Regulatory Landscape & Future Outlook
The regulatory environment for nature-related corporate disclosure and due diligence is evolving rapidly. In the space of just three years (2022-2025), the European Union enacted major legislation on deforestation due diligence, corporate sustainability reporting, and corporate sustainability due diligence - all of which create direct or indirect obligations for companies related to nature. Internationally, the Kunming-Montreal Global Biodiversity Framework established a new political mandate for corporate nature action, and the alignment between TNFD and major sustainability disclosure frameworks is accelerating the mainstreaming of nature-related financial disclosure. This lesson maps the current regulatory landscape and considers what the near-term future may hold for nature-related corporate obligations.
EU Deforestation Regulation (EUDR)
The EU Deforestation Regulation (Regulation EU 2023/1115) entered into force in June 2023 and applies to the placing on the EU market, or export from the EU, of specified commodities: cattle, cocoa, coffee, palm oil, soy, wood, rubber, and their derived products. Companies must conduct due diligence to ensure these products do not originate from land deforested or forest-degraded after 31 December 2020.
The EUDR's due diligence requirements include three steps: information collection (including GPS coordinates of production areas), risk assessment (against deforestation criteria and legality requirements in the country of origin), and risk mitigation measures where risks are identified. Large companies must comply from December 2025; SMEs have until June 2026. Non-compliance can result in fines of at least 4% of EU turnover, market access restrictions, and public disclosure of violations.
The EUDR has been criticised by some producing countries for its complexity and the burden it places on smallholder farmers who lack the systems to provide GPS coordinates and compliance documentation. However, it represents a significant step toward making deforestation-free supply chains a market access requirement for the world's largest import market, and is expected to drive substantial changes in global commodity supply chain management.
CBD Kunming-Montreal Global Biodiversity Framework
The Kunming-Montreal Global Biodiversity Framework (KM-GBF), adopted at CBD COP15 in December 2022, is the primary international policy framework governing biodiversity. Its 23 action targets for 2030 include Target 15, which is the most directly relevant to corporate disclosure:
Target 15: "Take legal, administrative, or policy measures to encourage and enable business, and in particular to ensure that large and transnational companies and financial institutions: regularly monitor, assess, and transparently disclose their risks, dependencies and impacts on biodiversity; provide information needed by consumers to promote sustainable consumption patterns; report on compliance with access and benefit-sharing rules and measures; progressively reduce negative impacts on biodiversity, increase positive impacts..."
TNFD is the primary international framework designed to enable companies to implement Target 15's disclosure requirements. Target 30x30, which commits to protecting 30% of land and 30% of ocean by 2030, creates additional context for corporate location-specific biodiversity risk: as more land is formally protected, operating in or near protected areas becomes an increasingly significant risk factor.
The 30x30 Target and Corporate Nature Risk
The KM-GBF's Target 3 commits signatory nations to protecting 30% of land and 30% of ocean by 2030 (the "30x30" target). As countries work to meet this commitment, areas currently used for agriculture, mining, or infrastructure may be designated as protected. Companies with operations or supply chain sourcing in areas that could fall within new protected area designations face potential asset stranding or operational constraint risks. Proactive nature-related risk assessment - identifying which operations or sourcing areas could be affected by new conservation designations - is therefore an important forward-looking risk management action.
EU Corporate Sustainability Reporting Directive (CSRD)
The CSRD, applicable progressively from 2024 to 2028 depending on company size and type, requires in-scope companies to report against the European Sustainability Reporting Standards (ESRS). ESRS E4 is the biodiversity and ecosystems standard, which requires companies to:
- Disclose transition plans for biodiversity and ecosystems
- Describe material impacts, risks, and opportunities related to biodiversity
- Report on sites in or near biodiversity-sensitive areas
- Disclose land use, water use, pollution, and species impact metrics
- Report on nature-related targets and actions
ESRS E4 is explicitly aligned with TNFD recommendations, such that companies reporting under ESRS E4 will be producing substantially similar information to TNFD disclosures. This alignment reduces the reporting burden and creates regulatory pull for TNFD adoption among European companies and their global value chain partners.
