Sweeping new nature restoration requirements set to be signed into law in Europe could open up considerable opportunities for Chief Sustainability Officers, including certainty around the financing of regenerative agriculture programmes.
That’s according to industry experts this week, after the European Parliament, Council and Commission agreed on the text of the Nature Restoration Law, which passed in the European Parliament with a razor-thin margin last June.
While it still faces hurdles on its way to adoption, the law is now one step closer to being implemented. Once binding, it will mean that EU countries must restore at least 20% of land and sea areas designated in need of restoration by 2030, and “all ecosystems in need of restoration” by 2050 – with wide-ranging repercussions for the agriculture, forestry and fisheries sectors.
For large corporations, regulatory certainty could unlock ambition
Large businesses broadly support the law, especially since the World Economic Forum estimated nature-positive products could generate US$10 trillion in business opportunities every year.
Most of them are already on a quest to roll out regenerative agriculture across their supply chains, and the law would support these efforts. “Having the certainty of stringent regulation is always good if you are a global leader and you have the resources and the interest to show leadership in this space. So, yeah, I think we've got general support,” says Oliver Carpenter, Director of Environmental Risk Analytics at climate risk analytics firm Risilience, which has worked with vocal supporters of the law including Nestlé, Burberry and Inditex.
He tells CSO Futures that the Nature Restoration Law will give these companies the certainty they need to finance regenerative agriculture programmes and work with their suppliers, though it also means they’ll have “a higher bar to meet now”.
But for it to work, the Nature Restoration Law needs the buy-in of those working with nature every day – and that’s currently not the case. Last week’s agreement was criticised by farming and fishing associations, who worry about the potential financial losses this could bring.
Getting buy-in from suppliers will require financial incentives
For José Lindo Solis, a lobbyist and policymaker specialised in climate and biodiversity agreements, finding the right financing mechanisms will be key to the effectiveness of the law – and to the ambition of the targets set by Chief Sustainability Officers.
“The challenge to convince the rural population and farmers about the positive aspects of the law is important,” he says. To achieve that, he believes that “innovative financing mechanisms should be activated,” including payments for ecosystem services, a type of arrangement through which those who benefit from the “services” provided by nature (be they companies or governments) reward those conserving it with subsidies or market payments.
This mechanism, or even the inclusion of “all carbon sequestered in nature conservation and agriculture in the EU ETS” (Europe’s mandatory carbon market), would provide daily financial liquidity and give CSOs “the possibility to expand their targets in water, soils and biodiversity”, Lindo Solis tells CSO Futures.
He adds: “This is what farmers are desperately asking for: more public and, why not, private subsidies. Those who pollute pay, but those who conserve get paid.”
Carpenter agrees that companies will need to support farmers financially to make their nature conservation plans a reality, and that will require improved traceability. “If you're a big corporate, you often don't have direct relations with a farmer, you're buying from commodity markets or this kind of intermediate. So I think traceability is still the big question of the day. It's all well and good saying we're going to do regenerative farming, but that actually means pushing money back upstream and supporting farmers rather than disengaging,” he says.
Application by member states could create confusion
But before the law starts to impact companies, their Chief Sustainability Officers and their suppliers, it will need to be legislated at member state level – and this is where the confusion could start.
Design and engineering firm Arup says it is working with a growing number of built environment players “to make nature an ally, and future-proof their businesses to meet these evolving requirements,” but much will depend on country adoption.
“Key to this will be whether and how the proposed law is adopted and applied across member states through national restoration plans,” says Fiona Patterson, Europe Nature Services Leader, in an email to CSO Futures.
At Risilience, Carpenter worries that the leeway each member state has in applying the law on a national level could result in “a whole patchwork of regulations” that might be difficult to balance for large companies.
Already, the law includes a number of exemptions that are seen as “loopholes” by activists. Some of them make very little sense: for instance, it mandates EU countries to “rewet” at least a quarter of drained peatlands in agriculture use by 2030, but says “rewetting will remain voluntary for farmers and private landowners” – those that surely control almost all agricultural peatlands.
TNFD recommendations can help CSOs prepare
While they wait for the law – and associated financial incentives – to be more clearly defined, Chief Sustainability Officers can already start to prepare by working with the recommendations of the Task Force for Nature-Related Financial Disclosures.
These can help companies quantify their impacts and dependencies on nature and biodiversity in the specific locations where they operate. “TNFD provides a good framework and asks lots of the questions that the law will drive,” says Carpenter, who also believes companies’ work to comply with the Corporate Sustainability Reporting Directive (CSRD) will “help contextualise the response to the Nature Restoration Law.”