When sipping our morning cup of coffee, we might enjoy the sweet smell and bitter-chocolaty taste, the energy boost it brings, and the opportunity to connect with others. But not many people realize that we should thank biodiversity (or the variety of life on earth, from microorganisms to ecosystems) for this luxury drink. By pollinating coffee flowers, bees help produce more and better-quality coffee. Natural predators like wasps help control pests that attack coffee plants. Many invertebrates and microorganisms help maintain soil fertility, thereby supporting coffee plants’ healthy growth. And the forests surrounding coffee plantations not only provide a home for all these organisms, but also the supply of clean water needed for irrigation.
Coffee is just one illustrative example of how our daily lives are enriched by biodiversity. The ultimate impact is much greater, affecting food, medicine, energy, clean air and water, and security from natural disasters, as well as recreation and cultural inspiration. In fact, the World Economic Forum’s (WEF) 2020 report Nature Risk Rising estimated that more than half of the world’s GDP (~$44 trillion) is highly or moderately dependent on nature and its services, and therefore faces risks from nature loss.
And the world is losing biodiversity. Although precise measurement is difficult, recent reporting, including the 2019 Global Assessment Report of the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services and the World Wildlife Fund’s 2022 Living Planet Report, provides some data. Collectively, these reports state that the extent of natural ecosystems has decreased by an average of 47% of their estimated natural baselines; about 25% of all species are threatened with extinction; and the abundance of tens of thousands of terrestrial, freshwater, and marine vertebrate populations around the world has declined an average of 69% between 1970 and 2018.
Importantly, biodiversity losses and the damage to natural ecosystems can have far-reaching economic and societal consequences. According to the WEF’s Global Risk Report 2023, these consequences may include increased occurrence of zoonotic diseases, reduced crop yields and nutritional value, growing water stress, more dramatic floods, sea-level rise, and erosion from the degradation of natural flood protection ecosystems. Businesses and their attorneys thus need to be aware of the risks that loss of biodiversity poses—but also of the legal requirements both domestically and globally that nations are imposing in an attempt to reduce the global loss of species.
This article provides an overview of U.S. and global legal frameworks for biodiversity protection. It then addresses recent developments in biodiversity protection that may affect businesses’ compliance requirements, including both formal and informal mechanisms.
Biodiversity’s Significance Grows, but Legal Frameworks Lag
The U.S. has been a leader in protecting imperiled species, with the Endangered Species Act of 1973 (ESA), 16 U.S.C. §§ 1531 et seq., now reaching its 50th anniversary. The U.S. Supreme Court famously described the ESA as “the most comprehensive legislation for the preservation of endangered species ever enacted by any nation.” Tenn. Valley Auth. v. Hill, 437 U.S. 153, 180 (1978). The core provisions of the Act—the requirement for government agencies to consult, to avoid jeopardizing listed species or adversely modifying or destroying critical habitat, and the prohibition on taking any listed species—remain largely unchanged since Congress first enacted the statute. These are referred to as the “section 7” and “section 9” obligations, after the ESA’s original section numbers in the public law. See 16 U.S.C. §§ 1536, 1538.
As a U.S. law, the ESA’s reach is necessarily limited, despite being one of the broadest species conservation statutes on the books. In some regards, the ESA is in fact a globally minded statute. For example, it permits listing of wholly foreign species, although it requires listing determinations to take into account conservation efforts under foreign law or treaties. Id. § 1533(b)(1)(A). In addition, section 8A of the ESA implements the Convention on International Trade in Endangered Species of Wild Flora and Fauna, which was also signed in the landmark year of 1973. See id. § 1537A.
Nevertheless, given limitations on U.S. sovereignty, the ESA simply cannot address all biodiversity problems around the globe—although the ESA’s jurisdiction is extended farther than many other federal statutes. For example, the section 7 consultation obligation applies to actions that a federal agency “authorizes, funds, or carries out, in the United States or upon the high seas.” 50 C.F.R. § 402.01(a) (emphasis added). Similarly, the section 9 take prohibition applies to persons subject to federal jurisdiction within the United States, its territorial seas, or upon the high seas. 16 U.S.C. § 1538(a)(1).
