Water scarcity and biodiversity loss are the new central climate risks. While CO₂ data has long been in the spotlight, it is becoming clear that companies urgently need to integrate water and ecosystem issues into their strategies. Why?
What this means for you as a company: Regulations such as the EU Nature Restoration Regulation (NRR) and the expanded reporting requirements under the CSRD set clear expectations. At the same time, nature-based solutions and water management offer ways to minimize risks and seize new opportunities.
Read on to discover how you can integrate these topics into your ESG strategies and which tools can support you along the way.
Water scarcity and biodiversity loss are among the systemic risks that go far beyond conventional, CO₂-focused climate assessments. In 2022, one third (34%) of EU territory was affected by water scarcity for at least one season. Despite a 19% reduction in water withdrawals between 2000 and 2022, the risk remains high (EEA).
The consequences are already tangible: Europe loses 25% of its freshwater supply each year through leaks—causing costs of around €80 billion annually (EEA Report). In Germany, energy companies use 56% of river water for cooling, while mining and industry account for another 18% (German Environment Agency).
At the same time, biodiversity loss is worsening the situation. Already, 85% of wetlands have disappeared, even though these ecosystems store twice as much carbon as all the world’s forests combined (Ramsar Convention). Marine habitats can absorb CO₂ up to four times faster than terrestrial forests (UNEP). The loss of such natural carbon sinks accelerates climate change and exacerbates existing water issues.
Water scarcity also directly affects wildlife: habitats are lost, competition for resources increases, and wild animals become more susceptible to disease. Up to one million species could become extinct in the coming decades, as highlighted by the IPBES Global Assessment.
In the next section, we compare these risks with CO₂ emissions to better understand their different characteristics and impacts.
The risks from water scarcity, biodiversity loss, and CO₂ emissions differ in measurability, timeframes, and business relevance. The following overview highlights these differences:
| Risk Factor | Measurability | Impact Timeframe | Business Dependencies | Regulatory Maturity |
|---|---|---|---|---|
| CO₂ Emissions | Highly standardized | Long-term (decades) | Energy costs, compliance | Very advanced |
| Water Scarcity | Regionally variable | Short-term (months/years) | Business continuity, supply chains | Developing |
| Biodiversity Loss | Complex, qualitative | Medium-term (years/decades) | Raw material availability, reputation | Early stage |
Water-related natural disasters are particularly severe: they cause 70% of all deaths from natural disasters (UNEP). Since 2000, flood-related disasters have increased by 134%, while droughts have risen by 29% in both frequency and duration (UNEP).
These trends are intensifying in Germany as well. Although only 24% of available water resources are currently used, availability is decreasing due to climate change. The situation is especially problematic for groundwater, which supplies 70% of Germany’s drinking water (German Environment Agency). Changing rainfall patterns—with more rain in winter and less in summer—increase flood risks and make water supply more difficult in the summer months (DW).
“We want to store and use water locally to restore natural water cycles.
To this end, we plan to revive rural landscapes and de-seal and green cities wherever possible, so we can store rainwater and be better prepared for heavy rainfall.”
This approach clearly shows that a CO₂-centric strategy is not enough. Studies indicate that about one third of the greenhouse gas reductions needed in the next ten years could be achieved by strengthening natural CO₂ absorption (Nature). Companies that integrate these insights early into their ESG strategies can not only minimize risks but also unlock new business opportunities.
The EU has introduced a comprehensive framework for water and biodiversity risks that goes beyond previous CO₂ regulations. A central element is the EU Nature Restoration Regulation (NRR), which came into force on August 18, 2024, and is considered a major milestone. This regulation requires member states to submit a draft of their national restoration plan to the EU Commission by September 1, 2026.
By 2030, 20% of land and marine areas are to be restored, and by 2050, even 100%. In addition, 3 billion trees are to be planted and 30–90% of habitat types improved (European Commission).
