In brief:
- The beauty industry has grown rapidly in recent years — but that growth now runs up against rising environmental pressures that disrupt ingredient supply and increase volatility.
- Climate shocks, biodiversity loss and water scarcity are already affecting raw materials, exposing the industry’s deep dependence on healthy ecosystems.
- Regulation is tightening: CSRD, TNFD and SBTN are making nature disclosure and action unavoidable, pushing companies to understand and manage their impacts and dependencies.
- Most risks sit upstream, where sourcing relies on a small set of nature hotspots facing soil degradation, water stress and declining pollination — heightening exposure to shortages and price swings.
- Nature loss is now a business risk, but also a catalyst for opportunity: regenerative sourcing, landscape investment and credible transparency build resilience, reduce costs and strengthen trust.
- Companies are beginning to act by defining transition plans, improving traceability, financing ecosystem restoration and shifting sourcing models toward regenerative agriculture.
- Integrating nature into core business decisions is becoming a prerequisite for operating through rising volatility, meeting stakeholder expectations and maintaining a resilient position in the market.
The beauty industry has expanded rapidly — growing nearly 60% over the past five years amid economic volatility and shifting global conditions. Expansion into new markets, the rise of premium skincare and purpose-driven brands, and a wave of acquisitions have reshaped the competitive landscape, bringing new complexity to global operations and supply chains.
But as the market grows, so do the environmental risks. Climate shocks, biodiversity loss and water scarcity are already disrupting ingredient supply and driving volatility across value chains. Regulation and consumer expectations are tightening, pushing companies to demonstrate transparency and accountability at every step of production.
Science has made it impossible to ignore the link between thriving ecosystems and stable supply chains — and regulators are catching up fast. Frameworks such as the Science Based Targets for Nature (SBTN) and the Taskforce on Nature-related Financial Disclosures (TNFD) are helping companies understand how their operations and supply chain depend on ecosystem services and impact water, land, biodiversity and oceans. The EU Corporate Sustainability Reporting Directive (CSRD) requires nature-related disclosure alongside climate, while the Kunming–Montreal Global Biodiversity Framework commits countries to halt and reverse biodiversity loss by 2030. Together, they send a clear message: nature is a core element of corporate resilience and an indispensable lever to achieve climate ambitions.
For cosmetics and personal care companies, this reality hits close to home. A large share of the industry’s raw materials highly depend on nature — including plants, soils and pollination systems, all of which are under increasing strain. As biodiversity declines and natural systems destabilize, the reliability of the ingredients and resources the sector depends on decreases — leading to increased risk of shortages and price volatility.
The industry has already begun to take action. Companies are mapping their dependencies, exploring how changes in land use, water availability and ecosystem health affect their portfolios, and testing new approaches to reduce pressure on nature and adapt to changing ecosystems. The focus is shifting from awareness to integration — embedding nature into decision-making as a prerequisite for long-term business stability.
Nature-related risks and opportunities are now well understood
Companies now have a clearer view of how nature loss translates into business risk — and how reducing pressures and restoring ecosystems creates business value. Every stage of the cosmetics value chain depends on natural systems, with the most significant dependencies occurring upstream.
When these systems falter, production costs rise and supply reliability declines. Understanding these dependencies is the first step toward managing exposure.
Risks for cosmetics companies are already happening
Nature-related risks for cosmetics companies are no longer theoretical — they are tangible and growing. For cosmetics companies, nature-related risks fall into two main categories:
- Physical risks stem from the degradation of ecosystems and the loss of natural services such as water filtration and retention, soil fertility, natural pest control and pollination, leading to reduced raw-material quality, shortages and price volatility.
- Transition risks arise from policy changes, market shifts and consumer expectations that demand transparency and accountability.
Understanding dependencies also means recognizing where they create exposure.
Upstream pressures
For cosmetics, the greatest risks lie upstream, where raw material supply is concentrated in a handful of nature hotspots already under stress from water scarcity, soil degradation, loss of ecosystem services (eg pollination) and climate change. The industry’s reliance on natural ingredients makes it highly sensitive to environmental shocks. Crops used for essential oils and botanical actives depend on pollinators and fertile soils, both in decline. Water scarcity adds another layer of stress, as key production regions face increasing competition for freshwater resources.
This vulnerability is amplified by production concentration. A handful of countries supply most of the world’s key feedstocks — for example, castor seed, primarily grown in India, where soil erosion, pollution and weather volatility are rising concerns. A disruption in one region can ripple across global supply chains, forcing companies to reformulate or absorb sharp cost increases.
Downstream pressures
Transition risks are mounting as regulation and public scrutiny grow. The implementation of CSRD and tools like the EcoBeautyScore (EBS) are setting new standards for transparency. Brands unable to demonstrate credible progress will face both reputational and regulatory consequences.
In short, the economics of the industry are increasingly tied to ecosystem health. Managing these dependencies early is the only way to convert risk into resilience.
