Biodiversity Management and TNFD: A Practical Guide for SMEs
Biodiversity risk is rapidly emerging as a core agenda item in corporate management. The World Economic Forum (WEF) has included biodiversity loss among the global top five risks, and all business activities depend directly or indirectly on natural capital. Biodiversity has now transcended environmental concerns to become both a financial risk and a business opportunity.
Why Biodiversity, Why Now
Shifting Global Awareness
WEF Global Risk Report: Biodiversity loss selected as a top 5 global risk (2024-2026)Over 50% of global GDP (approximately $44 trillion) has moderate to high dependence on natural capitalEcosystem services valued at $125-145 trillion annually (1.5x global GDP)Economic losses from biodiversity loss estimated at $2.7 trillion per yearDirect Business Impact
Raw material supply instability (pollinator-dependent crops, timber, fiber materials)Production disruption risks from water resource crisesBusiness permitting and certification risks from regulatory tighteningStrengthening consumer and investor preference for nature-positive companiesGlobal Regulatory and Framework Landscape
TNFD (Taskforce on Nature-related Financial Disclosures)
Following the final recommendations release in September 2023, over 320 institutions globally have adopted the frameworkIntegration discussions with ISSB (International Sustainability Standards Board) ongoing for 2025-2026Financial institutions expanding TNFD-based natural risk assessment in investment and lending evaluationsEU CSDDD (Corporate Sustainability Due Diligence Directive)
Mandatory environmental and human rights due diligence across entire supply chains (phased implementation)Korean companies exporting to the EU face indirect application as large corporation suppliersBiodiversity impact assessment included in scope (deforestation, water pollution, etc.)Kunming-Montreal Global Biodiversity Framework (GBF)
30% protected area designation for land and ocean by 2030 (30x30 target)Direction toward mandatory corporate biodiversity impact measurement, reporting, and reductionDomestic institutionalization progressing through alignment with Korea's K-Taxonomy (Green Classification System)K-Taxonomy (Korean Green Classification System)
2025 revision strengthens biodiversity-related criteriaBiodiversity impact considered when determining green finance support eligibilityAdditional biodiversity management items included in SME green certification evaluationUnderstanding the TNFD Framework
TNFD extends the TCFD (climate-related financial disclosures) structure to address all natural capital through four pillars:
| Pillar | Core Content | SME Application Points |
|--------|-------------|----------------------|
| Governance | Board and management oversight of nature-related risks and opportunities | Designate responsible personnel, establish management reporting structure |
| Strategy | Impact of nature-related risks and opportunities on business, strategy, and finance | Identify nature dependency by core business area |
| Risk Management | Processes for identifying, assessing, and managing nature-related risks | Set supply chain natural risk priorities |
| Metrics & Targets | Metrics and targets used to measure and manage nature-related risks and opportunities | Select and track 3-5 core KPIs |
The LEAP Approach
TNFD recommends the LEAP methodology for corporate natural risk assessment:
| Phase | Full Name | Description | Key Activities |
|-------|-----------|-------------|---------------|
| L | Locate | Identify nature interfaces | Map ecologically sensitive areas across operations and supply chains |
| E | Evaluate | Assess dependencies and impacts | Evaluate natural capital dependencies and business activity nature impacts |
| A | Assess | Analyze risks and opportunities | Conduct financial impact analysis and scenario review |
| P | Prepare | Prepare response and reporting | Develop management strategies, set metrics, prepare disclosures |
Natural Capital Risk Types
Natural capital risks that companies face are categorized into physical risks and transition risks:
Physical Risks
Water Resources: Production disruptions from drought and flooding, increased treatment costs from water quality deteriorationRaw Materials: Supply instability from ecosystem degradation, expanded price volatilityNatural Disasters: Facility damage from increased frequency and intensity of extreme weather eventsTransition Risks
Regulatory Risk: Strengthened environmental regulations, changed permitting conditions, penalty impositionSupply Chain Risk: Strengthened biodiversity requirements from large corporations and international buyersMarket Risk: Consumer preference shifts, increasing demand for nature-positive products and servicesFinancial Risk: Natural risk assessment reflected in investment and lending decisions, insurance premium increasesNatural Capital Risks by Industry
| Industry | Key Natural Dependencies | Core Risks | Priority Response Areas |
|----------|------------------------|-----------|----------------------|
| Food & Beverage | Pollination, soil fertility, water | Raw material supply instability, price fluctuation | Sustainable procurement, water management |
| Textiles & Apparel | Cotton/wool materials, chemicals | Raw material price increases, pollution regulation | Eco-friendly material transition, wastewater management |
| Construction | Land use, aggregates, timber | Permitting delays, compensation costs | Ecological impact assessment, restoration planning |
| Chemicals | Petrochemical feedstock, water | Emission regulations, accident risks | Green chemistry, hazardous substance management |
| Pharma & Bio | Natural products, genetic resources | ABS regulations, raw material security | Genetic resource access and benefit-sharing compliance |
| Electronics | Rare earth elements, conflict minerals, water | Material supply instability, waste | Circular economy, responsible mineral sourcing |
SME Implementation Roadmap
Phase 1: Awareness Building and Status Assessment (1-3 months)
This foundational phase focuses on building organizational understanding and establishing a baseline of the company's relationship with natural capital.
