This is a guest post from ESG Partners Inc.
(Member since 2021)
We’ve never heard more about the “S” word – sustainability – than we have in recent years. In light of increasing global disruptions and natural disasters, it’s taking on a more literal meaning. Will your business still be able to function in five years, 10 years, or beyond under these rapidly changing conditions? What can you do to ensure that it will?
Market conditions and risk factors
Traditionally, publicly traded companies have prioritized a focus on maximizing quarterly and annual returns. The challenge in this approach – financially and operationally – has become apparent in acknowledging that there are rational factors beyond these timeframes that can result in significant financial impacts or threats to the viability of the overall company itself. This can be seen in ongoing supply chain disruptions, catastrophic damage to infrastructure, increasing legislation preventing forced labour, and more frequent litigative action against board members who fail to perform their fiduciary duty by taking into account these risks — at the cost of their stakeholders and shareholders.
The global economy is under the influence of compounding factors, including legacy effects of the COVID-19 pandemic, the ongoing war in Ukraine, increasingly damaging climate change impacts, and rapidly shifting macroeconomic conditions such as notably high inflation and interest rate hikes. These factors are holding back global trade and influencing business at the microscale in the form of decreased consumer spending and tight labour markets.
How can I account for these conditions so my business can thrive in the short and long-term?
There are numerous practical tools and strategies that can be integrated into business planning and operations to adapt to these conditions, mitigate risks, and, in many cases, turn risks into opportunities.
Currently, this is most often referred to as ESG – identifying and managing Environmental, Social, and Governance factors, such as the type of risks outlined above, to reduce or eliminate potential operational disruptions and/or financial losses. (Corporate Social Responsibility (CSR) is a related approach, but it’s subjective in nature, not as systemic in risk analysis, and doesn’t necessarily produce quantifiable or traceable outcomes.)
The following are examples of tools and approaches that can be used internally, or via contracting external services, for the purpose of performance enhancement and resilience:
- Materiality assessments or material issues identification – Identifies areas of vulnerability, as well as business opportunities, by way of a systematic organizational scan. This takes into account influential factors, such as those outlined above, to inform risk management and mitigation planning.
- Supply chain risk assessment – Identifies “hot spot” areas of supply chain and procurement risks to inform risk management and mitigation planning.
- Climate change adaptation planning – Identifies vulnerabilities to increasingly frequent extreme weather events, and informs mitigation and action planning in the interest of business continuity and asset protection.
The role of the private sector in achieving a sustainable future where we can all survive and thrive is crucial. Governments can’t do it alone. The $20 million dollar cost to government from the past year’s flooding, wildfires, and hurricanes in Nova Scotia is one example from just this year alone.
The role of the private sector is a crucial part of the formula for carrying out solutions as we plan for business in a changing climate.
For more information, contact info@esgpartners.ca or visit esgpartners.ca
ESG Partners provides expert guidance on the Environmental, Social and Governance factors driving long-term, sustainable performance.
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