Audit Committee Bulletin: January 2014
Demystifying sustainability risk
Why sustainability should be on your risk management agenda
The confluence of risks and opportunities associated with environmental, social and economic performance has made sustainability a strategic business priority.
Customers expect it, employees seek it and shareholders rely on it. Sustainability has moved from a feel-good initiative to a strategic imperative, driven by demands from more informed stakeholders who increasingly examine whether or not a company succeeds in a manner that supports sustainability.
Embedding sustainability into your organization’s enterprise risk management program creates a clear opportunity to increase the effectiveness of risk management practices and improve business performance.
In boardrooms across Europe, momentum is building for a more integrated approach to sustainability, including how to address the risks that it poses. Embedding sustainability into your organization’s enterprise risk management (ERM) program creates a clear opportunity to increase the effectiveness of risk management practices and improve business performance.
The Committee of Sponsoring Organizations of the Treadway Commission’s (COSO) ERM framework has historically provided a good starting point for organizations as they begin their ERM journey.
COSO identifies the following competitive advantages for including sustainability in an ERM framework:
- Alignment of sustainability risk appetite to the organization’s corporate strategy and the new world view of company value
- Expanded visibility and insights relative to the complexity of today’s business environment
- Stronger linkage of company values and non-financial impacts to the organization’s risk management program
- Better ability to manage strategic and operational performance
- Improved deployment of capital