Evaluate: Dependencies and Impacts
The analytical heart of LEAP
Having located where your organisation interfaces with nature, the Evaluate phase asks: what is actually happening at those interfaces? This means systematically identifying which ecosystem services your business depends on, and which pressures your activities exert on natural systems. The outputs feed directly into risk assessment and are central to TNFD's concept of double materiality for nature.
The Conceptual Foundation: Dependencies and Impacts
The TNFD framework makes a critical distinction between two types of nature-business relationships. Dependencies are the ways in which an organisation relies on ecosystem services for its continued operations. Impacts are the ways in which an organisation's activities alter the state of nature, for better or worse.
These are related but distinct. A brewery depends on freshwater as a production input (a dependency on water provisioning services). It may also discharge treated effluent into a local river, altering water quality and aquatic biodiversity (an impact). Understanding both directions of the relationship is essential for complete nature-related risk assessment, and this dual lens is what the TNFD means by double materiality applied to nature.
The ENCORE Tool: A Structured Dependency Catalogue
The primary tool recommended by the TNFD for the Evaluate phase is ENCORE (Exploring Natural Capital Opportunities, Risks and Exposure), developed by UNEP-WCMC and the Natural Capital Finance Alliance. ENCORE provides a structured database linking economic sub-sectors to their dependencies on ecosystem services and to their potential impacts on natural capital drivers.
ENCORE maps 21 ecosystem services across four categories and links them to more than 167 business sub-sectors. The ecosystem service categories are:
| Category | Examples of Ecosystem Services | Business Relevance |
|---|---|---|
| Provisioning | Surface water, ground water, timber, crop pollination, fibres and materials | Direct inputs to production; most obvious for agriculture, food, and manufacturing |
| Regulating and Maintenance | Climate regulation, flood and storm protection, soil quality, water flow regulation, disease control | Underpins infrastructure viability, agricultural productivity, and insurance exposure |
| Cultural | Recreation, tourism, aesthetic values, spiritual significance | Relevant to tourism, real estate, and brand-sensitive consumer goods |
| Supporting (Habitat) | Nursery populations and habitats, genetic diversity maintenance | Foundational for long-term productivity in fisheries, agriculture, and biotechnology |
Conducting a Dependency Analysis
A dependency analysis asks: which ecosystem services does this business activity require, and how critical is each service to continued operation? The process involves three steps. First, select the relevant sub-sector codes in ENCORE for each business activity. Second, review the resulting dependency profile, which rates the materiality of each ecosystem service as high, medium, or low for that sub-sector. Third, validate these generic ratings against the site-specific conditions identified in the Locate phase.
Generic ENCORE ratings are starting points rather than definitive answers. A food company may find that ENCORE rates its crop farming sub-sector as highly dependent on pollination services. But the actual materiality of this dependency depends on what crops are grown, in what location, and whether alternative pollination methods are available. The Evaluate phase requires this site-level validation to move from generic sector exposure to company-specific materiality.
ENCORE as a Triage System
Think of ENCORE as a medical triage system. It cannot diagnose every patient in detail, but it can rapidly identify which cases need immediate attention. ENCORE's sub-sector dependency ratings tell you where your nature risk hotspots are likely to be, so you can direct more detailed investigation to those areas rather than treating every business activity as equally important. This makes the Evaluate phase manageable even for large, diversified companies.
Impact Drivers and Impact Pathways
Alongside dependency analysis, the Evaluate phase requires organisations to identify their impact drivers. These are the business activities or outputs that cause changes in the state of nature. The TNFD adopts the IPBES framework for the five direct drivers of biodiversity loss as its standard taxonomy for impact drivers:
- Land and sea use change: Conversion, fragmentation, or modification of natural habitats for agriculture, infrastructure, or urban development.
- Overexploitation: Harvesting wild species at rates exceeding natural regeneration capacity, including overfishing and unsustainable forestry.
- Climate change: GHG emissions that alter temperature, precipitation, and extreme weather patterns, affecting species distributions and ecosystem function.
