Exploring the role of natural capital and biodiversity risks and opportunities in corporate decision-making

This thesis tests the hypothesis that companies do not treat biodiversity and natural capital as material to their business due to an absence of policy and non-policy drivers, which is contributing to the environmental crisis and creating long-term risks to both society and themselves. Relatively little business management theory addresses companies’ interactions with nature, with previous research focused on quantitative assessments of specific activities rather than taking a strategic view. This thesis uses a mixed methods approach to address these gaps testing: 1. if companies perceive natural capital risks as material; 2. the drivers and barriers that affect the way they act; and 3. potential levers that could be deployed to bridge this ‘materiality gap’.

It uses content analysis to assess how the world’s largest companies disclose their interactions with nature. Combining different management theories – stakeholder theory, legitimacy theory and Hart’s (1995) Natural-Resource-Based View of the firm – it finds very few companies take comprehensive action, suggesting most do not consider it a material issue, treating it more as a form of impression management. Using correlation analysis, it finds that whilst most companies have not yet embarked on their nature positive journeys, those that take a broader view of materiality are likely to take more comprehensive action.

Thematic analysis is used to combine inputs from an expert workshop with documentary analysis and company interviews, to identify and rank different barriers and drivers in a PESTLE framework. These barriers are tested against companies’ performance, finding a relationship between economic, legal and political drivers, but that a company’s industry sector is less of a driver of its performance.

Findings from an expert workshop and documentary analysis are combined to create two future nature scenarios (‘Best-Case’ and ‘Middle-of-the-Road’) and a series of descriptive indicators. Using a back-casting approach to explore the path to a nature positive future, it finds that no single lever would drive change by itself with many depending on the introduction of others, and that fundamental changes to the socio-economic structure are required, reinforced by institutional reform and backed by strong leadership that implements coordinated long-term decisions.

The thesis identifies that the current suite of management theories provides an inadequate platform to address external systemic risks posed by natural capital degradation. It presents the concept of Beyond Stakeholder theory, extending traditional stakeholder theory to introduce a recognition that the company and its associated stakeholders operate within and are therefore restricted by the confines of the natural world.