The evolution of corporate sustainability inside companies has shifted the conversation from the margins to the mainstream.
The early conversations focused on regulatory compliance, aligning cost-saving measures with reputational benefits and, more recently, creating value by aligning sustainability with innovation.
The corporate sustainability conversation in a growing number of companies has shifted to another arena: risk reduction and mitigation. This reflects the realization that environmental, societal, and market shifts will increasingly roil everything from commodity prices to natural resource shortages to disease epidemics — all of which can affect business continuity, the right to operate and reputation.
These issues go to the heart of a company’s ability to compete.The complexity of corporate sustainability issues, especially when viewed through the lens of risk management, has led companies to understand that sustainability needs to be more tightly integrated throughout the organization: in finance, operations, procurement, facilities, human resources, supply chain, logistics, finance investor relations, marketing and communications, and more.
The result has been that the conversation inside companies is more dispersed, even systemic, well beyond the scope of a single department or business function.
How, and how much, companies disclose their sustainability-related risks provides a good barometer of top management’s engagement in these issues. How aligned is your company’s disclosure of sustainability-related risks published in your 10K or annual financial report with your company’s responses to the CDP, DJSI, and other surveys?
Companies that have a greater level of engagement from the CEO and the board have much closer alignment between what they voluntarily disclose (such as CDP and DJSI) and what they are mandated to disclose (such as 10-K filings).
When the CEO and the board are involved, there is much greater alignment in risk identification and disclosure. While 22% of surveyed companies indicated total alignment on both mandated and voluntary sustainability disclosures, 36% acknowledge “total alignment,” indicating both a fully engaged board and CEO.
Heightened CEO and CFO attention to sustainability reflects the gradual ascent of sustainability issues within the corporate risk register. C-suite involvement also underlines the growth of corporate sustainability as a strategic differentiator.
The 2013 E&Y 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: