The Stockholm Resilience Centre (Stockholm University) and the Beijer Institute of Ecological Economics (Royal Swedish Academy of Sciences) published Doing Business Within Planetary Boundaries (November 2024). The report outlines the key role that businesses and investors can play in addressing the climate and nature crisis, and calls for a shift in practices to measure corporate activities based on what really matters for the health of the planet. The report builds on ten years of transdisciplinary science, combining sustainable finance with ecological economics, resilience science, and Earth system science.
Human Level’s Take:
- The science is clear: human and economic activities are destabilising the very climate and living ecosystems that we rely on for goods and services and, therefore, for our survival. We have already crossed 6 of the 9 planetary boundaries necessary for maintaining stable and resilient biological life-support systems on earth. The stakes are high—not just for people and planet but also for businesses, as climate change, biodiversity loss, and water crises threaten to render vast areas uninhabitable and make business costly or impossible.
- However, many companies focus primarily on global greenhouse gas emissions in their performance measures, often overlooking local environmental impacts. This gives a false sense of progress and underestimates the risks posed by ecosystem degradation. Current risk assessments for nature and climate fail to account for the cumulative and aggregate effects of environmental harm. This means companies are vulnerable not only to the impacts of their own activities but also to those caused by other sectors and actors.
- Additionally, when companies disclose only the environmental impacts they believe are financially material, they risk ignoring impacts that contribute to cumulative environmental harm that could lead to larger systemic risks—such as the large-scale loss of essential ecosystem services.
- So what can companies do? Companies should expand their impact assessments beyond just greenhouse gas emissions to include a broader range of environmental factors, using frameworks like the Planetary Boundaries. By applying environmental science, companies can prioritise disclosures that account for the cumulative effects of their activities. The report recommends two key tools that companies can use: the Essential Environmental Impact Variables (EEIV) and the Earth System Impact Score (ESI score). The first is a science-based and sector-specific framework to help prioritise and collect data on the environmental impact of corporate activities for each sector. The second is a systemic, science-based and context-sensitive tool that helps companies assess the global environmental impact of their local activities, identify key areas for improving environmental performance and account for the cumulative and aggregate effects of its activities.
Some key takeaways:
- A planet under pressure: The “planetary boundaries” framework was created by scientists 15 years ago to clarify the diverse pressures humanity is putting on Earth. There are nine planetary boundaries (biodiversity loss; freshwater; land use; greenhouse gases; ozone-depleting chemicals; novel entities; aerosols; and nutrient overload) with many of them interacting so that impacts on one amplify impacts on another. We have currently crossed six of the nine planetary boundaries. Overshooting these boundaries will destabilise climate and living ecosystems such that they will cease to provide the goods and services we rely on for our survival. This also has real consequences for businesses. Climate change, biodiversity loss and water cycle changes could make large parts of the world uninhabitable - making business impossible or much more costly.
- Going beyond carbon to better assess risks to business and society: The planetary boundaries framework demonstrates that global temperatures, water flows, land use and biodiversity are tightly linked so that changes in one will ripple through natural systems and affect the others. However, corporate performance measures are focused primarily on global greenhouse gas emissions and fail to consider the importance of local environmental impacts. This presents real risks to business. It can lead to misleading perceptions of progress and an 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, the report recommends that corporate environmental disclosures encompass a wider set of environmental dimensions that reflect planetary boundaries and known drivers of nature degradation. It is crucial that these assessments consider cumulative environmental impacts, which recognises that 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. Omitting them from nature-related and climate risk assessments will directly affect the reliability of these assessments. The report also outlines how disclosing corporate environmental impacts based only on what is perceived as financially material runs the risk of overlooking an unknown portion of a company’s impacts. These impacts contribute to cumulating and aggregate environmental harm that increases the likelihood of systemic risks, for example, large-scale loss of ecosystem goods and services.
- What are companies to do? To address these challenges, the report recommends that companies take several measures: 1) collect information about the absolute environmental impacts of operations, which helps companies set meaningful targets and assess progress against these targets; 2) adopt place-based approaches to data collection and establish internal systems of information coordination. Understanding location-specific characteristics and vulnerabilities is necessary for the assessment of most environmental impacts other than carbon emissions; 3) ensure that corporate environmental disclosures reflect scientifically established priorities, such as the Planetary Boundaries; 4) consider using the Essential Environmental Impact Variables (EEIV) - a science-based and sector-specific framework - to prioritise and collect data on corporate activities that drive the most essential environmental impacts for each sector; and 5) consider using the Earth System Impact Score (ESI), which is a systemic, science-based and context-sensitive tool that helps users assess the global environmental impact of their local activities, including carbon emissions, water, and land use. It can also evaluate pressures on three planetary boundaries simultaneously and capture the amplified effects resulting from the interactions between them. For businesses, the ESI score can support them in identifying key areas for improving environmental performance and accounting for the cumulative and cross-scale effects of its operations.