In addition to this regulation, the Water Framework Directive and the Drinking Water Directive govern the sustainable use of water resources. The Corporate Sustainability Reporting Directive (CSRD) expands reporting obligations for companies, placing special emphasis on water and biodiversity aspects. While CO₂ regulations primarily target emission reductions, these new rules focus on ecosystem health and responsible resource management.
The new EU regulations complement and tighten the already strict national regulations, increasing pressure on companies. They require a fundamental adaptation of ESG strategies to meet the new requirements.
German companies face complex compliance tasks, as existing environmental laws are already comprehensive and are being further supplemented by EU requirements. Around 15.5% of Germany's land area consists of protected areas, which will be even more strictly regulated under the new provisions.
Non-compliance with these regulations can have significant financial and legal consequences. Companies face fines of up to 2% of annual turnover. For administrative offenses, penalties of up to €50,000 can be imposed, while liability by executives can result in penalties of up to €10 million. In severe cases of environmental violations, prison sentences of up to 5 years, or in particularly severe cases up to 10 years, can be imposed.
In addition to regulatory requirements, market forces are also increasing pressure. More than 60% of German consumers prefer products with natural ingredients and transparent labels. At the same time, 51% of wealthy investors plan to increase their investments in sustainable investments over the next five years.
The challenges are significant: According to the Federal Environment Agency, only 18% of the length of surface waters will achieve good ecological status by the end of the third management cycle of the EU Water Framework Directive. Companies must therefore not only ensure compliance but also actively seize opportunities arising from these developments.
Banks are also under increasing pressure to incorporate ESG risks into their lending practices. Sustainability-linked loans, where credit conditions are tied to achieving sustainability goals, are gaining importance. For companies, this means they should implement environmental management systems, train their employees on environmental obligations, and continuously stay informed about new environmental laws to minimize liability risks.
To successfully integrate water and biodiversity risks into your ESG strategies, you need a clear and well-thought-out approach that goes beyond pure CO₂ measurement. An example is geospatial climate risk maps, which analyze the vulnerability of your business locations to climate risks – from production facilities to supply chains.
Scenario analyses are another tool that helps you examine possible developments of climate-related risks across different time periods. They illuminate both short-term and long-term impacts on water resources and biodiversity. While mitigation measures are often complex and expensive, adaptation measures offer a more practical and faster way to take action at the local level.
Thanks to modern technologies like satellite remote sensing, you can collect independent data on water and biodiversity aspects of your locations. This technology provides valuable insights into spatial and temporal changes and shows how your activities affect the environment.
Various specialized tools are available for practical implementation:
A "basket of metrics" approach is recommended to ensure standardized measurements while considering the specifics of local ecosystems. Practical measures, such as switching to drip irrigation, can also save up to 80% of water used in agriculture.
With these approaches, you lay the foundation for sustainable integration of water and biodiversity aspects into your ESG strategies – an area where Fiegenbaum Solutions can provide targeted support.
Fiegenbaum Solutions offers comprehensive support to systematically integrate water and biodiversity aspects into your ESG strategies. With Life Cycle Assessments (LCA) for products and organizations, the company goes far beyond the classic CO₂ balance. It considers water consumption, impacts on biodiversity, and ecosystem services along the entire value chain.
Through the use of modern scenario analyses, Fiegenbaum Solutions identifies physical and transitional climate risks such as droughts, floods, habitat loss, or declining species diversity. These analyses help you develop robust strategies for the future. Virgile Haddad, Sustainability Analyst at Bernstein, emphasizes:
"While mitigation measures are usually based on technological solutions that are complex, long-term and costly, adaptation measures can be implemented faster, more practically and more easily and function at the local level."
Additionally, Fiegenbaum Solutions supports compliance with CSRD and EU Taxonomy requirements. The company develops customized reporting systems that not only meet regulatory requirements but also strengthen your strategic decisions.
