The 10-point tests to check your nature strategy

This is to assess the effectiveness of nature-related strategies.

Mckinsey has outlined a 10-point test that can help companies assess the effectiveness of their current strategy in capturing the growing nature opportunity and building resilience against nature-related risks.

Test 1: Is nature relevant to your operations and business success?
As a first step, companies can answer the following questions: How reliant are your operations on natural resources such as land and water? Are you reliant on any raw materials at risk of scarcity? What impact do natural ecosystems have on your product offering, value proposition, and licence to operate?

Additionally, which of your assets, products, and capabilities could represent a true competitive advantage as emphasis on nature increases? Are there any upcoming regulations that will affect your sourcing, your footprint, or other facets of your business?

Lastly, what topics are your stakeholders focused on today, and what will they care about in the future?

Test 2: How does your nature strategy complement your company values and enhance your competitive advantage?
A company’s nature strategy should be aligned with its distinct value proposition and unique competitive advantages.

For example, a company highly dependent on water can use its nature strategy to create opportunities via access to a proprietary source, efficient water usage in operations, and use of the company’s unique insights into future water needs and prices.

Test 3: Does your nature strategy reflect market shifts?
Certain market shifts have become too widespread and consequential to be ignored.

Some shifts in the nature space include: growing international consensus on the vital importance of taking action to protect and restore nature; aligning regulation and voluntary action; and markets are developing to address nature-related issues and create opportunities.

Test 4: Are your climate and nature strategies fully linked? Better yet, are they a combined effort?
To evaluate whether your company is fully benefiting from an integrated strategy, consider your approach to risks and opportunities related to both climate and nature.

If you are focusing primarily on carbon and other greenhouse gases, consider expanding the robust management processes that exist in those areas to also cover other nature dimensions.

Test 5: Has nature been integrated into your overall corporate strategy and approach to growth?
As markets and preferences shift, there is growing potential to enhance your business’s overarching value-creation strategy through nature-conscious approaches.

For instance, previously niche products like recycled plastics and meat substitutes now command profit margins that are 15% to 150% higher than those of traditional products.

Test 6: Does your nature strategy balance commitment and flexibility?
Scenario planning and stress testing can be vital tools to determine whether your nature strategy has struck the right balance between commitment and flexibility.

Test your strategy’s resilience by running it through various scenarios, such as regulatory changes, supply chain disruptions, or market shifts.

Test 7: Do your nature actions create a portfolio of risk/return profiles?
The principles involved in putting together the right mix of actions in the nature space are the same as those used to develop a standard corporate portfolio strategy; in both cases, the right combination will involve a mix of long- and short-term actions that vary in both their probability of success and their exposure to the different categories of risk.

This means pursuing actions that are net present value-positive under current conditions, as well as long-term initiatives that are contingent on market or regulatory changes.

Test 8: Have you operationalised your nature strategy?
Operationalising a strategy ensures that it moves from theory to reality, with initiatives that are actively implemented, tracked, reported on, and adapted over time.

Leaders need an understanding of nature’s interconnected impacts, on their own company and beyond, to effectively integrate insights into decision-making and steer the company forward.

Test 9: Are you creating a measurable positive impact on nature?
To measure impact, a company must establish clear quantitative metrics and conduct regular assessments. Company-wide targets should be systematically translated into specific, measurable metrics and KPIs for business units.

Test 10: Does your nature strategy enhance your company’s long-term business resilience?
Companies that integrate ESG priorities into their strategies whilst also outperforming on fundamentals such as revenues and profits are more than twice as likely to grow revenues by more than 10% than companies that outperform on fundamentals but do not incorporate ESG priorities into strategy.