Section 7 also requires consultation to avoid actions that would destroy or “adversely modify” any designated critical habitat. Id. § 1536(a)(2). Critical habitat may be designated in occupied areas that contain physical or biological features essential to the conservation of the species and that may require special management considerations or protection. Id. § 1532(5)(A)(i). It may also be designated in unoccupied areas that are determined to be “essential to the conservation” of the species. Id. § 1532(5)(A)(ii). Thus, a critical habitat designation “places conditions on the Federal Government’s authority to effect any physical changes to the designated area, whether through activities of its own or by facilitating private development.” Weyerhaeuser Co. v. U.S. Fish & Wildlife Serv., 139 S. Ct. 361, 365–66 (2018). However, the U.S. Fish & Wildlife Service and the National Marine Fisheries Service, the two federal agencies that implement the ESA, do not designate critical habitat designations outside U.S. jurisdiction. 50 C.F.R. § 424.12(g).
Other U.S. environmental laws that protect species are less expansive in their jurisdictional reach. For example, the Sponge Act, passed in the early 1900s, prohibits the taking, harvesting, or commercial trade in sea sponges less than five inches in diameter. 16 U.S.C. § 781. By its own terms, this prohibition applies only in “the waters of the Gulf of Mexico or Straits of Florida.” However, over a century ago, the Supreme Court narrowly construed the Sponge Act’s prohibition to apply only to federal waters, limiting the act’s ability to protect biodiversity. The Abby Dodge, 223 U.S. 166, 173, 177 (1912).
The U.S. Supreme Court has, in general, been limiting extraterritorial application of U.S. laws in recent years. For example, a series of cases have limited the reach of the Alien Tort Statute, 28 U.S.C. § 1350 (ATS), starting with Kiobel v. Royal Dutch Petroleum Co. 569 U.S. 108 (2013). Kiobel held that the ATS, which provides federal jurisdiction for tort actions by foreign nationals to remedy violations of the “law of nations,” applies only to such violations occurring in the United States. Id. at 124. While the Court had previously recognized the ability of lower courts to enforce “specific, universal, and obligatory” norms under the ATS, in 2018 it held that courts could not exercise jurisdiction under the ATS over foreign corporations. Jesner v. Arab Bank, PLC, 138 S. Ct. 1386, 1401, 1407 (2018). And in Nestlé USA, Inc. v. Doe, 141 S. Ct. 1931 (2021), the Court held that allegations of operational decision-making in the United States did not suffice for jurisdiction under the ATS. Id. at 1937. Beyond the ATS, the Court held in 2016 that while certain aspects of the Racketeer Influenced and Corrupt Organizations Act (RICO) applied to foreign conduct, RICO’s private right of action applied only to domestic injury. RJR Nabisco, Inc. v. Eur. Cmty., 579 U.S. 325, 346 (2016). Moreover, it closed the 2023 term by holding that certain Lanham Act provisions applied only to claimed trademark infringement arising from domestic use. Abitron Austria GmbH v. Hetronic Int’l, Inc., 143 S. Ct. 2522 (2023).