ISSB-TNFD Alignment and Future Standards
The International Sustainability Standards Board (ISSB), which develops sustainability disclosure standards for adoption into capital markets regulation globally, has committed to monitoring developments in nature-related disclosure and considering whether to develop a dedicated IFRS Sustainability Disclosure Standard on nature and biodiversity. In the near term, ISSB's existing standards (IFRS S1 and S2) apply to nature-related risks where they are financially material, meaning companies already have an obligation to disclose material nature risks under mainstream financial reporting frameworks in jurisdictions that have adopted ISSB standards.
TNFD and ISSB have committed to collaboration to ensure their frameworks remain complementary, avoiding duplication and supporting companies in meeting both voluntary (TNFD) and regulatory (ISSB-based) disclosure requirements simultaneously.
EU Biodiversity Strategy 2030
The EU Biodiversity Strategy 2030 sets ambitious targets for the EU's natural environment, including restoring degraded ecosystems across at least 20% of the EU's land and sea area, creating strictly protected areas covering 10% of EU land and sea, and eliminating or reforming harmful subsidies. The associated EU Nature Restoration Regulation, adopted in 2024 after a contested political process, establishes legally binding targets for ecosystem restoration across multiple habitat types. These commitments create a regulatory environment in which land-use practices across the EU are subject to increasing nature-related requirements, affecting both operations and agricultural supply chains within Europe.
Analogy: The Regulatory Climate as a Tightening Grid
Imagine nature-related regulation as a grid of lines that is being progressively tightened. In 2020, the lines were far apart - most companies faced few mandatory nature-related requirements. In 2025, the grid has tightened significantly: the EUDR imposes deforestation due diligence requirements, the CSRD requires biodiversity reporting for large EU companies, the EU Nature Restoration Regulation creates binding restoration targets, and financial regulators in several markets are consulting on incorporating nature risk into prudential supervision. By 2030, the expectation is that the grid will be tighter still, with mandatory disclosure, due diligence, and potentially mandatory biodiversity impact reduction targets applying to a much wider range of companies across many jurisdictions. Companies that start building nature-related risk management and disclosure capabilities now will be better positioned to meet this tightening regulatory environment than those that wait for legal mandates.
Future Outlook: Key Trends to Watch
- Regulatory expansion: Following the EU's lead, other major jurisdictions (UK, Australia, Canada, Japan) are expected to introduce or strengthen nature-related disclosure and due diligence requirements over the 2025-2030 period
- ISSB nature standard: ISSB is expected to publish a dedicated biodiversity and nature disclosure standard, creating a globally consistent mandatory baseline
- Biodiversity market development: Voluntary biodiversity credit markets are expected to scale, driven by corporate nature-positive commitments and regulatory pushes for nature market infrastructure
- SBTN target setting: Science Based Targets for Nature are expected to become a market expectation for large companies in high-impact sectors, paralleling the trajectory of science-based climate targets
- Nature-related stress testing: Financial regulators, including the Bank of England and De Nederlandsche Bank, have pioneered nature-related financial stability analysis and are expected to move toward formal nature risk stress testing requirements for banks and insurers
Key Takeaways
- 1The EU Deforestation Regulation requires companies to provide GPS-level traceability for specified commodities (including cattle, cocoa, coffee, palm oil, soy, and wood) sold in the EU, with large company compliance required from December 2025
- 2The Kunming-Montreal GBF's Target 15 directly requires large companies and financial institutions to assess, disclose, and reduce their biodiversity impacts, with TNFD as the primary enabling framework
- 3ESRS E4 (EU CSRD biodiversity standard) is explicitly aligned with TNFD recommendations, creating regulatory pull for TNFD adoption among European companies and their global supply chain partners
- 4The 30x30 target (protecting 30% of land and ocean by 2030) creates future corporate risk: operations or sourcing areas within potential new conservation designations may face constraint or asset stranding
- 5The regulatory trajectory points toward progressively mandatory nature disclosure, due diligence, and biodiversity impact reduction obligations across major jurisdictions through the 2025-2030 period