News15 Nov 2017

Sustainability a strategic risk issue with impact on business growth

| 15 Nov 2017

Sustainability is a growing strategic risk issue that could have financial impact on a business, and could prove to be an avenue of growth and opportunities, according to a panel discussion at the Pan-Asia Risk and Insurance Management Association's (PARIMA) Singapore 2017 conference yesterday. It is thus a topic of concern which businesses cannot ignore.

Sustainability rises on the agenda

“Sustainable development has really climbed the agenda, especially at big meetings like the G20, World Economic Forum, and ASEAN,” noted Ms Jessica Cheam, a prominent environment journalist and Managing Editor at Eco-Business, a website focused on clean technology, smart cities, responsible business and the sustainable development community in Asia-Pacific. 

Ms Cheam, who was also the keynote speaker at the conference, had earlier addressed trends in sustainability, climate change and international developments in her speech. These include the 17 Sustainable Development Goals (SDGs) which were adopted by the UN in September 2015 and which the corporate world has been encouraged to integrate in their business.

She noted that due to the SDGs, businesses’ engagement with sustainability had improved dramatically in recent years. This was compared to years ago, when only MNCs from the US and Europe would be keen to have such conversations with her as they were already along the journey. However, these conversations remain difficult in Asia.

Ms Cheam said the challenge was how to translate political rhetoric and grand statements of entities like the UN into actual action.  This is where collaboration and partnerships among different society players is important and why there has to be a discussion about SDGs at the corporate level. “I think it’s improving but a lot more to be done,” she said.

A C-suite issue

“Sustainability is a risk-taking strategy and actually a growth strategy--when you take care of this issue, it means that you are here for the long term, you are taking care of the future. These are the things a leader should be thinking about,” said Ms Victoria Tan, a PARIMA board member and Head, Group Risk Management Unit, Ayala Corporation, one of the largest conglomerates in the Philippines. The company and its management have been recognised as leaders in sustainability practices and adoption of the SDGs.

Ayala, which currently has almost all its investments in its home country, views its sustainability efforts as being part of the national development agenda for the local environment it operates in. Sustainability efforts should be a tone driven “by the top”, said Ms Tan, which was the case in her company.

With sustainability as the greater agenda, Ms Tan views risk management as helping to provide a collaborative platform to discuss sustainability and help achieve it. And for those organisations which do not drive it top-down, she advised risk managers to seek an audience with senior management to engage them on it.

As many CEOs may only look at matters with a financial impact, she suggested that one angle to have a sustainability conversation with them is to highlight how societal and environmental impacts from the business could impact reputation and licences to operate.

Competitive advantage, helps profitability

Agreeing, Ms Cheam added that sustainability practices could also be a competitive advantage of one firm over another. “The question to ask is if you don’t consider the sustainability issues, are we going to be resilient, are we doing this right? And the answer is no,” she said. “So this is absolutely a financial and economic imperative.”

She noted that sustainable issues also provide new business opportunities, if one looks at where the world is going, given new avenues in risk pooling, healthcare and infrastructure in developing markets.

“You business could be addressing social ills as well as environmental problems, and in the process you could make a fortune out of it,” she said, citing Nobel Peace Prize laureate Muhammad Yunus and the Grameen Bank as an example of a profitable and successful project that also solved a social need.

Expecting sustainability from business partners

On the question of whether a company should expect its partners to also be sustainable in their practices—even if it could cost them more, Ms Tan said that her firm has an accreditation process to screen suppliers which do. Sustainability standards do help to raise reputation and brand, which helps as customers nowadays are more discerning.

“Sometimes we have to pay a certain premium because there is a quality you want to retain (of the supplier)....if you ask a customer, are they going to buy from somewhere if they don’t know how it (the product) was manufactured? They would rather buy from a trusted brand,” she said.

Ms Cheam noted that some major corporations are showing leadership in setting such standards for their suppliers, playing a huge role in moving the industry forward. Unilever is one such company which makes it mandatory for its suppliers to follow a sustainable sourcing code, which they have to abide by if they wish to supply to what is the largest consumer goods company in the world.

Engaging people

Beyond engaging the C-suite, the other question is how to get the population in general engaged in the sustainability conversation. Ms Cheam said this is a big issue as many get switched off by the “doom and gloom” that tends to be associated with climate change news. Yet the subject is something that cannot be avoided as there is something related to climate change in the news every day.

“We are at this tipping point and therefore you can see that people are being forced to engage with the issue, so you can stick your head in the sand...or you can surface...ask how am I going to handle it, how am I going to make by business thrive and contribute to society," she said. "You just need to contribute doing that engagement and try and accelerate that process."

Ms Tan said that sustainability is a journey that needs to be a continuous discussion. It is not only a corporate issue, but it is about each individual becoming a mindful person, looking at the way he lives, contributes and even eats.

She advised risk managers to increase their capability and knowledge on the subject, such as finding their passion within it and choosing an SDG that resonated most to align with.

She said their sustainability reporting is “generation reporting”—what they are doing for the next generation.

The discussion was moderated by veteran journalist and broadcaster Teymoor Nabili.

The PARIMA Singapore 2017 conference was held yesterday with the theme of "Sustainable, Resilient & Intelligent Future", drawing close to 300 participants from 19 countries. It was the third of PARIMA’s conferences this year, following earlier conferences held in Manila and Shanghai. The next conference will take place in Bangkok from 21-22 May 2018.

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