Analyst Insight: Global food supply chains face increasing risks due to biodiversity loss. Biodiversity incentives provide a market-driven solution to finance conservation, enhance sustainability, and mitigate operational risks linked to ecosystem degradation.
Biodiversity underpins food security by supporting agricultural ecosystems, ranging from pollinators that facilitate crop production to healthy soils that ensure stable yields. However, conventional farming often depletes biodiversity, reducing soil health, resilience to pests and pathogens, and increasing nutrient loss. For example, one-third of fertilizer applied to grow corn in the U.S. merely compensates for the ongoing loss of soil fertility. Promoting crop variety and habitat diversity, for example, can promote resilience in food production and improve nutritional quality.
Biodiversity credits are one of the financial tools for ecosystem protection and restoration, while aligning supply chain sustainability with ESG commitments. They enhance food supply chains by supporting pollinator habitats, improving soil fertility and regeneration, increasing flood protection and supporting natural pest control.
However, biodiversity credits face a number of adoption barriers, including lack of standardized metrics, absence of a clear credit framework and adequate market governance, an unsustainable or uncertain business case for investment, and difficulty in measuring and verifying nature-positive outcomes.
Following are some best practices for implementation of biodiversity initiatives:
Adopt standardized metrics. Collaborate with experts to define biodiversity metrics aligned with disclosure frameworks.
Develop a strong framework and governance. Continue to evolve guidelines for high-integrity credit issuance and verification, such as ensuring that investments are transparent and respect the rights of Indigenous peoples and local communities.
Strengthen the business case. Highlight ROI through risk mitigation, brand value, and supply chain stability.
Devise hybrid financial models. Launch pilot programs to prove financial viability.
Pursue carbon market integration. Combine biodiversity and carbon credits for maximum impact.
Engage in debt-for-nature swaps. Broaden your initial investment and attract more stakeholders, especially during the early stages of agreements. Traditional DNS models often depend on government and donor funding, limiting scalability.
Deploy technology. New technologies can reduce costs and improve measurement, reporting and verification of biodiversity outcomes. For example, environmental DNA technology allows low-cost sampling and monitoring levels of multiple species across sites.
Balance regulation and ROI. Over-regulation raises costs and limits participation, while under-regulation risks misuse and greenwashing. A balanced approach involves science-based standards, tiered project requirements, and strong market insight.
Examples of biodiversity credit initiatives include:
Habitat exchange programs. Landowners such as ranchers earn credits for creating, maintaining and improving habitat on their property. The positive biodiversity outcome can be part of a biodiversity credit.
High Integrity Forest Investment Initiative. HIFOR was developed by the Wildlife Conservation Society, which is currently piloting the initiative with governments and communities. One HIFOR unit represents one hectare of well-maintained, high-integrity tropical forest that has been actively conserved within a large landscape for a decade..
Nature credits. CreditNature in Scotland issues Nature Investment Certificates, where gains in ecosystem recovery are converted to nature credits. Projects focus on habitat restoration of agricultural lands.
Biodiversity is critical to maintaining resilient, sustainable food supply chains. Bringing biodiversity benefits to food supply chains is both a necessity and an opportunity for ensuring global food security in the face of environmental challenges.
This report was originally published on SupplyChainBrain magazine – access the full edition here.
