Dependencies

Based on the excerpts from the document, a ‘Dependency’ or ‘Dependencies’ refers to situations where an organization relies on external resources, processes, or entities to carry out its operations, achieve its objectives, or maintain its value chain. These dependencies can be on natural resources, such as water and marine resources, ecosystem services, or even on specific groups within the value chain, such as workers in various stages of the supply chain. The concept encompasses both the direct reliance on materials and services, and the indirect dependence through the value chain, including financial assets like loans and equity investments.

Dependencies can significantly impact an organization’s risk profile, operational efficiency, and reputation. For instance, a company in the food sector may depend on suppliers from biodiversity-rich regions, exposing it to risks related to biodiversity loss or habitat restoration requirements that could disrupt the supply of key natural inputs. Similarly, a financial institution providing loans to enterprises could be indirectly implicated in environmental degradation caused by the borrower, illustrating how dependencies extend beyond direct operational activities to include financial relationships.

The identification and management of dependencies are crucial for sustainable business practices. Organizations are encouraged to assess their dependencies in various phases of their operation, from identifying business processes and activities that lead to dependencies on environmental assets and ecosystem services to evaluating the financial effects of these dependencies over short, medium, and long terms. By understanding and managing these dependencies, organizations can mitigate risks, seize opportunities, and contribute to sustainable development.

Moreover, the materiality assessment process outlined suggests that organizations need to consider their entire value chain when identifying material sustainability impacts, risks, and opportunities. This process should be informed by due diligence and fit for the organization’s specific context. The examples given in the document, including the potential impacts on value chain workers due to operational changes or global events like pandemics, illustrate the breadth of considerations that organizations must incorporate into their sustainability assessments and disclosures.