At the "2024 10th Taiwan and Asia-Pacific Sustainable Trends and Analysis Forum," Richard Chen , Director of Asia-Pacific Business Strategy Development at CSRone Sustainability Think Tank, and Assistant Manager Tracy Ni conducted an in-depth interview with Patrick Ho, Head of Sustainable Development at Swire Properties in Hong Kong, who also serves as a Taskforce Member of the TNFD. He shared his experiences and discoveries in discussing, formulating, and prioritizing the adoption of TNFD.

Q1：All industries directly or indirectly rely on natural resources, and ecosystem collapse could lead to significant operational risks. However, in the past, corporate organizations have operated from a linear economic perspective. How do you think the emergence of TNFD will bring about changes in business thinking and substantive significance to the capital markets? How do you think the current voluntary adoption of TNFD will guide companies to pay more attention to the relationship between corporate operations and natural capital?

Ans： The importance of "How TNFD Drives the Necessity for Market Transformation" is not only a matter for Taiwan but also a crucial issue for the entire Asia-Pacific region and even the global capital market. The socio-economic functioning and daily operations of humanity rely on natural ecosystems. However, in past market perspectives, natural capital has been seen as a free and unlimited public asset, never properly quantified for its financial value, and the value, investment, and returns in this area have not been fully understood or valued. Therefore, TNFD’s mission primarily drives corporate organizations to “assess, disclose, and take action” regarding the risks and impacts of natural capital to enhance organizational resilience and strengthen the transformation of negative impacts on global capital markets into positive ones.

I believe that measuring and reporting on the “interactions between biodiversity and financial operations" has become a major focal point in today's capital markets! From the initial drafting and public consultation of TNFD to its formal release, the first batch of adopters of this framework already covers 46 countries and regions, with 40% from Europe and the Asia-Pacific region, 6% from North America, and Latin America. Although TNFD currently operates as a voluntary disclosure framework, its disclosure framework has modelled that of TCFD, along with increasing adoption and requirements from regulatory agencies and capital markets in more and more countries for corporate organizations to incorporate TNFD into their reporting, and as part of company financial reporting content, TNFD is poised to become a global framework for biodiversity, thus driving more companies towards a more sustainable future together.

​Q2：The officially released TNFD emphasizes the prioritization of indigenous peoples, local communities, and affected populations, and strengthens communication with stakeholders, urging companies to be accountable to nature and communities. How do you suggest companies simultaneously consider, plan, and promote "a just transition for people and nature" while advancing sustainable development?

Under the definition of the Universal Declaration of Human Rights, individuals are entitled to rights and freedoms under the protection of the declaration regardless of race, color, gender, language, religion, political or other opinion, nationality, or social class. However, when corporate organizations promote sustainable development and assess the mutual impact between humans and nature, we must first recognize that "not all individuals and groups will experience the same level of positive or negative impacts of natural risks." Therefore, corporate organizations first need to identify those "key stakeholders who are affected by commercial activities." Among them, common stakeholders such as government authorities, investors, and boards of directors are usually clearly defined and regulated by laws and established standard operating procedures, while stakeholders such as local communities and indigenous peoples have more ambiguous definitions.

At the same time, corporate organizations need to transparently report on the process of identifying stakeholders and whether this process incorporates or adopts relatively fair and impartial consultation principles or international reference standards for measurement. If the identification process for stakeholder groups is not sufficiently accurate or the categorization is not clear, even if communication strategies are implemented, satisfactory consensus may be difficult to achieve. Therefore, more specific implementation methods need to be provided to ensure that corporate organizations take into account the opinions of stakeholder groups closer to natural capital in the process of promoting operations.

Finally, corporate organizations must explain how stakeholders participate in the operation process, and the frequency and formality of the consultation methods provided, whether they are regular/irregular, continuous/one-time, and formal/informal structures, to ensure smooth communication between corporate organizations and stakeholders and facilitate the just transition of people and nature.

Q3：CSRone research team found that as many as 95.8% of businesses in the Asia-Pacific region have acknowledged the importance of biodiversity, with 85.4% acting on ecological conservation through projects, sponsorship, and other means. However, due to the broad scope of issues covered by "natural capital," there is a lower level of correlation between the overall operations of businesses and natural capital. What do you think are the most challenging factors for businesses in implementing TNFD?

Ans： When implementing TNFD, corporate organizations face two main challenges in better understanding the relationship between natural capital risks and business operations:

1. Uncertainty in the Value Chain: As the Head of Sustainable Development at Swire Properties in Hong Kong, since the formal adoption of TNFD within our organization, we have begun to consider operational strategies from the perspective of the entire value chain regarding the risks and assessment management of natural capital. For the real estate industry, land development and construction itself cause destruction and loss of natural assets. Avoiding ecological damage and loss during development is an important considerations we have gained through adopting TNFD.

The dependence and impact between corporate organizations and natural ecosystems can be found at any stage of the value chain. Therefore, in reviewing the adoption of TCFD by corporate organizations, we also find that corporate organizations face diverse challenges from the "value chain," including but not limited to:

• Long supply chains: Involving dozens or hundreds of suppliers from raw material procurement to intermediaries to actual production and sales, leading to complexity in tracking product origins and management.
• Numerous suppliers and customers in different countries and regions: The more suppliers and customers there are in different countries and regions, the higher the cost of conducting priority analysis.
• Complexity in aggregation and manufacturing of composite product materials: Composite products may lead to difficulties for businesses in discerning the sources of product materials, as well as the manner and stages in which materials are utilized, thereby increasing the complexity of analysis and calculation.
• Variable supply chains: Changes in product or service design or changes in partners lead to fluctuations in the list of upstream and downstream suppliers, challenging the accuracy of value chain risk analysis.
• Confidentiality and legal restrictions: Some suppliers may be unwilling to disclose detailed management information based on principles such as business ethics and trade secrets.

