Explore: understand your DIROs

Understand impacts, dependencies, risks, opportunities

1 Explore impacts
2 Plan actions
3 Choose metrics

Built Environment Sector

The built environment system is responsible for 40% of global CO2 emissions, 40% of global resource use and 40% of global waste streams. The system is set to double in size as the global population is expected to reach 9.8 billion in 2050, putting great pressure on nature through increased water use, release of pollutants and production of waste and the associated greenhouse gas (GHG) emissions.  

There are, however, significant opportunities to reduce environmental impacts and contribute to nature restoration by adopting circular approaches in building material production systems and managing waste streams. 

Built environment system value chain

Four key stages describe the built environment value chain in the life cycle of a project:  

  1. Material extraction and production;  
  2. Design and construction;  
  3. Operations and maintenance;  
  4. Demolition and waste.  

The value chain mapping aligns with TNFD’s Additional Guidance by sector and working group members refine it through their input. 

Dependencies, impacts, risks and opportunities

A sector-level overview of dependencies, impacts, risks and opportunities (DIROs) provides a useful foundation for a company-level materiality assessment because it highlights the typical DIROs relevant to companies operating in the same sector.  

The DIROs capture how businesses in a sector interact with nature – relying on and impacting ecosystem services – and how these translate into risks and opportunities.  

Companies should do a company-level materiality assessment – as recommended by the Natural Capital Protocol, SBTN and TNFD frameworks – to evaluate how the potential sector-level DIROs apply to the specific context of that company. The materiality assessment provides greater visibility into the company’s relationship with nature, enabling it to: 

  • Identify and manage risks; 
  • Uncover new business opportunities; 
  • Respond effectively to evolving investor and regulatory expectations.  

This ultimately helps future-proof the business.  

Methodologies for company-level materiality assessments include the Taskforce on Nature-related Financial Disclosures Guidance on the identification and assessment of nature-related issues: the LEAP approach and Science Based Targets Network’s Step 1: Assess your impacts on nature.  

Dependencies and impacts in the built environment system

A sector-level overview of dependencies and impacts provides a useful foundation for a company-level materiality screening. It highlights the typical dependencies and impacts relevant to companies operating within the same sector.  

Below are the top dependencies and impacts identified for the built environment system.

Top 4 dependencies

Natural habitats, production processes and regulation service

In the extraction stage, the built environment system is very dependent on the provision of raw materials such as sand, gravel, timber, metals, etc. Destruction or degradation of natural habitats to access new sources of raw materials means losing valuable natural capital and ecosystem services like climate or water flow regulation, erosion control or storm protection. In the construction stage, increasing urbanization to meet housing and infrastructure needs means balancing land intake for urbanization and infrastructure with conservation of valuable habitats. As space becomes scarce, the built environment may increasingly compete with undeveloped lands, risking the loss of natural capital and its regulating services. 

Freshwater 

Many value chain stages of the built environment system depend on functioning water flows and water reserves. Freshwater resources collected from precipitation and water flow from natural sources are often critical and irreplaceable for extraction of raw materials, production of building materials and water use during operations. 

Flood and storm protection, erosion control 

The built environment system heavily depends on regulating services that protect against flooding or storms and control erosion. Increased soil sealing and removal of vegetation decreases nature’s capacity to provide these regulating services and increase the risk of natural hazards. 

Climate regulation

The built environment system depends on healthy ecosystems at a local, regional and global scale. For example, in urban areas, forests can mitigate the impacts of extreme weather events, counter the urban heat island effect and promote the well-being of local residents and employees. 

Top 4 impacts

Land/sea use change

Habitat loss and ecosystem degradation can occur at all stages of the built environment value chain but are predominant during materials extraction, production, design and construction. This is due to land and sea use change and the destruction or fragmentation of ecosystems - fragmentation being a particularly significant impact for transport infrastructure. Habitat degradation due to inappropriate management is a key impact for the operations and maintenance stage.  

