Navigating Nature Risks: What General Counsel And Board Members Need To Know

Nature-related risk is moving rapidly up board agendas. Once seen as a specialist environmental issue, nature risks are now a mainstream organisational risk, affecting governance, legal compliance, operational resilience and long-term value. For General Counsel (GCs) and Directors, the focus has shifted from understanding why nature matters to assessing, overseeing and responding to nature-related risk in a strategic way.

More than half of global GDP — around $44 trillion — depends directly on nature, yet biodiversity loss and ecosystem degradation are already disrupting supply chains and exposing businesses to legal and reputational risk. This article explores why nature risks are now a business priority, the changing legal and regulatory landscape, the focus on developing nature-related opportunities and key considerations for in-house teams.

Why does nature risk matter now?

Nature degradation creates legal, financial, operational and reputational risks for all sectors, not only those businesses traditionally associated with adverse impacts on the environment or who are subject to explicit regulatory requirements. Those risks might not obviously arise in relation to an organisation's immediate operations (that is, within its perimeter fence), but are almost certainly deeply embedded throughout complex value chains across the globe; affecting sourcing, resilience and continuity of goods and services.

Regulatory and investor focus on nature has gained momentum, with a greater expectation for businesses to monitor, disclose and respond to questions on nature-related impacts. Pressure is also coming from customers and younger stakeholders, who identify biodiversity loss as the biggest long-term global risk and therefore expect organisations to take urgent action rather than wait for legal obligations to apply.

Together, these factors create both risk and opportunity, reinforcing the need for robust, accurate approaches to managing and reporting nature-related impacts. Those that move early may gain competitive advantage, positioning themselves favourably as regulatory expectations mature and market preferences shift.

For many boards, the greater risk lies not in a company's impact on nature, but in its dependency on natural systems, which can shut down operations if left unmanaged. Nature-related risks are often more complex to assess and mitigate than carbon, meaning there is no one-size-fits-all approach. Understanding sector-specific priorities and undertaking risk mapping are essential first steps.

What distinguishes nature risks from other emerging issues is the breadth of its reach and the speed at which regulatory and market expectations are evolving. Boards and GCs who treat it as peripheral do so at increasing risk.

Directors' duties and legal expectations

The role of the GC in advising boards on nature-related risk sits squarely within existing legal duties and is increasingly aligned with emerging regulatory expectations. Under the Companies Act 2006, directors must have regard to the impact of operations on the environment (section 172) and exercise reasonable care, skill and diligence (section 174). Where nature-related risks are foreseeable and material, failure to factor them into decision-making could amount to a breach of these duties.

Beyond core duties, the regulatory landscape is evolving. The EU's Corporate Sustainability Due Diligence Directive (CSDDD) introduces obligations relating to environmental and human rights impacts across value chains, with organisations – including certain UK-connected businesses – coming into scope at different stages. In parallel, voluntary frameworks such as the Taskforce on Nature-related Financial Disclosures (TNFD) are gaining traction, driven by investor expectations and the desire for greater preparedness and transparency. While TNFD adoption is not mandatory, early engagement can strengthen governance and risk management and enhance investor confidence.

Reporting and disclosure: an evolving landscape

Reporting and disclosure expectations are evolving rapidly, requiring organisations to navigate a mix of mandatory requirements and emerging best practice. Anti-greenwashing expectations under the UK Sustainability Disclosure Requirements (SDR) and Sustainability Reporting Standards (SRS) emphasise the need for accuracy and substantiation in environmental claims, with nature-related disclosures increasingly part of this landscape. Robust governance, clear evidence for sustainability claims and transparent reporting are essential for businesses to maintain trust, protect value and meet evolving environmental, social, and governance (ESG) obligations.

Alongside these requirements, the TNFD LEAP approach is emerging as best practice in helping organisations identify dependencies and impacts, assess risks and opportunities, and undertake scenario planning. The EU's Corporate Sustainability Reporting Directive (CSRD) introduces further obligations for large and listed companies – including the requirement to publish regular sustainability reports – making it essential to understand when an organisation comes into scope.

