TNFD Strategy Disclosures: DIROs, Business Model, Resilience and Priority Locations

Educational practitioner material. Illustrative scenarios and wording require adaptation to the organisation’s facts, chosen materiality approach and reporting context.

A common drafting failure is to prepare Strategy A as a risk list, Strategy B as a collection of initiatives, Strategy C as a generic scenario paragraph and Strategy D as a map. The reader then cannot see whether the listed response addresses the material pathway, whether the scenario tests the same locations, whether financial planning reflects the issue, or why a location was prioritised.

A stronger architecture uses one controlled DIRO register and location register as the spine. Each material issue receives a stable ID. The drafting table then draws the relevant facts into Strategy A, the effects and response into Strategy B, the uncertainty and resilience conclusion into Strategy C, and the location information into Strategy D. Cross-references can reduce duplication, but only when they lead to specific information and preserve the context needed to understand each disclosure.

Figure 5. TNFD Strategy A-D drafting architecture. The diagram is an LRA educational interpretation of the TNFD Recommendations, LEAP and additional guidance.

Strategy A covers dependencies and impacts as well as risks and opportunities. For material impacts, the disclosure should describe location, value-chain position, impact drivers, external factors, changes in the state of nature, effects on ecosystem services and relevant metrics. For material dependencies, it should identify the environmental assets and ecosystem services relied on, location, value-chain position and factors affecting the state of nature and service availability. Interconnections between dependencies and impacts should also be described.

For material risks and opportunities, the organisation should explain how they arise from dependencies and impacts, the relevant short, medium and long-term horizons and the TNFD category. A broad topic such as “water” or “biodiversity” is therefore not a complete Strategy A item.

Strategy B should explain where material risks and opportunities sit in the business model and value chain and how they affect current and anticipated strategy and finance. This is broader than listing nature projects. It can include sourcing, technology, location, products, markets, collaboration, traceability, certification, landscape or watershed approaches, extended producer responsibility, capital allocation and other policies or efforts.

Nature-related effects can be concentrated in upstream production, processing, logistics, customer use or end-of-life stages. The final TNFD value-chain guidance supports a progressive approach using available primary and secondary information, prioritisation and data-improvement. An organisation should not use incomplete traceability as a reason to omit the value chain entirely, but it should also not present modelled exposure as verified site-level fact.

Describe the value-chain scope and prioritisation method, including sectors, commodities, geographies and relationships screened.

Separate known origins from modelled or unknown origins and state the evidence level.

Explain how high-risk or high-uncertainty categories are escalated for primary data, supplier engagement or location analysis.

Connect value-chain findings to procurement, product, customer, finance and response decisions.

Give a time-bound improvement plan for traceability, coverage, quality and verification.

Strategy C asks organisations to describe the resilience of strategy, business model and value chain to nature-related change, developments and uncertainty, taking different scenarios into account. The approach should be commensurate with the organisation’s circumstances. A first-year qualitative workshop can be proportionate, but the disclosure still needs to explain the scenario narratives, time horizons, critical uncertainties, locations or ecosystems tested, key insights and strategic consequences.

A proportionate scenario sequence

1. Define the focal decision. Choose an asset, sourcing strategy, product, portfolio or long-term plan that could be affected by material nature uncertainty.

2. Select critical uncertainties. Use relevant physical and transition drivers, including ecosystem thresholds, policy and market response, rather than arbitrary optimistic and pessimistic cases.

3. Build coherent narratives. Describe what happens to nature, climate interactions, policy, markets, technology, stakeholders and the organisation’s locations and value chain.

4. Explore effects and options. Test DIRO pathways, financial effects, management capacity, lead times, dependencies, trade-offs and option value.

5. Record strategic implications. Identify robust actions, contingent actions, trigger indicators, no-regret investment, potential lock-in and unresolved vulnerability.

6. Approve and disclose proportionately. Explain method, horizons, scenario narratives, insights, limitations and how the work informed strategy and financial planning.

Priority locations are material locations and/or sensitive locations. Material locations are those where the organisation has identified material nature-related dependencies, impacts, risks or opportunities. Sensitive locations are those where assets or activities interface with nature in areas important for biodiversity, areas of high ecosystem integrity, areas of rapid decline in integrity, areas of high physical water risk or areas important for ecosystem-service provision, including benefits to Indigenous Peoples, Local Communities and stakeholders.

1. Lock the reporting basis. Confirm materiality approach, reporting boundary, value-chain treatment, location approach, time horizons, source cut-off and cross-reference policy.

2. Approve the material DIRO and priority-location population. Use LEAP outputs, materiality decisions, evidence confidence, exclusions and improvement plans.

3. Create the Strategy A register view. Write concise dependency, impact, risk and opportunity pathways with location, horizon, category and metrics.

4. Map Strategy B effects and responses. Connect each material issue to business model, value chain, strategy, current and anticipated financial effects, planning, mitigation hierarchy and any transition plan or analysis.

5. Perform Strategy C resilience analysis. Select focal decisions and scenarios, record vulnerabilities, robust options, resources, trigger points and financial sensitivities where assessed.

6. Prepare Strategy D location disclosure. Select list, map or combined format; explain criteria, granularity, value-chain coverage, aggregation, confidentiality and unknown origins.

7. Draft with controlled cross-references. Use one main location and DIRO ID across sections and avoid forcing readers to assemble the core conclusion from many documents.

8. Run finance, governance, legal and technical review. Reconcile budgets, financial statements, risk registers, targets, claims, engagement evidence, board papers and location confidentiality.

9. Approve limitations and improvement plan. Describe data and methodological gaps specifically, without treating missing information as evidence of immateriality.

Why it works: the paragraph connects DIROs, horizons, direct and value-chain scope, business and financial effects, responses, transition-plan status, scenario insight, resilience condition and priority locations. In a full report, the organisation would add metrics, methods, governance and detailed cross-references.