Wells Fargoâ€™s third annual US homeownersâ€™ study showed that if given
US$50 000, some 24% of those surveyed â€˜dream greenâ€™ and would pur-
chase insulation, double-paned windows, solar panels and energy-efficient
appliances for their homes. Doreen Woo Ho, president of Wells Fargoâ€™s
consumer credit group, said â€˜we found that Americans are showing signs of
becoming more environmentally aware and want to take actions that save
money, help preserve the environment, as well as add value to their homeâ€™,
Planetark.com, 31 October 2006.
Water quality trading, certified sustainable products, wetland banking and
threatened species banking.
New technologies and products:
That will serve as substitutes, reduce degradation, restore ecosystems or
increase efficiency of ecosystem service use.
Such as ecosystem restoration and environmental asset finance or brokerage.
New revenue streams:
For fixed and variable assets that are currently unrealised, such as land and
forests which may act as carbon credits.
Increased use of standards and certification:
Companies will increasingly use standards for quality (ISO 9000), the envir-
onment (ISO 14 000 series), social issues (Investors in People) and health and
safety (OHSAS 18 000 series) to distinguish themselves from competitors.
Marketplace trends â€“ risks and impacts:
Market reduction and loss: products are being banned, or their use curtailed
as their impacts become apparent. This ranges from chemicals to endangered
species of food sources:
This trend will continue and examples are the EU REACH chemical plan
where some of the 120 000 man-made chemicals we use will be more strin-
gently tested for their toxicity and removed from use if their impacts are
Part A â€“ Overview of Risk Management
too large. The European Commission has proposed legislation to ban all
European Union exports of mercury from 2011; and
Zanzibar and Bangladesh have both made plastic bags illegal, whereas the
UK government says it darenâ€™t ban or tax them. Zanzibar and Bangladesh
have said they couldnâ€™t afford not to, as they are impoverished nations.
Market manipulations taxation:
As set out in the â€˜Value driversâ€™ section, the internationalisation of taxation
and increasing relevance of sustainability-related taxes will continue.
Countries are eyeing a raft of green measures to help combat climate
change, including higher taxes on cars, air travel, fuel, lighting and con-
Marketing environment: considering that perception is so important to main-
tain reputation and brand value, marketing claims can have a huge impact on
stakeholdersâ€™ perception of the organisation. It is also true that many com-
panies carry out positive activities that are not being reported and are not there-
fore contributing to the intangible value of the organisation:
There is an increase in award schemes that are highlighting these best prac-
tices, such as the Green Awards for sustainability communications (www.
greenawards.co.uk) aimed at rewarding marketing campaigns that best com-
municate the importance of sustainable development and responsible busi-
ness practices to consumers (see Chapter 10 for examples and case studies).
2.1.3 Technological and scientific
The pace of technology development will continue at accelerating rates, espe-
cially in information, nano, biological and energy technologies.
The continued growth and development of information technology has
Cost reductions: there has been a doubling of performance versus price curves
for computer chips, memory systems, data networks, and this trend will con-
tinue to speed up;
Digital format: more and more information is digitised, and more information
will become available in digital format only;
Reporting and communications: the internet has provided companies and
those seeking greater corporate accountability an unprecedented ability to
share and exchange information on a large scale, cost effectively. Some of the
most innovative companies are planning to provide â€˜sustainabilityâ€™ informa-
tion in a real time format;
Market and process opportunities: the next decade will see computing
and telecommunication increase in capacity five to seven times. This could
Computers will become imbedded in clothing and the built environment;
Business transactions will involve virtual personalities as intermediaries; and
Translating devices and phones will be common, as will voice recognition
systems and automatic language translation.
Chapter 3 â€“ Drivers and trends in sustainability risk management 43
Security and surveillance systems will become available on a micro scale
posing competitive and information security issues and new dilemmas with
regards to the balancing of privacy and access concerns.
