What is corporate sustainability and why does it matter?

Corporate sustainability is how organisations integrate environmental, social, and governance (ESG) considerations into their strategy and operations. It matters because of increasing regulatory requirements (CSRD, UK SRS), stakeholder expectations, and the business case for resilience. Companies that embed sustainability outperform those that treat it as compliance.

What is CSRD and does it apply to my company?

The Corporate Sustainability Reporting Directive (CSRD) is EU legislation requiring detailed sustainability reporting. It applies to large EU companies, EU-listed SMEs, and non-EU companies with significant EU revenue (€150M+). UK companies may be affected through EU subsidiaries or supply chain requirements.

What are SBTi targets and how do companies set them?

Science Based Targets initiative (SBTi) provides frameworks for companies to set emission reduction targets aligned with climate science. Companies submit targets for validation, typically covering Scope 1, 2, and increasingly Scope 3 emissions. The process involves baseline calculation, target setting, and ongoing reporting.

How do SMEs approach sustainability without enterprise resources?

SMEs can start with materiality assessment to identify what matters most, focus on quick wins (energy efficiency, waste reduction), leverage supply chain requirements as a framework, and use simplified reporting approaches. The key is proportionate action - not everything at once, but consistent progress on what matters.

What is the difference between ESG and sustainability?

ESG (Environmental, Social, Governance) is a framework for measuring and reporting sustainability performance, primarily used by investors. Sustainability is the broader goal of meeting present needs without compromising future generations. ESG is one way to structure and communicate sustainability efforts.

What are biodiversity markets?

Biodiversity markets are mechanisms that channel capital toward nature protection and restoration through credits, offsets, and payment for ecosystem services (PES).

How do biodiversity credits differ from carbon credits?

Carbon credits price a single metric (tonnes CO2e). Biodiversity credits price ecosystem outcomes (habitat quality, species protection) which are harder to standardize, making these markets newer and more fragmented.

What is BNG (Biodiversity Net Gain)?

BNG is a UK requirement (mandatory since Feb 2024) that developments must deliver a minimum 10% improvement in biodiversity value compared to pre-development baseline.

How do biodiversity markets relate to TNFD?

TNFD disclosure requirements are driving corporate demand for credible nature action. Biodiversity credits are one mechanism companies can use to demonstrate action on nature-related impacts.

Can biodiversity credits be stacked with carbon credits?

Yes. Many landscape projects can generate both carbon and biodiversity value. Stacking multiple revenue streams (carbon + biodiversity + water quality + productive use) creates more resilient economics for land stewards.

PANDIONSTUDIO

CAPITAL FLOWS: MARKET MECHANISMS

Biodiversity Markets

A Systems View

Mapping biodiversity markets across the 5-layer sustainability framework.
How capital flows from investors to landscape actors.

Biodiversity Credits: Detailed Mechanics →

In 30 Seconds

Biodiversity markets - including credits, offsets, and payment for ecosystem services - are emerging mechanisms to channel capital toward nature protection and restoration.

ChallengeFarmers ask: "How do I get income from biodiversity protection?" Currently vague.
OpportunityStacked revenues (carbon + biodiversity + water + productive use) on the same landscape.
GapCapital IN exists. Capital THROUGH is fragmented. Capital OUT to landscape actors is unclear.

Key insight: Biodiversity markets don't exist in isolation - they connect planetary science, ecosystem services, landscape management, policy frameworks, and corporate action.

The 5 Layers: Where Biodiversity Markets Fit

Mapping against the Pandion Sustainability Framework

Corporate Action

Why companies engage with biodiversity credits

Disclosure compliance - TNFD/CSRD requires nature impact reporting
Supply chain risk - Dependencies on ecosystem services create business risk
Net zero + nature - Climate commitments expanding to include nature-positive targets
Planning/development - BNG requirements for construction projects

Corporate concerns:

Greenwashing risk - Are credits credible?
Additionality - Would outcomes happen anyway?
Permanence - Will results last?
Verification - Who audits? What standards?

Policy & Governance

The regulatory architecture shaping credit demand and supply

BNG (UK)	Mandatory 10% net gain creates compliance demand
TNFD	Disclosure requirements drive voluntary corporate demand
CSRD/ESRS E4	EU mandatory nature reporting
ISSB S3	Coming global standard will mainstream nature disclosure
EUDR	Supply chain due diligence creates verified sourcing demand
Kunming-Montreal GBF	Target 15 business disclosure expectations

Regulatory trajectory: Voluntary → expected → mandatory. TNFD following TCFD's path.

Ecosystem Services

What functioning ecosystems provide - and what credits protect

Provisioning

Credits can support land management that maintains productive capacity

Regulating (Primary focus)

Pollination, water regulation, soil health, flood attenuation

The stacking opportunity: Biodiversity credits as one revenue stream among many from the same landscape.

Landscapes & Jurisdictions

Where biodiversity outcomes actually happen

Agricultural - Hedgerows, field margins, cover crops, reduced tillage
Forestry/woodland - Native species, structural diversity
Wetlands/peatlands - Restoration generates both carbon and biodiversity value
Coastal/marine - Emerging "blue credits" for mangroves, seagrass
Urban/brownfield - BNG requirements driving urban biodiversity

Landscape-level thinking: Jurisdictional approaches may be more effective than fragmented site-by-site credits.

