Blog
Embracing TNFD and CSRD: A Pathway to Better Environmental Disclosure for the Global South
Posted 2nd September 2024
By Pakhi Das
Reporting on TNFD and CSRD
“The first step to fixing nature is acknowledging and disclosing the problem areas. By doing so, we empower experts and stakeholders to develop effective solutions, ensuring a sustainable future for both businesses and the planet.”
Introduction
The journey towards better environmental stewardship begins with identifying and disclosing problem areas. For too long, the impacts of business operations on nature have been overlooked or inadequately reported. This lack of transparency has hindered efforts to address environmental degradation and develop effective conservation strategies. However, in recent years, the world has witnessed a growing emphasis on sustainability and environmental stewardship. This shift has been marked by the introduction of various frameworks and regulations designed to ensure that businesses take their environmental responsibilities seriously. Among these frameworks, the Taskforce on Nature-related Financial Disclosures (TNFD) and the Corporate Sustainability Reporting Directive (CSRD) stand out as pivotal initiatives aimed at transforming how companies report their environmental impacts. While these frameworks are gaining traction globally, their implications for the Global South, particularly India, are profound and multifaceted.
What are TNFDs and CSRD?
The TNFD was established to create a framework for organizations to report and act on evolving nature-related risks, ultimately supporting a shift in global financial flows away from nature-negative outcomes and toward nature-positive outcomes. This initiative is driven by the recognition that nature-related risks, including biodiversity loss and ecosystem degradation, pose significant financial risks to businesses and investors.
On the other hand, the CSRD, which builds on the existing Non-Financial Reporting Directive (NFRD) in the European Union, aims to enhance and standardize sustainability regulatory reporting. The CSRD mandates that large companies and listed SMEs disclose information on their environmental, social, and governance (ESG) impacts. This directive not only increases transparency but also ensures that sustainability becomes a central aspect of corporate governance.
Mossy forest with EU flag overlay
The Imperative of Enhanced Reporting and Accountability in the Global South
In an era where environmental and social impacts are under increasing scrutiny, companies in the Global South are finding themselves at a crossroads. The adoption of the TNFD and the CSRD frameworks offers a pathway to improved transparency and accountability. For companies based or operating in the European Union, the CSRD framework is required to meet regulatory requirements. Together with the voluntary TFND, they are about aligning with global best practices and addressing the growing demands from investors, consumers, and regulators for more responsible and sustainable business operations.
Enhanced reporting and accountability through TNFD and CSRD (if applicable) enable companies to provide a clearer picture of their environmental and social impacts. This transparency is crucial as stakeholders worldwide become more discerning about the practices of the businesses they support. By adopting TFND (if outside of the EU), companies in the Global South can demonstrate their commitment to sustainable practices, which is increasingly becoming a non-negotiable aspect of modern business.
However, despite the opportunities, the adoption of TNFD and CSRD frameworks does present some challenges. One of the primary challenges lies in the capacity to implement these frameworks. Many businesses in the Global South lack the resources and expertise to conduct comprehensive nature-related risk assessments and sustainability reporting. However, this challenge also presents an opportunity for capacity building and knowledge transfer. By investing in training and infrastructure, countries can enhance their ability to monitor and report on environmental impacts, ultimately leading to better conservation outcomes.
As a beacon of hope, there are several Indian companies which have proactively adopted the TNFD framework, demonstrating a commitment to sustainability and responsible business practices. Two notable examples are Tata Steel and Mahindra & Mahindra.
Tata Steel has been a pioneer in sustainability reporting in India. The company has integrated the TNFD framework into its reporting processes, emphasizing the importance of biodiversity conservation and sustainable resource management. By adopting TNFD, Tata Steel has not only enhanced its environmental disclosure but also identified key areas where it can mitigate nature-related risks. This proactive approach has positioned Tata Steel as a leader in sustainable business practices in the Global South.
Mahindra & Mahindra, a leading Indian multinational conglomerate, has also embraced the TNFD framework. The company recognizes that its operations impact natural ecosystems and that mitigating these impacts is crucial for long-term sustainability. By adopting TNFD, Mahindra & Mahindra has improved its ability to assess and disclose nature-related risks, ensuring that it remains accountable to stakeholders and contributes to global biodiversity conservation efforts.
The Kunming-Montreal Global Biodiversity Framework (KMGBF)
The adoption of TNFD by companies in the Global South aligns closely with the objectives of the Kunming-Montreal Global Biodiversity Framework (KMGBF). The KMGBF, established under the Convention on Biological Diversity (CBD), aims to address the underlying causes of biodiversity loss by mainstreaming biodiversity across government and society. One of its key goals is to ensure that businesses disclose their impacts on biodiversity and take measures to mitigate negative outcomes.
Better disclosure of nature-related risks and impacts is a crucial step in achieving the KMGBF’s objectives. By adopting TNFD, companies can provide transparent and standardized information on their biodiversity impacts, enabling policymakers, investors, and conservationists to develop targeted strategies for biodiversity conservation. This linkage underscores the importance of comprehensive environmental disclosure as a foundation for effective biodiversity management.
In conclusion…
The adoption of TNFD and CSRD represents a significant step towards better environmental disclosure and sustainability reporting. For countries in the Global South, including India, these frameworks offer a pathway to enhanced transparency, accountability, and environmental stewardship. By following the examples set by companies like Tata Steel and Mahindra & Mahindra, businesses can lead the way in identifying and disclosing nature-related risks, contributing to global biodiversity conservation efforts and aligning with the objectives of the Kunming-Montreal Global Biodiversity Framework.
Can International Biodiversity Consultants Ltd help?
IBC have been assisting European multinationals identify and document potential biodiversity impacts and are also supporting development of mitigation action programmes to address negative impacts across their global footprints.
Contact IBC via their email: info@ibioconsultants.com or use IBC’s online contact form