Data: key to managing Sustainability Risks!

If not managed and mitigated properly, sustainability risks can adversely impact a business’ profitability, success and even survival.

Organisations that extract value from their data are better positioned to manage these risks.

The current operating environment, with complex interconnected supply chains and increased sustainability-focussed regulations present both opportunities and challenges for businesses.

Customer and Investor awareness of  sustainability issues is also growing, with many of these stakeholders now taking a keen interest in the sustainability performance of organisations that they invest in or procure services and products from.

What are sustainability risks?

At its most basic, a sustainability risk is an event that has the potential to occur, and which can affect the achievement of an enterprise’s strategic or business objectives or/and have adverse societal impacts.

Notably, this concept captures both negative effects (such as a reduction in revenue targets or damage to reputation) as well as positive impacts (that is, opportunities – such as an emerging market for new products or cost savings initiatives).

Opportunities might include, for example, creating new products and services to meet developing sustainability needs, new technologies to improve sustainability or risk performance, or new business models to access and develop emerging markets and support the creation of sustainable societies

Sustainability risk management seeks to create long-term shareholder and societal value by embracing opportunities and mitigating sustainability-related risks.

Types of sustainability risks

The sustainability risks that an organisation will face at any given point will depend on that business’ location, industry and products. In a general sense however, sustainability risks may include:

• Operational Risk: The risk of disruption to operation or production activities;
• Regulatory Risk: The risk that the business might fail to comply with existing or emerging sustainability-related regulations, which may have implication for the business or it products;
• Reputational Risk: Risk of damage to a company’s brand and reputation due to the company or its supply chain engaging in practices that adversely impact the environment, society and the economy.

Good data enable robust management of sustainability risk

Data is key for unlocking insights for identifying, forecasting, and pre-emptively mitigating sustainability risks. Additional value can be extracted with the application of advanced analytics such as data mining and machine learning, which can enable the identification of sustainability issues before they arise and the formulation of pre-emptive interventions.

In light of increasing Investor interest in sustainability issues, data that meet appropriate standards for quality, accuracy, granularity and auditability, are key for validating businesses’ sustainability claims and for boost investor confidence.

FuturoFirma provides data-driven approaches for managing sustainability risks

We can support you with developing data processes to ensure that the governance and quality of your sustainability data is at the appropriate standard and coverage to assess and manage sustainability risks.

We also apply advanced analytics to predict the probability of sustainability risks occurring. This enables clients to pre-emptively implement interventions before the predicted risks occur.