Freshwater use  

Pressure on water sources through overexploitation is significant in all stages except demolition. This pressure is exacerbated by water-related hazards such as droughts and floods. For example, the effects of floods on water resources (e.g. aquifer recharge) are worsened by lack of soil permeability within the built environment. 

Pollution

The pollution of water and soil is an important impact during the materials extraction and production stage, but can also be significant during construction, maintenance and operations as well as during demolition in the case of inappropriate waste management. 

GHG emissions

High GHG emissions occur at all stages but are most prominent in material production and energy use in buildings where heavy machinery is used or in energy-intensive production processes. The energy production required for use in buildings or other infrastructure during the operation and maintenance stage also results in significant GHG emissions. 

The table below summarizes the key impacts, risks and opportunities shared across the four built environment subsystems and the fifth cross-cutting subsystem: buildings; urban infrastructure; transport infrastructure; marine and coastal infrastructure; and extraction (cross-cutting).  

The dependencies on nature are covered directly through the identification of risks. The table below is based on the 2018–2023 version of the ENCORE (Exploring Natural Capital Opportunities, Risks and Exposure) database.  

Detailed tables for each subsystem can be found in The Roadmap to Nature Positive: Foundations for the built environment system (Annex 2: Impact tables and Annex 4: Risks and Opportunities tables). 

Key nature-related impacts, risks and opportunities identified for the built environment   

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Risks & opportunities

Nature-related issues can affect every part of a business – from physical and operational disruptions to transition pressures like new regulations, litigation and reputational risk, and even systemic threats as ecosystems start to fail.  

Companies that respond proactively by transforming business models, products, services and investments can leverage those same forces. They can gain a competitive edge, strengthen investor and stakeholder confidence, and build the operational resilience needed to thrive in a changing world.  

The table below outlines examples of key risks and opportunities for the built environment system, based on the TNFD framework. 

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Further Reading

Supply chain

Nature-related impacts and dependencies frequently originate in supply chains, associated with particular geographies and ecosystems several tiers removed from a company’s operations. To strengthen accountability along the value chain, companies operating downstream can align their nature-related actions and corresponding metrics to those of their suppliers.

These are the material dependencies and impacts in your supply chain

If your company sources bio-based products from the forest or agri-food sectors—such as paper, packaging, timber, or agricultural derivatives—it is likely exposed to specific risks and opportunities linked to these materials in its supply chain. If not managed sustainably, both sectors can drive land degradation, conversion, and other forms of biodiversity loss. However, bio-based products also play a crucial role in the transition to a low-carbon, nature-positive economy, supporting ecosystem restoration while ensuring the supply of raw materials for the bioeconomy – 99% of which comes from the agri-food and forest value chains.

The Portal currently covers only bio-based materials sourcing from the forest and agri-food sectors, with plans to include other key material inputs in the future.

Agri-food

Top 5 dependencies

Freshwater

Businesses need sufficient quantity, quality and flow of freshwater (in the form of groundwater, surface water and seasonal precipitation) to produce crops and animal feed, provide water for raising animals and maintaining land, and for use in downstream washing and processing. 

Land and soil quality

High-quality land and soils help optimize crop growth, produce sustainable yields, provide natural protection against erosion, floods and storms and build resilience against environmental challenges. 

Pollination

Pollinators play a vital role in the reproductive process of flowering plants, including numerous crops that yield fruits, vegetables, nuts and seeds and for some crops used as animal feed

Disease and pest control 

Nature’s ability to regulate diseases and pest populations is essential for safeguarding crops, ensuring food security and maintaining the productivity and quality of agricultural systems, as well as ensuring the health of livestock for animal protein. 

Climate regulation

Climate regulation is provided by nature through the long-term storage of carbon dioxide in soils and vegetable biomass. It is critical to optimize plant growth, enhance crop yields, protect companies from disruption (for example extreme weather events) and ensure the long-term sustainability of the agri-food system. 

