Biodiversity is the variety of life across terrestrial, marine, and freshwater ecosystems. It is critical for sustaining life on Earth and facilitates essential processes such as pollination, soil health, and water purification. Yet wildlife populations have declined by 73% since 1970, and biodiversity loss is now considered one of the top global risks of the coming decade (WWF, 2024; WEF, 2020). Businesses both depend on and impact nature, making it critical to understand where operations may contribute to ecological harm.
ESC 1.5 in B Lab’s Standards V2 responds to this urgency by requiring companies to identify whether their facilities are located in or near ecologically sensitive areas, and to assess whether their operations are negatively affecting those areas. This helps ensure companies proactively manage biodiversity-related risks and reduce their impact on vulnerable ecosystems.
How to assess your facilities’ biodiversity impact
To assess how a company's facilities affect biodiversity, B Lab recommends following an approach built on the TNFD's LEAP methodology — the same framework referenced in ESC1.7 for evaluating actual and potential negative environmental impacts across a company's operations and value chain.
The TNFD LEAP approach covers more ground than B Lab requires: it also assesses nature-related dependencies, risks, and opportunities, which can be valuable — particularly where similar analysis is mandated by legislation. However, the B Lab Standards focus specifically on impacts and their management.
The following are the recommended steps, built on the TNFD LEAP approach, to assess the impacts of companies' facilities on biodiversity.
Phase 1: Locate. Map the company’s operations and determine whether its facilities are in or near ecologically sensitive areas. The company can set the radius for determining “near an ecologically sensitive area” and explain the rationale.
For ESC1.5, consider all facilities the company owns, leases, or manages, including all manufacturing and production facilities (including farms). You may exclude offices not involved in manufacturing or production.
What are “ecologically sensitive areas”?
They are areas with:
biodiversity importance - These include, for instance, areas protected through legal or other effective means, areas scientifically recognized for their importance to biodiversity, or areas important to threatened species.,
high ecosystem integrity - Ecosystem integrity means how well an ecosystem’s species, structure, and natural processes are kept in their healthy, natural state. These are areas that in comparison to the surrounding landscape or globally, contain significant opportunities for preserving environmental assets.,
rapid decline in ecosystem integrity - There may be areas with rapid decline in ecosystem integrity, meaning at risk of ecological tipping points.,
high physical water risks - This is also specifically called out under ESC1.4.
importance for delivering ecosystem service benefits to Indigenous Peoples and local communities - For instance, these include territories conserved by Indigenous Peoples and Communities, or areas of biocultural importance to Indigenous Peoples and local communities;
The example below illustrates how site characteristics and proximity to sensitive ecosystems can be combined with publicly available tools to inform risk assessment and decision-making.
Table 1: Example of company facilities selected for analysis.
Examples of tools:
Areas of biodiversity importance:
Areas of high ecosystem integrity
Areas of rapid decline in ecosystem integrity
Areas of high physical water risk
Areas of importance of ecosystem provision
Phase 2: Evaluate. Identify the potential impacts of the company's facilities on nature — how operations interact with ecosystems, what natural resources are used, and how they are exploited.
The evaluation can draw on environmental performance data, internal and external research, sector tools, and stakeholder engagement with suppliers, local communities, NGOs, or government agencies. Perfect data is rarely available at the outset; the goal is transparency over exhaustiveness, providing a starting point companies can build on as better data becomes accessible.
Step 1 — Identify Environmental Pressures. Identify the pressures resulting from company activities: measurable inputs (e.g. water, land) and quantifiable outputs (e.g. emissions, waste) that affect nature.
Step 2 — Analyse Changes in Environmental Assets. Assess how those pressures cause changes in environmental assets — the living and non-living components of the Earth, such as freshwater, ecosystems, minerals, and atmospheric systems. For example, excessive water withdrawal can reduce river flow and degrade aquatic habitats; air emissions can alter atmospheric composition and contribute to acid rain; land clearing removes soil structure and displaces species. In this step, companies may consider the direct drivers of biodiversity loss:
land/sea-use change (habitat loss),
direct exploitation of organisms,
climate change,
pollution,
invasive species.
Tools:
The ENCORE tool and the SBTN Materiality Screening Tool provide materiality ratings for direct drivers associated with different standardized activities.
LEAP Approach of TNFD for more details and examples.
The following table illustrates how the pressures generated by industrial activities cause physical changes in natural assets. These changes can also alter the ecosystem services on which the continuity of the business depends.
Table 2: Analysis of impacts.
Phase 3: Assess and prioritize impacts.
After identifying the impacts on nature, the standard requires a more detailed analysis of the severity and probability of each impact, so you can prioritize and manage them effectively. Proximity to ecologically sensitive areas and changes in the state of biodiversity can increase the severity and likelihood of an impact on biodiversity. For actual negative impacts, materiality is based on the severity of the impact, while for potential negative impacts it is based on the severity and likelihood of the impact. Severity should outweigh likelihood, so that highly severe impacts — even if they are unlikely — are still prioritized.
Type of impacts:
Actual Negative Impacts: This is something that is already happening (e.g., your factory currently consumes 100m³ of water from a depleted aquifer). It is prioritized solely because of its severity.
Potential Negative Impacts: It is a risk (e.g., a possible chemical spill near a river). It is prioritized by assessing the severity by the probability of occurrence.
Required output: The final result should be a record that includes the location, size (in hectares), and prioritized impacts of facilities in or near ecologically sensitive locations. If the company determines that its facility is near an ecologically sensitive area, it should explain the criteria it applied. The method to how the company derives the output is of equal importance to evidence.
After assessing and prioritizing impacts, the company is in a position to manage them and set targets and plans to manage its impacts. This assessment feeds into the company’s assessment of actual and potential environmental impacts under ESC1.7 and helps define the areas to address in its environmental strategy.
Why it Matters for B Corp Certification
Compliance with the ESC 1.5 requirement is essential for demonstrating environmental stewardship. To meet the standard, companies must move beyond general descriptions and maintain a Biodiversity Impact Register that includes:
Geospatial Identification (Phase 1): A complete list of facilities (manufacturing and production) located within or near ecologically sensitive areas. This record must specify the precise GPS coordinates and the physical size (e.g., in hectares) of the operation’s footprint.
Impact Analysis (Phase 2): A detailed identification of both actual and potential negative impacts on biodiversity.
Prioritization (Phase 3): Evidence of an assessment where impacts are prioritized based on their severity (scale, scope, and irremediability) and likelihood (for potential impacts).
Related resources
To explore this topic further, you may find the following resources helpful:
Environmental Stewardship and Circularity Impact Topic overview (Available in multiple languages).
Evidence examples for the Environmental Stewardship and Circularity Impact Topic (Available in multiple languages).
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