Our 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, which form the basis of this report.
The survey tells us that companies’ response and approach to sustainability issues are influenced signifi cantly by the “tone from the top” — that is, how and how much senior management are engaged in the conversation. As the sustainability conversation in some companies shifts — from eco-effi ciency to risk reduction and mitigation of natural resource shortages, extreme weather events and supply-chain disruptions — sustainability is being seen as affecting a company’s ability to compete.
Some of these risks are exacerbated as the decreasing role of governments and multilateral organizations shrink in the sustainability arena. The result is a muddled policy environment, making it diffi cult 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 on sustainability-related risks.
But corporate risk response appears to be inadequate to address the scope and scale of some of these challenges. For example, most companies have yet to run scenario analyses considering the availability of key inputs such as water or other raw
materials. Such analyses are increasingly important given the growing understanding that such issues as food, energy and water are inextricably linked and must be looked at holistically.
Amid this dynamic environment, investors and stock exchanges are pressing companies ever harder to assess and disclose sustainability issues considered material, in part by asking companies to integrate fi nancial and sustainability reporting. Companies, however, are slow to do so. Among the challenges is balancing demands for transparency with the legal risks of disclosing more information.
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