The growth of nanotechnology: in simplest terms, nanotechnology means con-
structing materials at the molecular or atomic level, and in nanoscale size. The
possibilities of making computers that fit in your wristwatch or even a button
on a shirt, or even one of the fibres of that shirt, Hewlett-Packard Laboratories
Future implications: issues of interest in the nearer term will include embedded
and eventually invisible computing. A decade ahead, perhaps less, will witness
the development of super surveillance devices. Beginning with â€˜robofliesâ€™ and
possibly leading to nearly invisible â€˜dust motesâ€™ with nanoscale cameras and lis-
tening devices, both investigative and privacy issues will be in the forefront.
The growth of biotechnology: developments will involve the applications of
genomics, life sciences and bioethics sciences and there is no greater promise
of improvements in human well-being, or so fraught with ethical and risk
issues. The list of associated issues is long, including stem cell research, DNA
evidence, cloning, genetically modified foods, animals, and people, genetic
screening and discrimination:
Future trends: the impacts of these developments could mean things like
DNA security identification chips and faster DNA testing methods will make
DNA evidence gathering commonplace. Genetic screening for disease risks
will become faster, easier and more widespread. Stem cell research will lead
to applications of stem cell therapies, including the possible farming of bio-
logically created organs and tissues.
Sustainability technology will see a sharp rise in investments and management
energy. An example of potential benefits is:
The collaborative study conducted by members of the Truck Manufacturers
Association (TMA) and the US Department of Energy (DOE) could save nearly
one billion gallons of fuel annually as a result of new aerodynamic technolo-
gies on truck trailers.
2.2 Social drivers
These drivers are largely covered by the stakeholder matrix analysis, in Chapter 9,
for example education is in section A (Academic and research organisations
trends) and cultural dissent is in section D (Direct actions groups and NGOs).
There are large-scale risks present within the socio-economic aspects of
our global society which includes: income differentials and the widening gap
between rich and poor; human rights violations; debt and economic slavery;
inadequate diets and distribution of food supplies; the prevalence of preventable
and curable diseases; global conflicts increasingly fought over resources, and
Part A â€“ Overview of Risk Management
the rapidly increasing number of refugees from these conflicts as well as from
political, environmental and natural disasters.
These are all vast challenges for human society but here we review these
types of risk and societal trends in a business context:
There will be increased moves to understand and account for social capital
by organisations and society.
Social capital refers to the institutions, relationships and norms that shape
the quality and quantity of societyâ€™s social interactions. Increasing evi-
dence exists that social cohesion is critical for societies to prosper eco-
nomically and for development to be sustainable.
Social capital is not just the sum of the institutions which underpin a
society â€“ it is the glue that holds them together. (World Bank)
2.2.1 Society and demographics
Growing global population: the human population of the earth is increasing
at approximately 70 million persons per year;
There is real population decline in 61 countries, accounting for 44% of the
Earthâ€™s population; fertility rates are now at or below replacement levels; and
Aging population: the global economy faces a transition of unprecedented
dimensions caused by rising old-age dependency and shrinking working-age
populations among the worldâ€™s largest economic powers.
Cultural changes: there will be a wide range of cultural changes, with the poten-
tial for a renewed emphasis on traditional values of religion and family, as well
as on issues like education, relationships, diversity and an emphasis on women
in positions of power, and a reorientation of the environmental movement.
Polarisation of people by class, race, ethnicity and lifestyle preferences: less
than positive cultural trends will also be seen, including the polarisation of
people by race, ethnicity, lifestyle and class.
Emergence of â€˜cultural creativesâ€™: this is a trend occurring in the developed
world at quite a rapid pace as society releases some of the challenges facing it
and the ineffectiveness of some institutions. For instance, research by socio-
logist Paul Ray and psychologist Sherry Anderson of over 100 000 Americans
identifies three primary cultural types: traditionalist, moderns and cultural cre-
atives. The former two groups are in decline and will continue to do so, the lat-
ter are growing in size, and they estimate accounts for 50 million people in the
US (about 26% of the population), and 80â€“90 million in the EU. They have the
following types of characteristics:
Environmentally: love nature, aware of the problems of the whole planet,
would pay more to clean up the environment and stop global warming;
Chapter 3 â€“ Drivers and trends in sustainability risk management 45
Socially: they value relationships; value and volunteer for helping other
people; want more equality for women at work and want more women lead-
ers in business and politics; care intensely about psychological or spiritual
Politically: are unhappy with current politics; want politics and government
to emphasise childrenâ€™s well-being; rebuild neighbourhoods and communi-
ties; support the creation of an ecologically sustainable future.
