I write this having just returned from the Risk and Insurance Management Society (RIMS) conference, along with 10,000 risk management professionals. As I engaged in conversations, I was struck by the dedication and expertise of this group – and their ability to have the backs of their executive teams as they steer company strategy towards opportunities. But I was also struck by how brokers, insurers and risk managers vary dramatically in their readiness to respond to emerging sustainability risks.
There are plenty of reasons why. Perhaps it is the controversial nature of climate change or perhaps it is just the sheer complexity of the sustainability risks to a particular enterprise…but this topic is not being rigorously addressed throughout the industry, yet it is clearly the next big set of risks that could undermine the C-suite’s success.
In 2013, 80% of the world’s largest companies had climate change strategies according to the Carbon Disclosure Project. Sustainability risk goes beyond the uptick in quantity and severity of weather systems, and includes the contributors of climate change and their effects on the environment, business and society. These contributors – fossil fuel use, deforestation, energy use, landfill dependency, industrial processes – present risks to a company’s brand, reputation, partnerships, staffing, and bottom line. The question being asked today is what’s going on in their supply chains, in the midmarket? A recent Trucost study showed that B2B customers are increasingly looking to minimize impacts in the supply chain since most industries’ most significant impacts come from outside their own operations. Increased focus on supply chain sustainability, in and of itself, warrants a closer watch on management and operational sustainability activities.
Risk and opportunity are different sides of the same coin. Risk managers striving to do the best possible job need to stand up, help their companies assess sustainability risks and prepare to adapt for a carbon constrained future. Ask what the corporate sustainability strategy is, and if it doesn’t exist, help develop it. Risk management is central to corporate sustainability, continued viability in the marketplace, and ultimately bottom line success.