In response to the aforementioned challenges, the TNFD team has also compiled and provided a way to respond to and identify them through the "Proposed approach to value chains" in the public consultation document. Furthermore, TNFD is actively exploring better practices through various initiatives, one of which is the feasibility assessment of the concept of "Global Value Chain Passport (GVC passport)" in the European market. If TNFD becomes the future global core disclosure indicator, it is expected to improve the efficiency and integrity of corporate organizations' measurement of the impact of the value chain on natural capital by assisting suppliers in establishing passports with sustainable and nature-related data.

2. The Accuracy, Accessibility, and Verifiability of Data Integration and Data Quality Management: Collecting data from different countries, regions, and upstream and downstream operations may result in inconsistencies in data units and the use of data databases, indirectly leading to doubts about the accuracy and verifiability of information. Therefore, it is recommended that corporate organizations, when referring to and evaluating data, adopt globally or nationally recognized open databases on nature-related and dependencies to ensure that data collected from different sources can be integrated and analyzed, enabling a better understanding of the relationship between natural capital and business operations.

Q4：As the concept of sustainability management gradually extends from internal operations to the entire value chain, with businesses playing a pivotal role in addressing the natural and biodiversity crisis, how would you advise companies to incorporate the value chain into consideration and conduct risk identification when implementing TNFD?

Ans： When approaching the value chain and considering how far up and down the chain to analyse, the key guiding principle should be where the material dependencies, impacts, risks and opportunities, are likely to arise. For some organizations, issues could arise primarily in their direct operations, or among their Tier 1 suppliers and customers, but in others they may arise primarily from the extraction or cultivation of raw materials far up the supply chain, or far down the distribution chain as a result of the final disposal of the product.

Companies can use the LEAP approach to identify the highest priority issues – dependencies, impacts, risks and opportunities – identify which of the challenges above might be present, and how to obtain the information needed in order to be able to understand the nature of the dependencies, impacts, risks and opportunities present.

As set out in the TNFD’s LEAP guidance, TNFD also recommends that report preparers use sector, geography, and supply chain filters, including a number of tools such as the Science Based Targets Network (SBTN) High Impact Commodity List and other filters, to help focus their assessment. These prioritization approaches and reference tools are outlined in more detail in the Locate and Evaluate sections of the TNFD’s LEAP guidance.

Furthermore, I would like to emphasize that although TNFD provides the "LEAP" assessment methodology, it is not the only designated methodology to be used. As long as corporate organizations understand the differences between "LEAP" and other methodologies they adopt, and transparently report their assessment processes, this would still consider to be good practices. We warmly welcome organizations to provide feedback after implementation and share their experiences and findings.

Q5 ：Please share some implementation steps or practical resources to inspire Asia-Pacific or Taiwanese corporate organizations and sustainability professionals who are planning to adopt TNFD.

Ans： Even though the promotion of TNFD is perceived as originating from the West, it has garnered more positive responses from countries and corporates the Asia-Pacific region. Globally, 1,495 organizations are members of the TNFD Forum – a consultation group of institutions that align with the TNFD’s principles. Of these, 463 are headquartered within the APAC region. While this suggests a reasonable level of engagement, around two-thirds of APAC’s TNFD Forum members are based in just two countries, Japan and Australia.

Furthermore, during the "10th Taiwan and Asia-Pacific Sustainable Trends and Analysis Forum" hosted by CSRone Sustainability Think Tank, I was excited to learn that 18 Taiwanese companies have already completed adoption. As someone from Hong Kong and a member of the TNFD Task Force, this news is truly heartening! To inspire more corporate organizations to embark on nature-related assessment, the following three ways are provided to facilitate reference and communication for sustainability professionals:

1. Participate in the TNFD Forum

The TNFD Forum is a knowledge exchange center composed of various global organizations from different backgrounds. It is open for government and regulatory agencies, corporate, academic institutions, and non-profit/non-governmental organizations to join freely, with 1,783 members as of the end of March. Through regular webinars, timely information announcements, and hosting specific theme and working groups, we establish a platform for collective learning and inquiry to help ourselves and other organizations build sufficient knowledge backgrounds.

2. Join the TNFD Community of Practice

As a member of the TNFD Forum, you can simultaneously participate in the TNFD Community of Practice. In this community, corporate organizations can access "customized capacity-building and training opportunities" to further understand the TNFD framework and the adoption of the LEAP methodology. Additionally, members can exchange testing and disclosure experiences with each other to accelerate the transformation of natural-related risks and objectives into concrete actions.

3. Utilize the Open Toolkit & Worksheets

To assist corporate organizations in accelerating the TNFD implementation process, the TNFD team has released several guidance manuals, including "Scenario Toolkits" and "Natural Risk and Opportunity Registry Index," for sustainability professionals to download and use.

In the future, TNFD will continue to collaborate with more new partners to promote "supportive programs for TNFD implementation." It is also hoped that corporate organizations and sustainability professionals in the Asia-Pacific or Taiwan can "take a big-picture view and start small," integrating TNFD into their operational strategies and planning processes as early as possible. They can also choose a pilot area to map out operational and ecological conservation zones, understand the mutual impact relationship between their operational scope and natural ecosystems, thereby enabling us to better understand and address the challenges to the ecological systems posed by operations.

Sub-editing: SC. (Tracy) Ni / Assistant Manager, CSRone

 

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