Apart from in 2020, Earth Overshoot Day has arrived in the first week of August every year since 2011. And this year is no different: Earth Overshoot Day recently occurred on 3rd August 2023. In comparison: in the early 2000s and 1990, it would sometimes be as late as the end of October.

This day serves as a reminder of the unsustainable consumption patterns that have become prevalent across the globe and indicate an acceleration in resource depletion and ecological damage. Introduced by the Global Footprint Network, the day is designed to raise general awareness for the concept of the Earth Overshoot Day – which calculates the ecological footprint of human activity, considering factors like carbon emissions, food consumption, and water use– which may have significant implications businesses and investors. One of the most apparent financial implications of Earth Overshoot Day is the increasing strain on resources. So, it is important investors and businesses understand how they are managing these resources as companies may be reliant on finite resources face increasing supply constraints, rising costs, and potential disruptions in their supply chains. At the same time, investors need to be aware of these risks to make informed decisions about their portfolios.

Reporting on the environmental impact from companies has historically been lacking. However, shortly before Earth Overshoot Day this year, the almost final European Sustainability Reporting Standards (ESRS) - which will be mandatory for use by companies that fall under the EU’s Corporate Sustainability Reporting Directive (CSRD) - were released on 21st July. These common standards take a “double materiality” perspective – obliging companies to report both on their impacts on people and the environment, and on how social and environmental issues create financial risks and opportunities for the company. ESRS sets reporting rules around resource use and circular economy, pollution, water, and marine resources. It also includes a dedicated standard for biodiversity and ecosystems – with a focus on the use of resources and its impact on the natural world.

While the ESRS are only mandatory when the topic is material to the company, it is likely that topics around ecological impact including nature, biodiversity and circular economy will be raised by stakeholders when companies undertake their materiality assessments. When they do arise, companies will be required to report on policies and actions related to them, including metrics and targets. These quantitative indicators will have to cover how harm is avoided or minimised and, for example, what the company is doing to rehabilitate or restore nature or compensate for damage. Similarly for the circular economy, companies will be expected to disclose information around resource inflows and outflows. By understanding the implications of ecological overshoot, businesses can adopt strategies that promote long-term resilience.

While the CSRD is focused on companies listed or operating in the EU, the final Framework from the Taskforce for Nature-related Financial Disclosure (TNFD) is set to be published in September. Whilst currently voluntary for application, they may become mandatory in many jurisdictions over time, also forming the basis for the development of nature and biodiversity reporting standards under the International Sustainability Standards Board (ISSB). The framework will include a set of core global metrics (14 indicators according to the latest version), which all businesses will be “strongly” encouraged to report on, where relevant, on a ‘comply or explain’ basis. These metrics cover climate change, land, water, pollution, and resource use. Companies who report against this framework will also need to report the revenues that are exposed to physical risks and transition risks from nature, and revenue and assets that are dependent on ecosystem services or with a high impact on nature.

Earth Overshoot Day can be a reminder to businesses and investors to think about existing business practices and their impacts. Additionally, the emerging reporting regulations and frameworks will (more or less 'gently’) push both businesses and investors to consider nature and ecosystems in their decision-making. This will not only help preserve the planet's resources but also highlight the long-term financial benefits of supporting resilient and future-proof businesses.

In conclusion, Earth Overshoot Day serves as a vital wake-up call for businesses and investors to reassess their practices and investment choices. It highlights the urgent need to transition towards a sustainable economy that balances human well-being with the Earth's ecological limits. By addressing the challenges of ecological overshoot, businesses and investors can position themselves for long-term success while contributing to a more sustainable and resilient future for our planet.