Another focus is on data-driven decision-making. Here, water and biodiversity data are integrated into your existing management systems. Yannick Ouaknine, Head of Sustainability Research at Bernstein, emphasizes:
"If we can succeed in raising awareness, as we have done with climate change, and if we then act collectively, we can start to address the problems."
Fiegenbaum Solutions also helps you develop Net Zero strategies that connect water and biodiversity goals with your climate goals. Nature-based solutions such as mangrove or riparian vegetation restoration play a central role, as they can reduce both flood and drought risks.
For startups, Fiegenbaum Solutions offers special conditions to sustainably design impact-oriented business models from the start. The flexible consulting structure – from project-based approaches to long-term retainer agreements – ensures that companies of all sizes can benefit from the expertise.
With these tailored approaches, Fiegenbaum Solutions develops strategies that not only help you meet regulatory requirements but also create tangible benefits for your company.
Start by identifying hotspots for water scarcity and biodiversity loss in your operations and supply chains. Such analysis reveals key risks and opportunities. Modern digital technologies can provide great support here. Christian Gutknecht, Water Sector Manager at the Endress+Hauser Group, highlights the strategic importance:
"Digitalisation in the water industry ("Water 4.0") has become a buzzword and will lead to far-reaching changes in both the public and private sectors. For some time now, companies have been faced with the challenge of strategically adapting to the new digital world and rethinking their strategy, business models and cultures to this end. If an organisation fails to take this important step, it will lose its future viability and competitiveness."
Investments in nature-based solutions can not only reduce operating costs but also improve environmental performance. Examples include reforestation, wetland restoration, or the use of water-saving technologies. The water industry already shows how the use of water-saving components, reduction of water losses, and water reuse can significantly increase efficiency.
The circular economy offers new opportunities, particularly in water-intensive industries, by recovering chemical energy and valuable materials from liquid side streams. Dr. Christoph Blöcher from Covestro Deutschland AG explains:
"Future circular production will involve an increasing importance of processes in the aqueous phase and even in early process development, integrated water management is necessary to recover chemical energy and valuable substances such as nutrients from aqueous residual streams."
Collaboration with local communities, NGOs, and other stakeholders can strengthen conservation measures and facilitate access to funding. Particularly in Germany, where extreme weather events caused estimated damages of 145 billion euros between 2000 and 2021, proactive risk management is becoming increasingly important.
These approaches create a solid foundation for concrete business successes, as the following examples demonstrate.
The REWE Group impressively demonstrates how biodiversity strategies can lead to measurable benefits. The PRO PLANET label identifies products that are produced in a socially and ecologically sustainable manner. A focus is on bee and insect-friendly cultivation methods among fruit and vegetable producers. This commitment helps the company stand out in a highly competitive market.
BIONADE illustrates with the Rhön Bio Project how water management and biodiversity protection can be successfully combined. The project promotes organic farming in the Rhön region, avoids chemical fertilizers and pesticides, and thus contributes to improving drinking water quality and protecting native species. At the same time, BIONADE secures a high-quality raw material base and strengthens its sustainable brand identity.
The German water industry also shows how efficiency improvements directly lead to competitive advantages. Dr. Thomas Track, Head of the Water Management Subdivision at DECHEMA e.V., explains:
"Water is the key to realizing large-scale plants for the production of green hydrogen and its downstream products such as methanol or ammonia. That's why we need to think about integrated water management together with strategies for renewable energies and hydrogen production right from the start. Plant engineering and process technology, as we will see at ACHEMA 2024, will make a decisive contribution to this."
The global market for water for injection is growing rapidly: today it stands at over $20 billion and could rise to over $50 billion in the next ten years.
There is also tangible progress in agriculture. Emissions in Germany have fallen by around 24% since 1990, mainly due to the reduction in livestock numbers after reunification. Companies implementing sustainable practices are also well positioned to support Germany's goal of achieving 30% organic farming by 2030.
