Chapter 1: A planet under pressure

The human population has increased substantially. On average we have also become healthier and more prosperous. This growth has been enabled by the substantial consumption of resources from the planet’s oceans, rivers, forests, grasslands, coastal plains, and other landscapes, which has also resulted in rapidly growing economies in the now globalized world.

However, this progress has also brought about a worsening climate crisis, damage to the planet’s ecosystems and increasing social inequality (Figure 1). Human activities are now threatening the biological systems we rely on – to the extent that continued human progress and well-being are in jeopardy. We have directly altered at least 70% of the planet’s land surface and over 66% of the ocean. Over 96% of Earth’s mammal biomass is now made up of humans (36%) and our livestock (60%) – with less than 4% represented by wild animals.

Planetary boundaries

Almost 15 years ago, scientists created a framework called “planetary boundaries” to clarify the diverse pressures humanity is putting on Earth. The boundaries represent estimated limits for nine global processes, beyond which our climate and living ecosystems risk becoming destabilized and unpredictable, and could cease to provide the goods and services we rely on.

Three boundaries relate to the materials we take from the system:

• biodiversity loss
• freshwater
• land use

The remaining six relate to substances we release back into the environment:

• greenhouse gases (which cause climate change and ocean acidification)
• ozone-depleting chemicals
• novel entities (plastic, concrete, synthetic chemicals and genetically modified organisms that owe their existence to us)
• aerosols (air particles)
• nutrient overload (reactive nitrogen and phosphorus from e.g., fertilizers)

Most planetary boundaries do not operate in isolation. They interact, and impacts on one often amplify the impacts of another. Below are examples of key interactions between three of the planetary boundaries described here: climate, land use and changes to freshwater.

Climate change affects land cover through changes in rainfall, but also through changing temperatures and so-called ‘carbon fertilization effects’ which promote more vegetation growth. Land cover change, on the other hand, affects the climate through the release or uptake of carbon in the vegetation. The freshwater cycle is affected both by the type of land use and by climate change, which alters rainfall patterns.The latest update to the planetary boundaries shows that we live in a fundamentally new reality, where six of the nine boundaries have been transgressed and the effects are already visible. The biosphere, the thin layer of life around the planet that supports humanity, grows ever more fragile and depleted. Changes in the climate system and the biosphere, previously assumed to affect societies in a distant future, are now unfolding with increasing speed and force. This has major implications for all economic activities.

Going beyond carbon to better assess risks to business and society

Until recently, corporate environmental performance measures focused primarily on global greenhouse gas emissions, often neglecting the vital importance of local environmental impact. But as noted, global temperatures, water flows, land use and biodiversity are tightly linked, and changes in one will ripple through natural systems and affect the others. A narrow focus on greenhouse gases can therefore result in misleading perceptions of progress and inadequate policy development. It will also lead to underestimation of the risks to business and society from ecosystem degradation and loss of access to goods and services on which they depend.

To effectively assess and manage risks to businesses investments, and the planet, corporate environmental disclosures need to encompass a wider set of environmental dimensions that reflect planetary boundaries and known drivers of nature degradation.

Such a move beyond greenhouse gas emissions is already visible in a growing number of jurisdictions and recently developed standards and frameworks (notably the European Sustainability Reporting Standards (ESRS), the Global Reporting Initiative (GRI), and the Taskforce on Nature-related Financial Disclosures (TNFD)). These reporting recommendations and standards are a welcome and positive step in the right direction. However, recent scientific research clearly shows that their current format for disclosure risks preventing well-intended reporting efforts from delivering on sustainability ambitions. We elaborate on this in Chapter 2.

Nature-related risks

Broadly speaking, nature-related financial risks are risks to companies and their investors (e.g. credit, business and liquidity risks) that stem from the loss or degradation of natural capital (the goods and services of nature) and which translate into a financial effect on said organizations due to their dependency on this natural capital.

This risk thinking is what underpins nature-related financial risk assessment tools such as the ENCORE tool (Natural Capital Finance Alliance 2022) and an increasing range of nature-related financial risk reports (e.g. NGFS 2024, NOU 2024).

Understanding corporate and financial risks as a function of resource dependency is certainly necessary, but not sufficient to capture how risks will materialize to and from companies in the future. Resource dependencies of any given company are vulnerable to environmental impacts created both by the company itself, and by the impacts created by other actors and sectors. It is these cumulating environmental impacts that in aggregate put pressure on the planet’s ecological systems and threaten to undermine their capacity to deliver the goods and services we rely on. Chapter 2 elaborates on why a reliable estimate of cumulative environmental impacts is unlikely under current disclosure guidelines and outlines the risks of not addressing this.