Environmental laws are not immune to this trend. The National Environmental Policy Act (NEPA) provides a particularly demonstrative example of how domestic law protections are increasingly limited to domestic activities. NEPA was historically read to apply to the extraterritorial effects of actions taken within the United States or by federal agencies in territories not subject to another nation’s sovereignty, like the high seas. For example, the U.S. Court of Appeals for the D.C. Circuit found that NEPA applied to incineration of food waste in Antarctica in Environmental Defense Fund v. Massey, reasoning that Antarctica is a “global common” not unlike outer space. 986 F.2d 528, 529 (D.C. Cir. 1993). Following that logic, NASA completed Environmental Impact Statements (EISs) for the Mars rovers between 2014 and 2020. See NASA, Supplemental Record of Decision, Final Supplemental EIS, Mars 2020 Mission (Mar. 2020). Nevertheless, when almost three decades after Massey the D.C. Circuit was faced explicitly with the issue of whether NEPA applied to federal agency actions in space, it chose to dismiss the petition for review and did not decide the issue. Viasat, Inc. v. Fed. Commc’ns Comm’n, 47 F.4th 769 (D.C. Cir. 2022). A year later, Congress did decide, by amending NEPA to preclude the statute’s application to “extraterritorial activities or decisions, which means agency activities or decisions with effects located entirely outside of the jurisdiction of the United States.” 42 U.S.C. § 4336e (2023).
Species conservation and biodiversity is of course a global concern because few if any fish or wildlife are limited by state borders (much less the boundary between territorial seas and international waters). Given the limited reach of domestic law, the logical next step toward international management would be treaty discussions. Indeed, domestically, the treaty power can give Congress expansive ability to legislate, as with the Migratory Bird Treaty Act (MBTA). 16 U.S.C. §§ 703–712; see State of Missouri v. Holland, 252 U.S. 416, 433 (1920) (holding the MBTA to be a valid exercise of the treaty power under Article II § 2 and the necessary and proper clause of Article I § 8, cl. 18 of the U.S. Constitution).
However, any follower of international affairs will note that the Senate has been reluctant to ratify treaties (other than key national security agreements) for the last few decades. Instead, much of the activity relevant to both global biodiversity protection and businesses’ potential biodiversity compliance obligations has been occurring internationally.
International Biodiversity Protection Law
Today, much global action on biodiversity is being channeled through treaties to which the United States is not a full party. But such actions are still relevant domestically. U.S. companies that do business in party states may need to adjust their operations to comply with treaty requirements, and foreign companies may set compliance with such treaties as marketplace norms in the United States. Over time, the acceptance of treaty obligations may grow into customary international law, especially when the executive branch takes action in accordance with the treaty. For example, the United States is not a party to the United Nations Convention on the Law of the Sea. Nevertheless, it has adopted certain of this Convention’s provisions, especially those relating to national jurisdiction over the ocean, including declaration of an Exclusive Economic Zone. President Ronald W. Reagan, Proclamation 5030 of Mar. 10, 1983, 48 Fed. Reg. 10,605 (Mar. 10, 1983) (noting that “international law recognizes that, in a zone beyond its territory and adjacent to its territorial sea, known as the Exclusive Economic Zone, a coastal State may assert certain sovereign rights over natural resources and related jurisdiction”).
The Convention on Biological Diversity (Convention) provides the main global legal framework for action on biodiversity. 1760 UNTS 79, 31 ILM 818 (1992). It opened for signature at the 1992 Rio de Janeiro “Earth Summit” and entered into force in 1993. President Clinton signed the Convention but the Senate has not ratified it, so the United States is the only member state of the United Nations that is not a party to the Convention. The Convention’s “decade of biodiversity” (2010–2020) helped raise international awareness of concerns about biodiversity by setting targets (known as the Aichi Biodiversity Targets) aimed to halt the global loss of biodiversity by 2020. Because none of these targets were successfully achieved at the global level, the Convention’s party states have developed a post-2020 global biodiversity framework comprised of more comprehensive, measurable, achievable, and time-bound targets. Nearly 200 nations negotiated this framework over a period of two years, and in December 2022 it was formally launched at the 15th Conference of the Parties (COP15) for the Convention as the Kunming-Montreal Global Biodiversity Framework (GBF).