- Pollution: Discharge of pollutants including synthetic chemicals, nutrients (nitrogen and phosphorus), plastics, and noise into air, water, and soil.
- Invasive species: Introduction of non-native species that outcompete indigenous biodiversity, often facilitated by trade and transport.
ENCORE maps each business sub-sector to the impact drivers it potentially activates, allowing companies to identify not just what they depend on but what pressures they exert on nature. An impact pathway is the chain of causation connecting a business activity, through its impact driver, to the resulting change in ecosystem state, and ultimately to consequences for biodiversity or people.
Materiality Assessment for Nature
Not every dependency or impact pathway warrants equal attention. The Evaluate phase culminates in a materiality assessment that filters the full list of identified dependencies and impacts down to those that are significant enough to carry forward into risk assessment and eventual disclosure.
The TNFD applies the concept of double materiality to nature, drawing on the ESRS (European Sustainability Reporting Standards) framework. Financial materiality asks whether nature-related issues create financial risks or opportunities for the organisation. Impact materiality asks whether the organisation's activities cause or are linked to significant adverse impacts on nature, regardless of whether those impacts currently translate into financial risk. Both perspectives matter, and TNFD-aligned disclosures should address both dimensions.
Example: Evaluating a Textile Manufacturer
A garment manufacturer uses ENCORE to evaluate its cotton spinning sub-sector. The tool identifies high dependency on surface water (irrigation), soil quality (crop productivity), and pollination services. It also identifies key impact drivers including land use change (cotton farming converting grassland), pollution (pesticide and dye discharge), and water consumption (reducing water availability downstream).
The team then maps these against the priority locations identified in Locate: a sourcing region in the Indus River basin, which is already experiencing severe water stress. This elevates water dependency from a generic medium-materiality flag to a site-specific high-materiality issue, because the combination of business dependency and ecosystem degradation is acute at this particular location. This finding carries directly into the Assess phase as a physical water-related risk.
Integrating Dependency and Impact Analysis
The most sophisticated aspect of the Evaluate phase is recognising that dependencies and impacts are interconnected. When an organisation's own activities degrade the ecosystem services it depends on, it creates a self-reinforcing risk loop. A company that extracts groundwater at rates that deplete aquifer levels will eventually compromise its own water supply. A food company that sources from farming practices degrading pollinator habitat will face increasing costs as natural pollination services decline.
This systemic dimension of nature risk distinguishes it from many other business risks and explains why the TNFD places such emphasis on the Evaluate phase as an exercise in understanding both directions of the nature-business relationship simultaneously.
ENCORE's ratings are based on structured expert elicitation combined with literature review. For each of the 167 sub-sectors and 21 ecosystem services, a team of economists and ecologists assessed the dependency relationship on a five-point scale from very high to very low, with supporting rationale. The impact driver mappings similarly reflect documented evidence of sector-level pressures on natural systems.
ENCORE is not a quantitative model: it does not produce numerical estimates of dependency magnitudes or impact footprints. Instead, it provides a qualitative screening layer that identifies where deeper quantitative analysis is warranted. For organisations seeking quantitative footprinting, tools like the Biodiversity Footprint Calculator (BFC) or Corporate Biodiversity Footprint (CBF) methodologies build on ENCORE's conceptual structure to generate numerical outputs in units such as Mean Species Abundance (MSA) loss.
Key Takeaways
- 1The Evaluate phase distinguishes between dependencies (how business relies on ecosystem services) and impacts (how business activities affect nature) - both directions of the relationship matter
- 2ENCORE maps 167 business sub-sectors to 21 ecosystem services across provisioning, regulating, cultural, and supporting categories, providing a structured starting point for dependency and impact identification
- 3The five direct drivers of biodiversity loss recognised by IPBES - land use change, overexploitation, climate change, pollution, and invasive species - form the TNFD's standard taxonomy for impact drivers
- 4Double materiality for nature means assessing both financial materiality (nature risks to the business) and impact materiality (business impacts on nature) simultaneously
- 5ENCORE ratings are qualitative screening tools, not quantitative footprints; site-specific validation against the Locate findings is essential for meaningful materiality assessment