TNFD DIROs Explained: Dependencies, Impacts, Risks and Opportunities

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London Reporting Academy · Controlled publication draft · 3 August 2026

The same business activity can create a dependency and an impact at the same time. A processing facility may depend on water-flow regulation and reliable freshwater supply while its abstraction and discharge affect the catchment. Changes in water availability, ecosystem condition, regulation or community expectations can then create risks or opportunities. Separating the concepts improves analysis because it shows where the organisation relies on nature, where it changes nature and how those conditions transmit into decisions and performance.

A DIRO record should begin with the activity and location, not with a broad label such as biodiversity risk. The team then identifies environmental assets, ecosystem services and impact drivers; documents dependencies and impacts; identifies the relevant change in nature or policy response; and explains the organisational consequence. The causal chain can be qualitative, but it should be testable against evidence.

Figure 1. A DIRO causal pathway. Arrows indicate a supported analytical link, not automatic causation.

Dependencies arise from ecosystem services and environmental assets that support activities and value creation. Examples include water supply, soil fertility, pollination, flood regulation, erosion control, climate regulation, genetic resources, biomass and the assimilative capacity of ecosystems. The relevant dependency is not simply that nature is valuable; it is the specific service or asset, the activity relying on it, the location, the degree of reliance and the availability of substitutes or resilience measures.

Impacts are changes in the state of nature and can be positive or negative, actual or potential, direct or indirect, and cumulative. They may arise from land- or sea-use change, resource extraction, pollution, invasive species, disturbance, restoration, avoided conversion or other impact drivers. A policy or expenditure is not itself a positive impact: the report should distinguish the action taken from evidence of change in nature.

For negative impacts, assessment may consider scale, scope and irremediability, alongside likelihood for potential impacts under the chosen method. Location and ecological context are central. The same volume of discharge can have different consequences in a resilient, high-flow system and a degraded, low-flow ecosystem. Cumulative impact also matters where individually small activities combine across a landscape or catchment.

A risk record should identify the nature-related cause, the transmission channel and the exposed financial or strategic element. For example, water stress is not by itself the full risk statement. A stronger record explains that reduced catchment availability may trigger licence restrictions, curtail production at a named facility, increase unit costs and affect cash flows over a defined time horizon. This distinction supports scenario analysis, controls and financial planning.

TNFD distinguishes opportunities that can improve business performance and those that can improve sustainability performance. These categories can overlap. Business opportunities may include resource efficiency, resilient sourcing, new products, new markets, lower financing costs, improved asset value or risk mitigation. Sustainability-performance opportunities may include restoration, reduced impact drivers, improved ecosystem condition or collaboration at landscape scale.

Opportunity language should be subject to the same evidence discipline as risk language. An ambition to develop a nature-positive product is not yet an opportunity realised. The register should identify the customer or operational need, investment, timing, dependencies, assumptions, expected benefit, potential trade-offs and how success will be measured.

Figure 2. DIRO register architecture. The register should support assessment, action, disclosure and review.

Internal prioritisation helps allocate assessment resources; materiality determines what information should be reported under the selected framework and reporting context. They may use related inputs but should not be collapsed into one unexplained score. TNFD recommends the ISSB financial-materiality approach as a baseline in the absence of jurisdictional guidance, with an additional impact-materiality lens where chosen or required.

A robust decision record shows the criteria, evidence, thresholds or qualitative judgement, time horizon, aggregation level, approver and how uncertainty was treated. Where a dependency or impact is significant but a financial consequence cannot yet be measured, the team should not force a zero conclusion. It should record the analytical gap, consider qualitative decision-usefulness and plan the evidence needed.

Every DIRO record has a unique ID, owner, review date, source list and version history.

The activity, value-chain stage and location are linked to the reporting boundary.

Screening, primary data, modelled data and expert judgement are labelled separately.

The causal pathway distinguishes correlation, assumption and evidenced causation.

Risk and opportunity categories are applied consistently and reconciled to ERM terminology.

Positive impacts, actions and opportunities are not used to obscure negative impacts.

Materiality and prioritisation decisions identify the criteria, time horizon and approver.

Metrics, targets, actions and public wording trace back to the same DIRO record.

Sensitive stakeholder, Indigenous knowledge and location data have appropriate access controls.

Physical risks arise from acute events or chronic degradation and reduced ecosystem function. Transition risks arise from changes in policy or law, markets, technology or reputation, while systemic risks arise from ecosystem or financial-system instability that can create non-linear, correlated or portfolio-wide effects.