots of high impact?
- Are there sectors that have significantly more impact than others?
- Which impacts are material? Are some more material than others?
At this stage, you will hopefully have a clearer picture of not only where your largest dependencies and impacts are located but also which of these are material and can then be assessed in the next stage of LEAP.
Next steps
- Using the identified dependencies and impacts, start to consider what the corresponding risks and opportunities are (LEAP - Assess).
- Undertake stakeholder analysis and subsequent engagement with investors, affected stakeholders and Indigenous Peoples, Local Communities to understand their views and interpretation of your organisation’s activities.
- Identify KPIs relevant to your dependencies and impacts.
- Prepare to disclose decisions made as a result of this analysis (LEAP - Prepare).