<<

. 113
( 131 .)



>>

processes, which are more durable in their efficient use of resources and inputs
and outputs from systems.


Environmental risk Net risk to value Chapter reference

Environmental incident risk 1.3% Ch 19
Historical environmental liabilities 0.8% Ch 19
Air Pollution “ from production 0.4% Ch 19, 20
Air Pollution “ from transport 0.5% Ch 19, 20
Air Pollution “ peripheral pollution 0.3% Ch 19, 20
Resource use “ materials 0.4% Ch 19
Resource use “ energy 0.4% Ch 19
Resource use “ natural resources inc land 0.4% Ch 19
Resource use “ waste generation 0.5% Ch 19
Resource use “ water use 0.2% Ch 19
Resource use “ waste water pollution 0.2% Ch 19
Total 5.4%


These findings may seem excessive, but the figures relating to climate change
(Air pollution from production and transportation) have recently been echoed
by other reporters, including the ˜Stern™ Report on the “Review of the Economics
Chapter 24 “ Conclusions and future trends 619



of Climate Change.” Sir Nicholas Stern estimates that the costs of doing nothing
about climate change are £3.68 trillion in damages, or approximately 5“20% of
the global economy at risk.


Further emerging risk issues
The example of the Stern Report findings show how the magnitude and impact
of potential risks are material to organisations in that they will cause financial
losses. Extensive work is being conducted to bring these to the readers™ atten-
tion in future editions. A recent example of research is that future risks were
discussed at a conference on the subject of 21st century global risk management
at the Evian Group plenary meeting in Montreux, Switzerland in 2006. Dr Steve
Howard, Chief Executive, The Climate Group and Founding Member, HSBC
Carbon Management Task Force summed up the importance of these types of
reviews and research on emerging risks:
We live in times of unparalleled risks and opportunities. As greenhouse gas concentra-
tions climb the search for creative solutions offered by the Evian Group is to be wel-
comed”there is nothing more important,

Their findings suggested that there are 10 big global risks, which demand inno-
vation and shared action at national, regional and international level. They are:
Climate chaos;
Radical poverty;
Organised crime;
Extremism;
Informatics;
Nanotechnology;
Robotics;
Genetics;
Artificial intelligence; and
Financial systems.
(Keynote address by DK Matai, The Evian Group Initiative press release, 10
October 2006).
We have reviewed elements of these within the book and will continue this
research in future editions.


Building the business case for action

The purpose of a sustainable risk management approach: key points
You can prevent the impacts upon your organisation from a wider range of
risk issues, and develop a system for scanning the market environment.
This will save you organisational value and capital in the long-term.
You can also create new revenue streams for your business if you ask
Part E “ Case Studies of Business Risks
620




yourself: ˜what can we do that is commercially viable and socially respon-
sible (i.e. sustainable in the broadest sense)?™ and ˜can we do this whilst
managing our risks in a sustainable manner?™
Why?
Just asking yourself this question will help you innovate and come up
with new ideas for risk management techniques and new products,
services or revenue stream, often without diversifying; and
There is a growing demand for corporate policies, products and services
that make a difference to the lives of others.
Why is this important?
For the last few years™ sustainability has begun to equal survivability in the
new market environment:
51% of the British public say they have chosen a product or service
because of reputation for responsibility of the organisation in question.
(Source: The Ethical Consumer, MORI/The Co-operative Bank 2002); and
86% of customers have a more positive image of a company that is seen
to be doing something to make the world a better place. (Source: Business
in the Community, the Ultimate Win Win Win (1999) supported by
Research International).
Extra benefit to your company
You can protect and improve your reputation if you show how your
organisation products were produced or that your service is sustainable
and has a responsible purpose; and
You will attract the kind of human resources who share your belief in
your products.



Some benefits of a sustainable risk management system
The benefits of a Sustainable Enterprise/Economic Risk Management (SERM)
system are wide and varied and samples of these include:


Strategic and corporate benefits (Book part A)
These general risk issues are reviewed throughout the book and particularly in
the Chapters in Part A, i.e. environmental scanning tools in Chapter 3 and the
corporate governance Chapters from 21“23:
This is reviewed throughout the book and elements of part A of the book:
Strengthened risk management systems, which incorporate the principles of
sustainability through the organisation. These include items like those high-
lighted in the diagram below, including: risk management assessments of a
wider range of risks emanating from economic, social and environmental
Chapter 24 “ Conclusions and future trends 621



issues, environmental scanning; stakeholder and reputation analysis; and
due diligence checks;


A Sustainable Organisation
Sustainable Enterprise /Economic Risk Management System (SERM)
and Improved Competitive Performance



Social/Ethical Environmental
Economic
Performance Performance
Performance



Economic Models Social and H&S Models Environmental Models
Due Diligence (DD) (Ch 4 & 5) Social and Ethical MS EMS (e.g. ISO14001, EMAS)
Countering Bribery (Ch 7 ) Cultural DD Model (Ch 13) (Ch 18 and 19)
Code of Ethics (Ch 7) HR standards at work (Ch 14) Eco-efficiency
Business Continuity (Ch 8) (e.g. UN UDHR, ILO, SA8000) (Chapters 18 & 19)
Marketing and Cause H&S at work standards Carbon Neutrality
Related Marketing (Ch 10) (Ch 16) (e.g. OHSAS18000) Carbon Trading (Ch 20)
Technology DD (Ch 11) H&S of customers (Ch 17) Water Management (Ch 19)


Organisational Management Tools
Value Driver assessment (Chapter 3)
“Environmental” Audit (Chapter 3)
Stakeholder Drivers Assessment (Chapter 3)
Risk Assessment Framework(Chapter 4)
Stakeholder Engagement Model (Chapter 9)
Reputation and Brand Value Management (Chapter 9)
Corporate Governance (Chapters 21“23)
Corporate Responsibility (CSR) (Chapter 23)
Sustainable Development (Chapter 23)
Value chain/ business function Analysis (Chapter 24)


Organisational Vision and Objectives
Sustainable and Economic Risk Management (SERM System) Planning
(All Chapters and particularly 1, 2 and 24)
Sustainability (Chapters 1, 2, 23 and 24)



Business value is enhanced: “The evidence is building that embedding uni-
versal principles and related environmental, social and governance policies
into management practices and operations delivers long-term business value
and is rewarded by markets”, said Georg Kell, Executive Director of the UN
Global Compact. (CSRwire) July 5, 2007;
Competitive advantage gains: With investment in the growth and preserva-
tion of economic, social/human, and environmental capital can come com-
petitive advantages as reported by Michael Porter and Mark Kramer in the
Harvard Business Review December 2006. The competitive advantages of
price and technical innovation are being further eroded as key advantages are
Part E “ Case Studies of Business Risks
622



copied with greater speed there will be more competition in key areas of dif-
ferentiation such as brands value and values; and
Financial benefits from various elements of sustainability risk management.

Sustainability factors

Business Governance Economic Social factors Environmental
case issues and factors factors
engagement Social Human Health
issues factors rights and
safety

Chapter numbers 1“5 & 21“23 6“11 12“13 14“15 16“17 18“20

“ “ “ “
Access to
Economic Capital
“ “ “ “ “
Brand Value and
Reputational Capital
“ “ “ “
Cost savings and
productivity
“ “ “
Competitive
Advantage
Improvements
“ “ “
Market access
and growth
“ “ “ “
Resource growth
and Environmental
Capital
“ “ “ “
Risk Management
“ “ “
Human and Social
Capital growth
“ Evidence of financial benefits at the present time



Stakeholder benefits
Accurate and timely financial and sustainability reports and the communica-
tion of risks to stakeholders are also beneficial and protective of shareholders™
interests. An example is a survey by UK pension funds called the Marathon
Club that found that more than 88% of the investment industry agreed that
good corporate governance helps to manage a fund™s investment risks and long-
term return prospects more effectively. In the same survey 80% of respondents
said that good corporate responsibility adds value. (Financial Times, 17
October 2005);
Corporate governance issues: good corporate governance can bring increased
share value as investors are keen to pay premiums for investing in companies
they deem to be well managed (Chapters 21“23);
Trust and credibility can be increased among stakeholders. This may trans-
late into brand value and a market reputation, as well as customer loyalty,
Chapter 24 “ Conclusions and future trends 623



public credibility, and investor confidence, if the organisation is perceived to
be doing things right;
Investors strongly feel that environmental, social and governance (ESG)
issues affect market value in over 50% of companies included in the FTSE
All World Developed Index, reports London-based EIRIS; and
Peer pressure: A McKinsey & Company survey of chief executives participat-
ing in the Global Compact revealed the following:
More than 90 per cent of CEOs are doing more than they did 5 years ago to
incorporate environmental, social and governance issues into strategy and
operations;
72 per cent of CEOs said that corporate responsibility should be embedded
fully into strategy and operations, but only 50 per cent think their firms
actually do so; and
59 per cent of CEOs said corporate responsibility should be embedded into
global supply chains, but only 27 per cent think they are doing so.


Economic
The price of greatness is responsibility Winston Churchill

Economic risk is reviewed throughout the book and particularly part B.
Benefits include:
Financial out-performance: A report released by Goldman Sachs, one of the
world™s leading investment banks, showed that among six sectors covered “

<<

. 113
( 131 .)



>>