EY - Six growing trends

Six growing trends in corporate sustainability

Sustainability’s growing focus

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Our 2013 survey looked at how companies are responding to a wide range of internal and external forces related to environmental sustainability risks and how well companies are prepared to address them.

Six trends emerged:

  1. The “tone from the top” is key to heightened awareness and preparedness for sustainability risks.
  2. Governments and multilateral institutions aren’t playing a key role in corporate sustainability agendas.
  3. Sustainability concerns now include increased risk and proximity of natural resource shortages.
  4. Corporate risk response is not well paired to the scale of sustainability challenges.
  5. Integrated reporting is slow to take hold.
  6. Inquiries from investors and shareholders are on the rise.

The survey tells us that companies’ response and approach to sustainability issues are influenced significantly by the “tone from the top” - that is, how and how much senior management are engaged in the conversation.

Sustainability is being seen as affecting a company’s ability to compete.

Some risks are exacerbated as the role of governments and multilateral organizations shrink in the sustainability arena. The result is a muddled policy environment, making it difficult for some companies to make long-range plans and investments.

NGOs, stock exchanges and investor groups are stepping in to fill the void, often exerting higher leverage than governments to move companies and markets to provide transparency and disclosure. But corporate risk response appears to be inadequate to address the scope and scale of some of these challenges.

Investors and stock exchanges are pressing companies ever harder to assess and disclose sustainability issues considered material, in part by asking companies to integrate financial and sustainability reporting. Companies, however, are slow to do so.

To address these trends, organizations should follow these action steps:

  1. Address vocabulary challenges head on, build multi-disciplinary teams
  2. Get sustainability, risk and investor relations together
  3. Model scenarios of water shortages, climate change, and population growth for risk planning
  4. Monitor shareholder resolutions across multiple industries to stay ahead of the curve
  5. Monitor NGO activity as a precursor to regulation or market pressure.