Conduct executive biodiversity awareness trainingDevelop preliminary understanding of natural capital dependencies across operations and supply chainsBenchmark biodiversity practices by industry sector through peer case studiesReview TNFD framework basics and assess applicability to company operationsPhase 2: Risk Assessment (3-6 months)
With foundational awareness established, the company can proceed to systematic risk identification and prioritization using recognized methodologies.
Conduct systematic risk assessment following the LEAP approachMap ecologically sensitive areas near business sites (protected areas, watersheds, wetlands)Screen Tier 1 and Tier 2 supplier natural capital risksDevelop physical and transition risk priority matrixPhase 3: Response System Development (6-12 months)
This phase translates assessment findings into concrete policies, targets, and management systems that embed biodiversity considerations into business operations.
Establish biodiversity policy and targets (No Net Loss or Net Positive goals)Set core KPIs and build monitoring systemsDevelop and communicate supply chain biodiversity guidelinesOperate employee training and awareness programsPhase 4: Disclosure and Communication (12-18 months)
The final phase focuses on transparent communication of the company's biodiversity management approach and performance to external stakeholders.
Publish nature-related information disclosures following TNFD recommendationsInclude biodiversity section in ESG reportPrepare responsive reporting for large corporation and international buyer requirementsStrengthen external stakeholder communicationSelf-Assessment Checklist (15 Items)
Governance (5 Items)
[ ] Is a designated person responsible for biodiversity matters?[ ] Are nature-related risks reported regularly to management?[ ] Are biodiversity-related policies and guidelines documented?[ ] Is environmental regulatory compliance regularly reviewed?[ ] Are biodiversity targets reflected in business strategy?Risk Management (5 Items)
[ ] Is the business site's natural capital dependency identified?[ ] Are ecologically sensitive areas near business sites recognized?[ ] Are supply chain nature-related risks assessed?[ ] Are water usage and wastewater discharge volumes measured and managed?[ ] Is a waste and hazardous materials management system established?Implementation and Metrics (5 Items)
[ ] Are greenhouse gas emissions calculated? (Scope 1, 2)[ ] Are water usage and reuse rates tracked?[ ] Is the resource circulation rate (recycling rate) measured?[ ] Are environmental investment and expenditure separately managed?[ ] Is external disclosure on biodiversity matters conducted?K-Taxonomy and Biodiversity
Korea's Green Classification System (K-Taxonomy) has strengthened biodiversity-related criteria through its 2025 revision, with significant implications for SMEs seeking green finance access.
Green economic activity recognition criteria now include biodiversity conservation activitiesDNSH (Do No Significant Harm) principles incorporate biodiversity itemsNatural capital impact assessment reflected in green bond and green loan eligibility determinationAdditional biodiversity management capability evaluation items for SME green certificationThis means SMEs must develop biodiversity management capabilities to access green financing or participate effectively in large corporation supply chains.
KITIM Biodiversity Management Consulting
KITIM systematically supports SME biodiversity management implementation:
Status Assessment: Natural capital dependency evaluation, ecologically sensitive area mapping, risk screeningTNFD Response: LEAP approach-based risk assessment, disclosure strategy development, metrics establishmentESG Integration: ESG report biodiversity section preparation, K-Taxonomy compliance supportSupply Chain Management: Supply chain natural risk assessment, guideline developmentGovernment Program Linkage: Ministry of Environment and MOTIE support program identification and connectionTake advantage of our free enterprise diagnosis to assess your company's biodiversity risks and determine the most effective response strategies.
