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Chief Executives named climate change and resource scarcity among the top five great forces of transformation, or megatrends, that will reshape business as we know it, in PwC’s 17th Annual CEO Survey, published last month. The potential impact of each megatrend, and the interplay between them, is substantial. Companies will need new strategies for risk mitigation to help them navigate a future that promises a shifting set of unknowns and new level of unpredictability. But given the CEO awareness, why do so many businesses struggle with how to manage social and environmental risks?
There is a need and opportunity for better collaboration amongst different functional leaders – especially the critical relationship between risk and sustainability professionals—with a focus on the goal of resilience. While risk professionals and audit committees have tools at their disposal for managing the traditional set of risks, many may feel out of their element when considering how to manage environmental and social risks. On a different floor of the same building, sustainability professionals may be accustomed to monitoring global megatrends, including issues like child labor in developing countries.
While the risk and sustainability leaders are both concerned with the company’s supply chain security, they may communicate rarely, from a governance or even a common parlance perspective. The inability to connect risk and sustainability know-how can inhibit a company’s ability to stay current in enterprise risk management. Focusing on resilience helps bridge the gap and helps everyone focus on how to rebound from climate-related shocks in a resource constrained world.
PwC recently brought together senior risk and sustainability executives across industries to generate ideas on how to go from reactive to proactive on managing climate change and resource scarcity-related risks. Sitting side by side, risk and sustainability professionals identified five steps to help these teams come together on resilient solutions:
With shared language and collaboration, a company can amplify their resilience across the risk, sustainability and business strategy functions. And by combining resources, ideas and experience, the company can position itself to not only better manage risks, but pursue game-changing opportunities that can help accelerate its competitiveness in the future.
The SASB (Sustainability Accounting Standards Board) released provisional Sustainability Accounting Standards for the financial sector, offering guidance on voluntarily disclosure of non-financial information for the benefit of investors and other stakeholders. SASB has and will continue to release standards by industry, based on insights provided by Industry Working Groups of 850 participants representing $12T assets under management and $5T market capital.
What does this mean for you? The standards provide an opportunity for companies to think about their long-term value creation strategy and the impact of social, economic and environmental factors that are material to your business. The answer to when and what to disclose may differ for every company, but as the SASB issue their guidance (keep an eye on SASB's website for the status for your industry), it's a good idea for companies to start thinking about the following questions:
If you have questions about how you might use the standards to achieve more integrated thinking on the major drivers of business performance within your organization, e-mail us at firstname.lastname@example.org.