Top 4 impacts

Freshwater use 

The vast withdrawal and consumption of groundwater and surface water for agricultural and livestock production puts pressure on finite freshwater resources. This results in water scarcity, ecological imbalances and competition for freshwater, while also contributing to environmental degradation, depletion of freshwater ecosystems and reduced soil water holding capacity. 

Land and water use change and degradation 

Damage to terrestrial and freshwater ecosystems contributes to biodiversity loss and negatively affects stored carbon. Impacts arise from land conversion (for example, approximately 50% of the world’s wetlands have been drained for agriculture6), deforestation (with agricultural expansion driving around 90% of global tropical deforestation7), intensification and soil degradation to grow agricultural products for human consumption and crops for animal feed and from the use of vast areas of land to feed, raise and produce animals. 

Pollution 

The agri-food system contributes to widespread pollution including freshwater, land, soil and non-greenhouse gas (GHG) air pollution. Key causes are the overuse of agrichemicals (including mineral and organic fertilizers and pesticides), fuels and feed supplements (for example, antibiotics) used to grow crops and raise animals, the use of energy from fossil fuels (for example, in transport and refrigeration) and plastics and packaging. 

Greenhouse gas (GHG) emissions 

Agri-food systems account for one-third of total anthropogenic GHG emissions, which  are released at all stages of the value chain and are, significantly contributing to climate change. Key sources include agricultural and livestock production (carbon dioxide and methane); land conversion and deforestation for crops and livestock; ineffective manure management; emissions from fertilizer production (carbon dioxide from fossil fuels) and field application (nitrous oxide); and fossil fuels used in processing and transportation (carbon dioxide). 

Forest

Top 6 dependencies

Wood fiber  

Wood is a key direct physical input throughout the production process. 

Freshwater 

Water is needed at many stages of the value chain including forest operations, pulp and paper mills, as well as paper recycling operations. 

Land and soil quality 

Healthy soil is essential for the growth of healthy forests. Degraded soils are prone to erosion and are nutrient-poor and water-permeable.

Bio-remediation ecosystem services 

Bioremediation occurs when biological systems such as micro-organisms prevent the contamination of soils and water by transforming toxic pollutants (for example, from fertilizers) into less hazardous or non-hazardous forms. 

Disease and pest control 

Without nature’s ability to regulate disease and pest populations, forests would be left vulnerable to parasites, bacteria, fungi or viruses, resulting in widespread losses or reductions in yields.

Climate regulation  

Climate regulation is critical for the sector as non-adapted forest ecosystems become increasingly unstable in a warming climate, leading to greater incidences of forest fires, droughts and pest outbreaks. 

Top 4 impacts

Biodiversity and habitat loss

Forests are the largest terrestrial carbon sinks, and they provide habitat for 80% of global terrestrial biodiversity. Forest conversion, as well as forest degradation and deforestation linked to unsustainable forest management leads to biodiversity loss and climate change. Although agriculture is the main driver of deforestation, between 2001-2015, 2-13% of forest conversion to other uses was due to tree plantations for wood products, with a sharp decline since 2013. Over the same period, an estimated 26% of global forest disturbances were due to degradation linked to forest products. This figure represents a temporary reduction in tree canopy cover (e.g., after harvest), without any indication of the severity. 

Greenhouse gas (GHG) emissions

As some segments of the forest products sector are energy intensive, reducing the reliance on fossil fuels is crucial. In 2021, on average, 67% of forest products companies’ energy came from renewable sources, mostly through the use of woody biomass derived from harvesting, processing and manufacturing wood fiber. 

Freshwater use  

In forest production, water-demanding tree species and nursery irrigation require large amounts of water. Water is also a critical input in industrial facilities used mostly to pull the wood and recovered fiber, to make paper and generate power. 

Pollution 

Production facilities can cause significant air, water, soil and noise pollution. In industrial facilities, these impacts come mainly from the incineration of process residuals and waste, the discharge of chemicals and wastewater, as well as solid waste disposal. They also come from waste disposal and decomposition in landfills further downstream. 
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