Planetary Foundations

The science underpinning why biodiversity matters

Biosphere integrity - Credits aim to protect/restore living systems that maintain planetary boundaries
Land-system change - Credits can incentivise land use that maintains ecosystem function
Climate-nature nexus - Biodiversity and carbon are interconnected

Credits must deliver real ecological outcomes, not just metric compliance.

Capital Flows: How Money Moves

Capital IN

Investment entering the system

Institutional investors
Corporate buyers (BNG, voluntary)
Blended finance
Development finance (DFIs)

Capital THROUGH

Mechanisms moving money

Credit registries
Aggregators/intermediaries
Natural capital funds
Payment schemes (ELMS, PES)
Verification bodies (MRV)

Capital OUT

Revenue reaching landscape actors

Farmers/land stewards
Landowners
Conservation organisations
Community groups
Supply chain actors

The Blockage

Capital IN exists. Capital THROUGH is emerging but fragmented. Capital OUT to landscape actors remains unclear. The farmer's question - "how do I actually get income from biodiversity protection?" - often lacks a clear answer.

The Stacked Revenue Model

Biodiversity credits as part of an integrated landscape revenue model.

Same landscape, multiple revenue streams:
├── Provisioning (product sales - potentially premium pricing)
├── Carbon credits (established pathways)
├── Biodiversity credits (emerging)
├── Water quality payments (emerging)
└── Other regulating services (flood risk, pollination - future)

Why This Matters

Single-credit models may not create viable economics
Stacked revenues = more resilient income
More durable outcomes for investors

What's Needed

Coordination across payment mechanisms
Shared data/verification infrastructure
Clear pathways for landscape actors

Data Flows: The Four Evidence Types

Biodiversity markets require robust data infrastructure across four key evidence categories.Learn more about Data Flows →

MRV Systems

Measurement, Reporting, Verification

Baseline: Pre-intervention habitat assessment
Metrics: BNG units, species counts, habitat quality
Verification: Third-party ecological audits
Monitoring: Remote sensing + ground-truth surveys

Traceability

Credit provenance and chain of custody

Registry IDs: Unique credit serial numbers
Ownership chain: Issuance → transfer → retirement
Site location: Geographic origin and boundaries
Double-counting: Prevention across markets

Disclosure Data

Corporate reporting requirements

TNFD alignment: Nature-related disclosures
BNG compliance: Planning condition evidence
Regulatory filings: CSRD, ESRS E4 requirements
Frameworks: SBTN, GBF Target 15 reporting

Impact Evidence

Beyond biodiversity outcomes

Co-benefits: Carbon, water quality, community
Additionality: Counterfactual analysis evidence
Permanence: Long-term outcome durability
Ecological integrity: Real outcomes vs metric gaming

The Data Infrastructure Challenge

Unlike carbon (tonnes CO2e), biodiversity lacks a universal metric. This creates verification challenges and limits market fungibility. High-integrity credits require strong MRV systems, clear traceability, compliant disclosure data, and demonstrable impact evidence across multiple dimensions - species, habitats, ecosystem function, and co-benefits.

The Three Enablers

Digital Infrastructure

Remote sensing for outcome verification
Registries for credit tracking
Platforms connecting buyers and sellers
IoT/sensors for ground-truth data

AI & Automation

Species identification (computer vision)
Predictive ecosystem modelling
Multi-source data synthesis
Anomaly detection for reversals

Standards & Interoperability

Consistent quantification methodologies
Third-party certification frameworks
Data standards for comparison
Registry protocols (double-counting)

Key Questions

For Investors:

How do you assess biodiversity credit quality and avoid greenwashing risk?

For Corporates:

How do credits fit your nature strategy - offsetting residual impacts or driving supply chain transformation?

For Landscape actors:

How do you access credit markets without prohibitive transaction costs?

For Policy makers:

How do mandatory and voluntary markets interact? Does BNG crowd out or complement voluntary action?

For The system:

Can biodiversity credits scale while maintaining ecological integrity?

Pandion's Perspective

We work across all five layers - understanding planetary science, ecosystem services, landscape realities, policy frameworks, and corporate needs.

Translate between different stakeholder languages

Identify where capital flows are blocked

Design data architectures that serve multiple purposes

Connect landscape actors to appropriate mechanisms

Assess credit quality beyond surface-level claims

The question isn't just "do credits work?" but "how do credits fit within the broader system of nature finance?"

Where To Go Next

Biodiversity Credits: The Details

BNG mechanics, TNFD, voluntary standards, and the UK policy landscape.

Carbon Markets: Systems View

The parallel systems view mapping carbon markets against the 5-layer framework.

← Back to Capital Flows ← Sustainability Overview

Disclaimer: This content is for general educational and informational purposes only. It does not constitute financial, investment, legal, or tax advice and should not be relied upon as such. Pandion Studio does not provide regulated investment advice.