The evidence that sustainability can be good for business is overwhelming. Most of the case studies, examples, and analysis that has been done show positive links between a sustainable approach to environmental and social issues, and corporate profits, Thus far, the research has been primarily focused on direct operational efficiencies (like retrofitting your office lighting to save money and reduce your carbon footprint), innovation (using biomimicry to drive new product development), and productivity (ie. more engaged employees take less sick leave).
However, there hasn't been as much talk about the nexus between sustainability and risk management. And for corporations operating in complex supply chains in a globally-connected economy -- well -- effective risk management can be the difference between success and failure. Below, we take a look at three articles that shed light on why companies still struggle to incorporate sustainability into their risk management practices (and vice versa).
Has sustainability become a risky business? This GreenBiz article by John Davies reviews a report by Ernst & Young. The key takeaway: While more companies are concerned about increased risk and the proximity of natural resource shortages, corporate risk response appears to be inadequate to address the scope and scale of some of these challenges. The free report looks at six corporate sustainability trends with a strong focus on the internal influencers of corporate performance (CEOs and boards), as well as external forces ranging from governments to shareholders and investors.
Playing It Safe Is Riskier than You Think by Bill Taylor in the Harvard Business Review makes the case that "difficult and uncertain times are often the best times for organizations to separate themselves from the pack, so long as their leaders are prepared not to stand pat." While not directly about sustainability, this article certainly supports the notion that economic turmoil is no reason not to be ambitious about tackling big sustainability challenges.
Research: Why Companies Keep Getting Blind-Sided by Risk by Mary Driscoll in the Harvard Business Review presents fascinating insight into why companies (and their executives) are not succeeding at identifying and mitigating risk. Survey findings indicate that most organizations’ leaders did indeed express concern about the impact of political turmoil, natural disasters, or extreme weather. But the findings also show that the people at the front lines of the business were hamstrung by a lack of visibility into risk. Nearly half said they lacked the resources needed to adequately assess business continuity programs at supplier sites. Many relied on the suppliers filling out perfunctory, unreliable checklists. There are some big lessons here for sustainability practitioners!
We'll be focusing a lot of our work in 2014 on how to help companies use a "lens of sustainability" to spot risk earlier, broaden risk response options, and more effectively mitigate risk within their operations and all along their supply chain. If this work strikes a chord with you, please get in touch with us. We'd love to hear from you!