Aliging Profit with Purpose - Global Goals Yearbook 2019

DISCLOSE AND
REPORT ESG
RISKS
7
1
DRAFT GOVERNANCE
FOR EFFECTIVE RISK
MANAGEMENT
6
CHECK
AND REVISE
ESG RISKS
2
UNDERSTAND
STRATEGY AND
CONTEXT OF THE
BUSINESS
3
IDENTIFY
ESG RISKS
TAKE MEASURES
AGAINST
ESG RISKS
5
4
EVALUATE AND
PRIORITISE ESG
RISKS
topics, very few had really seen any
progress in recent years and did not believe
that they were important for their
businesses. Issues around climate change
and corporate impacts on people do not
seem to have permeated the membranes
of most enterprise risk management
systems in the organisations where we
conducted interviews. Indeed, only one
of the companies referred to specific
climate change and environmental protection
risks. Not one company referred
to human rights risks (including labour
risks), be they in their own organisation
or in their supply chains. This was
another surprising finding, given the
level of media coverage on poor working
conditions, child labour, and modern
slavery. This reinforces the view that
many companies are barely at the start
of their ESG journeys with regard to
integrating issues into their risk management
processes. Given that the UN
Global Compact has been in existence
for almost 20 years, the embedding of its
four pillars now needs to be prioritised,
and at some level addressed within risk
registers.
Challenge 3: Materiality
Although sustainability issues may not
rank high on risk registers, the risk
managers with whom we spoke did indicate
that they are looking to develop
an understanding of what sustainability
means within their risk universe. Not
unsurprisingly, when risk and sustainability
come together, the question of
materiality becomes a central challenge.
The approach to materiality has a fundamentally
different starting point for
sustainability risks than for conventional
financial risks. In order to assess key
risk areas, one first needs to consider
the impact that the company has on the
environment and on the people with
whom its products or services interact
– not initially on the business itself (as
with financial risks). Those that pose the
greatest potential to have a severe and
negative impact on the environment and/
or people are likely to result in a material
risk to the company. These are the risks
on which risk managers should focus. By
following this process, they introduce a
concept of prioritisation.
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Global Goals Yearbook 2019 131