The GBF is designed to facilitate policy action in short order, with the objectives of reversing biodiversity loss by 2030 and allowing for the recovery of all ecosystems by 2050. It comprises four major goals and 23 targets to be achieved by 2030, which include conserving 30% of the world’s terrestrial and aquatic ecosystems and restoring at least 30% of the world’s degraded ecosystems, halting the loss of areas of high biodiversity importance, reducing by half excess nutrient releases and risks from pesticides and hazardous chemicals, and reducing or mitigating the impact of invasive alien species on biodiversity and ecosystem services.
Despite not being a party to the Convention, the United States has been a major contributor to the Global Environment Facility (GEF), which provides financial resources to implement the Convention. For instance, in April 2022 the United States made its largest GEF pledge ever, amounting to $600.8 million over four years. This pledge supports the Biden administration’s “30 by 30” (“30×30”) policy that calls for conservation and restoration of 30% of U.S. lands and waters by 2030. President Joseph R. Biden Jr., Exec. Order 14008 of Jan. 27, 2021, Tackling the Climate Crisis at Home and Abroad, 86 Fed. Reg. 7619 (Feb. 1, 2021).
To implement the 30×30 policy goal, the U.S. Departments of the Interior, Agriculture, and Commerce and the White House Council on Environmental Quality prepared a report calling for a decade-long effort to support locally led and voluntary conservation and restoration efforts across public, private, and Tribal lands and waters. Conserving and Restoring America the Beautiful Report (2021). The intent of this effort is to create jobs and strengthen the economy’s foundation, tackle the climate and nature crises, and address inequitable access to the outdoors. The report outlines key principles to guide conservation efforts, including pursuing a collaborative and inclusive approach for the benefit of all people; supporting locally led conservation efforts; honoring Tribal sovereignty; pursuing approaches that create jobs and support healthy communities; honoring private property rights and supporting the voluntary stewardship efforts of private landowners; using science as a guide; and building on existing tools and strategies with an emphasis on flexibility and adaptive approaches. The policy thus parallels international biodiversity protection efforts and, if successful, could significantly benefit domestic biodiversity conservation through increased habitat protection.
Biodiversity Disclosures: The Next Big Regulatory Requirement?
The GBF is not binding in the United States, and the 30×30 policy is only aspirational, but both governmental and nongovernmental initiatives are providing fertile ground for private litigation and enforcement actions, in addition to market pressures. Of particular interest for business is the GBF’s Target 15, which specifically calls for measures to ensure that large transnational companies and financial institutions regularly monitor, assess, and transparently disclose risks, dependencies, and impacts on biodiversity associated with their operations, supply and value chains, and portfolios.
Unlike kilotons of carbon emissions, biodiversity cannot be measured using a single metric applied globally. Measuring biodiversity is complex, requiring expert knowledge and site-specific metrics spanning different levels of biological organization (from genes to ecosystems). As a result, biodiversity specialists from different organizations have been working to reduce this complexity and to develop approaches to assess and disclose biodiversity-related risks that align with the GBF. These new approaches are now in the process of converging into a unified cross-sector framework like the one released by the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD), a global organization that developed recommendations for more effective climate-related financial disclosures. In 2017, the TCFD released its recommendations, and has since followed up with additional publications addressing implementation, metrics, and targets for climate disclosures. See Recommendations of the Task Force on Climate-related Financial Disclosures (2017); Implementing the Recommendations of the TCFD (2021); Guidance on Metrics, Targets and Transition Plans (2021).
Building upon the TCFD, the Taskforce on Nature-related Financial Disclosures (TNFD) was created in 2021 to develop and deliver a risk management and disclosure framework for companies and financial institutions to report and act on evolving nature-related risks and opportunities. According to its website, the TNFD is a global, market-led initiative, represented by financial institutions, corporations, and market service providers, with over $20 trillion in assets. It has already released four beta-versions of its framework for testing and consultation, and a final version is expected in September 2023. See TNFD, Nature-Related Risk & Opportunity Management and Disclosure Framework—v0.4 Beta Release (Mar. 2023). Similarly, in 2023 the Science Based Targets Network (SBTN, a global coalition of 80+ environmental nonprofit organizations) released the first corporate science-based targets for nature. SBTN, Take Action: Setting Science-Based Targets for Nature: A Step-by-Step Guide (2023). These targets build on and complement existing climate targets and were developed to guide companies and cities towards an equitable, net zero, and nature-positive future. The first SBTN nature targets will help companies improve their impacts on freshwater quality and freshwater quantity, as well as protect and restore terrestrial ecosystems.
