How should companies and organisations respond to the growing environmental and social risks that are beyond their control?
Taking into account the cost of pollution, loss of functionality and other problems the world is experiencing as a result of
disregarding the environment, what is the role of companies and organisations in a greener future?
In a remarkable move, the Chinese government declared late last year that it would move to an age of “ecological civilisation”.
At a meeting of 400 international bankers taking place in Beijing alongside a plenary of the Communist Party, the decision-makers admitted that they got things wrong.
They thought that development had to come first — that they could develop their country first and clean up later.
However, the levels of toxic pollution being experienced in Beijing and other Chinese cities made them realise they had to change their approach.
At the recent C40 cities meeting held in Johannesburg, a representative from New York told the audience that after Hurricane Sandy a risks analysis had shown that at the core of their vulnerabilities was the centralised electricity grid.
Without electricity, vulnerable citizens were trapped in high-rise buildings, unable to get water and unable to access food.
Mini-grids and distributed power systems now feature high on New York’s list of considerations for building greater resilience. The solution is not that everyone rushes out and buys a diesel generator, but that they work together on rebuilding for a different future.
Expecting more from companies
For all the Fukishima disasters, the hurricanes and the devastating social unrest experienced around the world, one would expect to see companies focus far more on the areas beyond their control to understand their risks and work in collective responses to mitigate those risks.
Otherwise history will repeat itself with the same outcomes.
We are at the point where companies have to look at environmental and social issues differently. It is not enough to be legally compliant. It is not enough to have environmental management systems and sustain- ability reports.
If a company doesn’t have even those basics, it can’t possibly under- stand the strategic risks to its business going forward.
If one takes a purely business approach, then social unrest and dramatic environmental disasters have been both supply chain and market risks for one or other business some- where.
For some, they might have been an opportunity.
South Africa is not immune. Our floods and droughts may not have made international headlines, but communities around the country are suffering from lack of basic services, made worse by periodic droughts and floods.
So when companies publish integrated reports, one would expect to see an analysis of how they have factored those types of risks into delivering their strategies and what they have done to mitigate them — be- yond simply taking out insurance, which will inevitably become more expensive and in some cases, such as weather insurance, may not al- ways be available because insurance companies will find it increasingly hard to provide.
What should we expect from companies and organisations?
The basics need to be there. There need to be systems, accountability and transparency about performance. We need to see an understanding of their key risks, and it should include environmental and social issues.
One would expect that they begin moving from a project focus to a more programmatic and deeply embedded approach.
For years, a standard question from stock exchanges and similar institutions has been how much companies spend on “environmental issues”.
That should become more difficult to answer because environmental is- sues should cut through everything a company does.
One would expect to see an assessment of climate risk. Are strategic lines of business at risk in a world of less predictable weather and more frequent extreme events?
In a world of growing populations and more unemployment, what will be the impacts of your own business? Will more or fewer people benefit, and how will you deliver your core services?
How will a growing but unemployed young population pay for the services you are offering? There is of course a growing middle class, but not every business will be able to pin themselves to those coat tails.
Organisations don’t exist simply in a world of their own control. They should also be testing their own vulnerabilities in relation to those of others.
If finance is their key enabler, what are they doing to understand how financial risk can be reduced? If the supply chain is crucial, do they understand how floods in Thailand or an earthquake in Japan or snow- storms across the US can impact on their ability to move product or parts?
Or, if they are in the food industry, have they considered weather patterns, reducing quantities and quality of water, and the need to shorten supply lines?
A greener future needs leadership and innovation, an integrated approach and a greater sense of community and citizenship.
Karin Ireton is director of group sustainability management at Standard Bank South Africa and a member of the Greening the Future Awards judges panel.
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