Emergence of corporate awareness: there are strengthening views of what
companiesâ€™ place in society should be, as the University of South Africaâ€™s
research (from their Corporate Citizenship in partnership with the Bureau of
Market Research www.unisa.co.za) finds:
Three-quarters of consumers questioned in a survey responded that govern-
ment should play a more proactive role in encouraging greater corporate
Over three-quarters of respondents expected companies to improve the social
and environmental impacts of their products and services; and
Two-thirds expected companies to implement socially responsible practices
in their supply chain.
2.2.2 Political and governmental
There is the direct impact upon organisations of legislative developments which
is covered in the following section and with tool 3 the Stakeholder Analysis
Matrix (elements G, H and I), and within each chapter in more detail.
Governments (locally, nationally and increasingly internationally) also have
strong influences upon organisations by other direct mechanisms, like their
Trends are that:
There has been a general turning away from the notion that government was
the best or primary institution for solving large social problems. This trend is
expected to continue as welfare reforms continue globally. There will be
increased awareness of some of the barriers to this process. In the US in a
post-9/11 era there have been decisions to replace private safety inspectors
with a federalised public screening agency staff in the view that government
management in this area is superior;
Governments are exerting more covert influence by implementing tendering
processes whereby organisations have to reach a minimum standard (like
achieving ISO 14001 to be able to tender), or demonstrate that they have
responsible processes and risk management systems (like having few or no
fatalities at work in order to tender for government building contracts);
Government also affect the risk agenda indirectly and an increasing trend is
the growth in government informal recommendations: Government regula-
tors at all levels are calling on companies to increase the quantity and qual-
ity of information they disclose to the public about their practices and
Part A â€“ Overview of Risk Management
Corporate governance legislation and more active public prosecutors are
having an effect on bringing corruption and bribery matters to the public
Becoming green is a vote winner, for example in the US a recent heading
read: â€˜Environment wins in democratic landslide in 2006â€™. The story refers to
the House Minority Leader, Nancy Pelosi of California, who will move into
the Speakerâ€™s seat, becoming the first woman Speaker of the House in US his-
tory. Her environmental views match those of conservationists, particularly
on climate and energy issues.
Recent examples include:
The European Commission has recently published an outline of how it envis-
ages corporate social responsibility taking shape within the EU, encouraging
all firms to adopt the â€˜triple bottom lineâ€™ of economic, social and environ-
mental responsibility (ED 19/07/01);
There are greatly increased calls for more product responsibilities and con-
trols as the European Commission supports moves to tighten vehicle emis-
sions limits further than those foreseen in current proposals after European
Union governments and lawmakers called for tougher standards. The
Commission proposed â€˜Euro 5â€™ vehicle standards, which would slash emis-
sions of particulates from diesel cars by 80% and nitrogen oxides (NOX) by
20%. They would also cut NOX and hydrocarbon emissions from gasoline or
petrol-powered cars by 25%; and
The OECD is backing greater corporate responsibility as corporate social
responsibility will take on ever greater importance in the coming decades,
presenting companies with a set of clear challenges.
There are increased legal threats and penalties to individuals and organisations
as governments seek to shape markets and govern corporations by market
forces and public regulation as well as implementing laws that shape the struc-
ture of corporate governance (see also Chapters 21, 22 and 23).
Some examples include:
Increased litigation: in the US the number of class-action lawsuits against US
companies rose sharply in 2004 according to a report by Stanford Law School
and Cornerstone Research, the Securities Class Action Clearinghouse Report
cited a 17% increase in the number of actions filed for 2004 and that the com-
panies being sued lost $169 billion in market value. This figure was almost
treble the figure for 2003.
Personal liability of directors: there are increasing legal grounds for personal
liability of directors and managers. The legal duties inherent in office for com-