Mandatory sustainability disclosures have already entered into force in Europe in the 2023 Directive (EU) 2022/2464 of the European Parliament and of the Council of 14 December 2022. This Corporate Sustainability Reporting Directive (CSRD) requires large companies with a presence in Europe to publish regular reports on the social and environmental risks they face and on how their activities impact people and the environment. It comprises specific biodiversity disclosure requirements, including impact metrics; biodiversity targets; action plans; plans on governance, resources, finance, and transition; and policies relating to biodiversity and ecosystem risks and opportunities. Companies will have to apply the new rules for the first time in the 2024 financial year, for reports published in 2025. As a result, many companies with a presence in the European Union are preparing for these new biodiversity-related disclosures.
While it may seem far-fetched to imagine that this type of disclosure could become mandatory in the United States, the Securities and Exchange Commission (SEC) proposed rules in 2022 to expand and standardize climate-related disclosures for investors. 87 Fed. Reg. 21,334 (Apr. 11, 2022). The new SEC rules would require disclosures about governance of climate-related risks and relevant risk management processes; when the identified climate-related risks may manifest and how they have affected or are likely to affect the registrant’s strategy, business model, and outlook; and the impact of climate-related events and transition activities on financial estimates and assumptions used in companies’ financial statements. Id. at 21,345. The SEC noted that its proposed disclosures “are similar to those that many companies already provide based on broadly accepted disclosure frameworks, such as the Task Force on Climate-Related Financial Disclosures and the Greenhouse Gas Protocol.” Press Release 2022-46, SEC Proposes Rules to Enhance and Standardize Climate-Related Disclosures for Investors (Mar. 21, 2022). The proposed rules have received significant pushback from the regulated community because of the potential for SEC reporting requirements to extend down the supply chain. Nonetheless, the final rule is expected in October 2023.
Given the EU action on biodiversity and the SEC’s reference to other jurisdictions’ reporting standards, it would not be surprising to see some type of future biodiversity disclosure requirements in the United States inspired by the CSRD. However, pressure is mounting on business to assess and disclose biodiversity-related risks, even in the absence of regulatory mandates. These pressures take several forms, including securities litigation over sustainability or biodiversity claims, “greenwashing” claims under consumer protection statutes such as the Federal Trade Commission Act, and substantive litigation under standards such as France’s Duty of Vigilance law. As one example, multiple shareholders filed securities litigation in U.S. courts against an Australian-based publicly traded mining company after the Fundão Dam collapse in Brazil in 2015. See In re BHP Billiton Ltd. Sec. Litig., 276 F. Supp. 3d 65 (S.D.N.Y. 2017).
Thoughts over Coffee
Businesses face increasing regulatory, market, and financial pressure to regularly monitor, assess, and transparently disclose biodiversity risks and opportunities. While U.S. law has limited reach outside its territory, the dominance of U.S. securities markets on the global scene, coupled with references to global norms by U.S. regulators and international business organizations, may lead to broader expectations for companies and organizations operating in the United States to disclose and mitigate their effects on biodiversity both at home and abroad. At the same time, the U.S. legal system is narrowing its formal reach. As a result, new biodiversity-related obligations may be imposed on businesses in nontraditional ways, including through securities regulation and litigation or by competitive and market pressures from other jurisdictions. With obligations and potential liabilities coming from new places and in new methods, companies may need to think of new ways to assure compliance throughout their supply chain, from coffee bean to cup.