These examples clearly show: Companies that strategically integrate water and biodiversity aspects into their business can not only make a positive contribution to the environment but also open new markets, reduce costs, and secure their long-term competitiveness.
The times when exclusively CO₂ emissions were the focus are over. Companies must integrate water and biodiversity as equal pillars in their ESG strategies. The regulatory developments in Germany and the EU make one thing clear: this transformation is not optional, but necessary.
More than 80% of European habitats are in poor condition. Given these alarming figures and strict requirements, companies are well advised to act early – for example, by expanding green and blue infrastructure. Those who act now have the chance not only to meet legal requirements but also to secure long-term competitive advantages. Federal Environment Minister Steffi Lemke clearly states the objective:
"We want to store and use water locally in order to restore natural water cycles. To this end, we plan to revive natural landscapes in rural areas, and de-seal and green towns and cities wherever possible so we can store rainwater and be better prepared for heavy rainfall (sponge city)."
The integration of water and biodiversity aspects requires a holistic approach with clear measures. Companies should create water supply plans and specifically utilize synergies between water development, biodiversity promotion, and climate adaptation. At the same time, close cooperation with government actors and greater public awareness of the value of water and ecosystem services is crucial.
Every euro invested in restoring natural habitats brings a benefit of 4 to 38 euros. These impressive figures not only open new perspectives for environmental protection but also exciting business opportunities for companies offering innovative solutions. This is where Fiegenbaum Solutions comes in, supporting companies with customized, industry-specific approaches.
Fiegenbaum Solutions helps transform complex challenges into strategic advantages. From water-saving technologies to integrating biodiversity goals into corporate strategy – the future belongs to those who comprehensively understand climate risks and act decisively.
Companies that think beyond the pure CO₂ focus not only create security for the future but also tap into new market potential. How quickly can you incorporate these insights into your business strategies?
Water scarcity and the decline in biodiversity are increasingly at the center of attention because they have direct and far-reaching consequences for our ecosystems, society, and the economy. While CO₂ emissions drive climate change in the long term, these two crises have immediate effects on people's livelihoods and the stability of natural systems.
A loss of biodiversity significantly weakens ecosystems. This means not only that their ability to store carbon decreases, but also that climate change is additionally driven by this. At the same time, water scarcity brings serious problems – especially for agriculture, industry, and drinking water supply. These challenges can exacerbate social and economic instability and demonstrate how closely these issues are interconnected.
It is up to companies and decision-makers to actively incorporate these risks into their strategies. Only in this way can they strengthen their resilience to the impacts of climate change while simultaneously opening up new opportunities for a more sustainable future.
Companies in Germany and the EU face the task of incorporating environmental aspects such as water and biodiversity issues into their ESG reporting. The foundation for this is EU Directive (EU) 2022/2464 as well as the Corporate Sustainability Reporting Directive (CSRD). From 2024, the CSRD applies to large companies and obliges them to disclose comprehensive information on sustainability-related topics.
Particularly important are the EU Taxonomy and the ESRS standards. Here, the standards ESRS E3 (Water and Marine Resources) and ESRS E4 (Biodiversity and Ecosystems) stand out in particular. These requirements demand that companies present their environmental performance in detail and transparently to meet growing regulatory requirements. The goal is clear: to strengthen sustainable business practices and identify and manage potential risks early.
The conscious consideration of water and biodiversity aspects in your sustainability strategies can benefit you in multiple ways. On one hand, risks such as water scarcity or the loss of natural resources can be identified and mitigated early, which strengthens your company's resilience in the long term. On the other hand, such an approach supports meeting stricter legal requirements and avoiding potential sanctions.
Additionally, integrating these topics creates space for new approaches and ideas, such as developing sustainable products or more efficient use of resources. This not only strengthens the trust of your stakeholders and customers but also enhances your brand image and market position. With a proactive approach, you can establish yourself as a pioneer in sustainability and secure decisive competitive advantages.