McKinsey Explainers

What is biodiversity?
Biodiversity is the multitude of diverse organisms across an
ecosystem. It is essential for supporting the health and
sustainability of all life on Earth.

November 2024
Biodiversity refers to the full variety of life on 53 percent of terrestrial biodiversity loss, while
Earth, from bacteria and plants to animals and crop agriculture accounts for about 32 percent.1
entire ecosystems, such as mangrove forests or
coral reefs. A wide range of flourishing flora and
fauna species indicates an ecosystem’s overall What is the international community
health. Because biodiversity is critical to a number doing about biodiversity loss?
of industries—from pharmaceuticals to The UN Conference of the Parties (COP) meets
agriculture—there’s also a strong relationship every year to discuss the world’s progress toward
between biodiversity and healthy economies. net zero. A related group, the UN Conference of the
Parties to the Convention on Biological Diversity,
Business leaders are increasingly aware of the meets every two years to discuss the prevention of
threats of biodiversity loss and are taking steps to biodiversity loss. The first COP on biodiversity,
confront them. In this Explainer, we’ll explore the COP1, was held in 1994 in the Bahamas.
importance of biodiversity and what companies are
doing to support it. COP15, chaired by China and held in Montreal in
2022, was the largest-ever conference on
Learn more about McKinsey’s Sustainability biodiversity. There, nearly 20,000 leaders and
Practice. representatives—a marked increase from the fewer
than 4,000 who attended the previous
meeting—adopted a landmark agreement to
What role does biodiversity play in protect natural capital and limit biodiversity loss
nature more broadly? around the world. The Kunming-Montreal Global
Biodiversity is a core component of biosphere Biodiversity Framework provides a range of targets,
integrity, one of the nine planetary systems that including the following:
keep Earth in balance and maintain its overall
stability and resilience. Six of these, including — protecting at least 30 percent of terrestrial,
biosphere integrity, are currently in danger of inland water, and coastal and marine areas
further degradation and collapse.
— ensuring that at least 30 percent of degraded
All indicators of natural ecosystem health have areas are under effective restoration
fallen sharply over the past 50 years. A recent
survey of business leaders by the World Economic — mobilizing $200 billion per year by 2030 to
Forum ranks biodiversity loss and ecosystem invest in biodiversity
collapse as the third-largest global risk over the
next ten years. Its varied repercussions could have In addition to the 30x30 initiative outlined in the
dire impacts on our societies and well-being. Kunming-Montreal framework, several countries
are pursuing changes in land use policy. Brazil, for
The main reason for the world’s biodiversity loss is example, has committed to recovering about 15
land conversion, most of which is caused by food million hectares of degraded pasturelands by 2030.
and agricultural systems. Scientists estimate The country has pioneered the use of integrated
that livestock agriculture contributes to about crop–livestock–forestry systems, which maximize

1
According to the Biodiversity Intactness Index.

What is biodiversity? 2
land use while providing agricultural and economic Here are four potential use cases for biodiversity
benefits. As of 2021, over 17 million hectares of credits:
cropland were already using these techniques.
— Enhance carbon credits for better nature
Learn more about McKinsey’s Natural Capital and outcomes. Carbon credits and biodiversity
Nature service line. credits could be bundled and made available for
organizations to buy together to achieve their
climate targets.
What are some innovative
mechanisms for addressing — Access ecosystem services as inputs. Many
biodiversity loss? organizations rely on natural capital—such as
Natural climate solutions (NCS)—nature-based waterways, soil, and air—that they don’t directly
actions that either reduce or sequester greenhouse control. Biodiversity credits could allow these
gas emissions—frequently support biodiversity. companies to fund improvements to the health
These solutions protect, restore, and manage of the natural capital in their value chains, which
nature to support global climate goals. They include could secure and improve access to these
forestry practices, wetland-related practices, ecosystem services.
restorative or regenerative agriculture practices,
and ocean-based practices. — Contribute to nature recovery beyond an
organization’s own impact. This could involve
Biodiversity credits are another nascent mechanism companies contributing to a region’s ecosystem
for addressing biodiversity loss. These are verifiable restoration or protection program through the
and quantifiable units of restored or preserved purchase of biodiversity credits.
biodiversity over a predetermined time frame. What
“unit of biodiversity” actually means, though, varies; — Bundle products with nature recovery. This
there are multiple ways to define a unit. Depending would allow customers to invest in nature
on the project, a unit is usually based on a specific improvements as an additional attribute of the
area (one hectare, for example), a measure of product for sale.
improvement (such as a 1 percent gain across an
ecosystem-specific metric), and the length of the
contract. A credit could also include other features, What can different industries do to
such as specific actions to restore keystone species support biodiversity and natural
or support Indigenous communities. capital?
When it comes to biodiversity loss, the industries
What can biodiversity credits accomplish? With the that touch either large swathes of land or
right safeguards in place, credits could help ecologically sensitive areas are those that have the
businesses create value while protecting nature and deepest impact. The agriculture industry falls into
local communities. The voluntary market for the former category, while oil and gas organizations
biodiversity credits is still in its early stages, but typically fall into the latter.
McKinsey and the World Economic Forum estimate
that global demand could reach $69 billion by 2050.