The EcoBeautyScore (EBS) is redefining how environmental performance is measured across the cosmetics sector. Developed by a global consortium and aligned with the EU Product Environmental Footprint (PEF), it standardizes how companies evaluate and communicate product impacts.
For companies with credible data, EBS is an opportunity to lead — a way to demonstrate measurable progress and build consumer trust. For others, it introduces transition risk: product scores that expose inconsistencies between claims and performance can quickly erode reputation.
Crucially, EBS aligns with CSRD and TNFD disclosure frameworks, ensuring product-level data can flow into corporate reporting. It’s both a mirror and a motivator — raising transparency while rewarding those who act on their findings.
Opportunities for cosmetics companies
Nature action is not only a defense against risk — it’s a source of innovation and advantage. The TNFD defines opportunities as activities that create value for both nature and business. For cosmetics, four main levers stand out:
- Cost, risk and supply resilience: Regenerative sourcing and investments in soil, water and ecosystem health help reduce operational costs and exposure to supply volatility, while stabilizing ingredient availability and quality.
- Reputation and trust: credible, nature-positive sourcing builds lasting consumer confidence and mitigates reputational risk.
- Climate alignment: Nature-related actions such as agriculture and sustainable land management deliver carbon and biodiversity benefits, advancing net-zero goals.
What’s good for nature is increasingly good for business. Companies that act early are already finding that healthy ecosystems are the foundation of stable supply, investor confidence and long-term growth.
Challenges to measuring risks and opportunities
In theory, nature-related risks and opportunities are clearer than ever. However, quantifying them remains complex for the following reasons:
- Data and traceability gaps limit visibility across global supply chains.
- Local specificity matters: water stress in one basin can’t be averaged with another.
- Evolving methodologies — from SBTN to TNFD — continue to refine how companies identify priorities and measure progress.
Measurement shouldn’t stall progress. The goal isn’t perfect precision but credible direction. Companies that establish baselines, set science-based targets, and disclose transparently will build credible transition plans and be best positioned to meet investor, regulator and consumer expectations.
How companies are going to action on their supply chain
1. Define a Transition plan
The first step for beauty companies is to define a clear roadmap, guided by the mitigation hierarchy aligned with SBTN (Avoid, Reduce, Restore and Regenerate, Transform) or IFC Performance Standard 6 for example. This ensures that priorities are structured to deliver measurable outcomes.
These transition plans will incorporate both mitigation and adaptation actions, reducing risks and enhancing opportunities for both nature and the business.
Examples of actions:
- Mitigation: reduce water use in manufacturing, cut chemical inputs and redesign packaging to prevent waste and plastic leakage into the environment.
- Adaptation: support regenerative agriculture programs that rebuild soil and landscape health, protect pollinators and improve farmer economic resilience — securing ingredient quality while reducing exposure to environmental and regulatory volatility.
2. Finance the Transition
Access to finance is growing. Sustainability-linked loans (SLLs) and bonds (SLBs) now tie capital costs to progress on biodiversity, water and climate metrics. The Natura example featured in the TNFD Discussion paper on nature-related opportunities demonstrates how these instruments can channel investment into ecosystem restoration while strengthening investor confidence. Financing that rewards measurable environmental outcomes is becoming a core enabler of transformation across the beauty sector. Green premiums increasingly help securing ‘sustainable’ sourcing in face of increased competition among buyers of regenerative products and enable suppliers to comply with more demanding regulations.
Focus: Regenerative agriculture
One of the most powerful levers on upstream value chain of natural ingredients is regenerative agriculture. By improving soil health, enhancing biodiversity and strengthening water cycles, regenerative practices address several high-risk dependencies at once — from pollination and soil fertility to water availability.
A global cosmetics group, for example, recently worked with Quantis to turn multiple environmental assessments into a regenerative sourcing roadmap. The project brought together teams from sourcing, R&D and sustainability to identify priority feedstocks — such as castor, guar, palm, rapeseed and sugarcane — and align actions across regions. The outcome was a coordinated plan combining supply diversification, farmer training and innovation in material substitution, creating a foundation for measurable, nature-positive progress.
Investing in regenerative systems doesn’t just mitigate risk; it builds long-term supply resilience and can reduce costs over time. When coupled with sustainability-linked financing and robust data frameworks, it becomes a powerful pathway for companies to act on nature and strengthen business performance simultaneously.
Looking ahead
Nature and business are inseparable, especially in beauty. The companies that treat ecosystem health as a core business metric, not a sustainability add-on, will be best positioned to weather volatility, earn trust and attract investment.
As the sector faces tighter regulation, rising costs and supply uncertainty, its success will increasingly depend on how well it manages its relationship with nature. Embedding nature considerations into strategy, sourcing and product design isn’t just about sustainability — it’s about ensuring the future stability of the beauty industry itself.