Measuring nature-related risk remains challenging because it cannot be captured through a single metric and, instead, requires assessment of multiple, place-specific indicators, often embedded within complex supply chains. Sectors such as agriculture, mining and infrastructure are already demonstrating that this can be achieved effectively by focusing on what is most material; supported by improved supplier data, stronger IT systems and closer collaboration across internal teams.

Overall, while disclosure frameworks continue to evolve, boards and in-house legal teams should adopt a focused, proportionate approach, rather than attempting to measure everything at once.

Priority nature-related risk areas

To make nature risk tangible, it is helpful to focus on four broad categories: physical, transition, legal and systemic risks. These categories help organisations understand how nature-related impacts can affect operations, governance, compliance and long-term resilience.

Supply-chain exposure is a particularly significant feature of nature-related risk. Environmental degradation within supplier networks can disrupt continuity of goods and services and create reputational consequences that extend well beyond the immediate point of impact. For many organisations, the most material risks sit within procurement and supplier networks rather than their own operations, with dependencies often geographically concentrated. As a result, company procurement processes are increasingly being used as a key risk-management lever, alongside greater transparency and robust contract design aligned with environmental goals.

Regulatory developments such as the EU Deforestation Regulation introduce additional consequences, including potential fines and procurement implications if non-compliance is identified for organisations within its scope which use commodities grown in areas where deforestation may occur. Risk exposure ultimately varies by sector and business model, and GCs play a critical role in helping boards understand how these risks interact with existing risk frameworks.

Nature: the new business case

Alongside risk, there is a growing business case for engaging with nature-related opportunities. Developments in Biodiversity Net Gain (BNG), supporting action to prevent biodiversity loss and restore natural habitats, and wider nature markets are already shaping how nature projects are designed and delivered – particularly for developers, landowners and the infrastructure sector, with broader application expected across other sectors.

Natural capital is also attracting interest as an emerging asset class, with activity growing across nature markets including nutrient neutrality, water quality, flood management and forestry. In parallel, investment in nature-positive innovation is delivering tangible benefits, with businesses responding to regulatory and nature-related pressures by adopting alternative materials and circular design approaches, for example, that reduce reliance on resource-intensive inputs.

Nature-based monitoring and data are emerging as competitive differentiators and are acting to inform business planning and prioritise investment in nature, supported by policy developments such as the Environmental Improvement Plan in England. Realising these opportunities requires moving beyond reporting and towards implementation. By embedding nature considerations earlier in decision making and joining up teams across the business, organisations can strengthen operational resilience and unlock long-term value.

Next steps for General Counsel

In-house legal teams can take practical steps now to prioritise nature in board decision making and get ahead of regulatory change. For those at an earlier stage, seeking targeted guidance and identifying priority areas will help focus effort where it matters most.

Key considerations in the immediate to short term include:

• Ensure the board understands its nature duties and that nature risk is considered and documented in board meetings.
• Undertake materiality assessments and supply-chain mapping across your operations to understand and map where nature-related impacts, risks and dependencies sit.
• Use TNFD scenarios to frame risk implications and develop resilient strategies.
• Stress-test supply chain failure (e.g. crop failure of key ingredients – consider the alternatives).
• Integrate nature into reporting and governance processes, ensuring compliance with current requirements and identifying where voluntary disclosure is appropriate.
• Engage with suppliers and embed risk mitigation into procurement processes and policy. Review key supply chain contracts as part of your approach – for example, are they impacted by EU Deforestation Regulation (EUDR)? Should EUDR principles/best practices be adopted?
• Ensure nature considerations are reflected in board papers and that nature features regularly on the agenda and is factored into business planning.
• Track existing and forthcoming nature regulations and then monitor the regulatory pipeline to ensure compliance while also identifying opportunities (e.g. nature markets).
• Review and update business continuity plans to reflect nature-related risks and check insurances for protection against these risks.

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.