What is biodiversity? 3
McKinsey research indicates that corporate action — “Striking the balance: Catalyzing a sustainable
could help set natural capital on a path to recovery land-use transition,” November 7, 2023, Tom
by 2050. Here are two practices that could have a Brennan, Nicolas Denis, Nelson Ferreira,
large effect on the agriculture sector’s impact on Amandla Ooko-Ombaka, Pradeep Prabhala, and
nature: Stephanie Stefanski

— Agroforestry (for example, planting trees in — “Author Talks: What will it take to save the
cropland and pastureland and implementing planet?” August 16, 2023, Siddarth Shrikanth
buffer strips of natural-vegetation cover) could
bring significant improvements in biodiversity. — “The agricultural transition: Building a
Agroforestry in cropland and pastureland sustainable future,” June 27, 2023, Onyx
combined could reduce 11 percent of the Bengston, Sherry Feng, Vasanth Ganesan,
projected 2050 biodiversity deficit. Joshua Katz, Hannah Kitchel, Pradeep
Prabhala, Peter Mannion, Adam Richter, Wilson
— Regenerative agriculture at scale could mitigate Roen, and Jan Vlcek
a significant amount of biodiversity loss by
2050. This includes planting cover crops and — “Seeing nature differently: How businesses are
using no-till farming, which helps the soil retain waking up,” April 20, 2023, Jason Eis and
more carbon. Elizabeth Maruma Mrema

Here are some other corporate actions on — “Partnering for the planet: An NGO success
biodiversity that would involve organizations and story,” April 20, 2023, Tony Hansen and
entities from multiple sectors: Jennifer Morris

— plant-based alternatives for meat and dairy, — “Nature in the balance: What companies can do
advanced seed technology, and the reduction of to restore natural capital,” December 5, 2022,
food loss and waste Daniel Aminetzah, Julien Claes, Caroline De Vit,
Ivo Erben, Duko Hopman, Kartik Jayaram,
— sustainable-forestry measures—including Joshua Katz, Tomas Nauclér, Hamid Samandari,
variable thinning instead of clear-cutting and Tucker Van Aken, and Dee Yang
multispecies forestry techniques
— “Valuing nature conservation,” September 22,
Learn more about McKinsey’s Sustainability 2020, Julien Claes, Michael Conway, Tony
Practice, and check out job opportunities related to Hansen, Kimberly Henderson, Duko Hopman,
sustainability if you’re interested in working at Joshua Katz, Clarisse Magnin-Mallez, Dickon
McKinsey. Pinner, Matt Rogers, Antoine Stevens, and
Robert Wilson
Articles referenced:
— “Biodiversity: The next frontier in sustainable
— “Biodiversity credits: Lessons for leaders,” April fashion,” July 23, 2020, Anna Granskog, Franck
8, 2024, Jason Eis and Madison Cole Laizet, Miriam Lobis, and Corinne Sawers

Get to know and directly engage with senior McKinsey experts on biodiversity
Daniel Aminetzah is a senior partner in McKinsey’s New York office, Joshua Katz is a partner in the
Connecticut office, Julien Claes is a partner in the Brussels office, Kartik Jayaram is a senior partner in the
Nairobi office, and Tomas Nauclér is a senior partner in the Stockholm office.

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What is biodiversity? 4