Corporate social responsibility and the consequences of risk management

Corporate Social Responsibility And Risk Management Ergapolis

“Humanity is on the path of collapse.” – Lester Brown

Expert debates, growing media mobilization, oppressed politicians, lobby in excitement, incrimination of emerging countries, an obese population on one hand and a starved one on the other, populations decimated by wars, loss of biodiversity, pollution, financial scandal, global economic crisis, the rich getting richer and the poor becoming poorer, social inequality, pandemic…humanity is facing a crisis like never before.

 Our western society provides abundance for many, but this way of life is not sustainable if we include the ambitions of developing countries, which aspire legitimately to the same quality of life.

 Every year, scientists specialized in climate issues release a date, the Earth Overshoot Day, which indicates the day humanity consumes more resources than the earth’s capacity to produce.

Past Earth Overshoot Days

 These estimations are calculated by climatologists, economists, agronomists, forest engineers and mineral and natural resource experts who assess the resources we extract from the planet and the rate of rejuvenation of these natural elements, like the fish populations, biomass production, crop production, and so on.

As aforementioned, the Earth Overshoot Day represents the tipping point where humanity consumes more resources than what the earth can regenerate in that year. The day when we will use more trees, more water, more fertile soil and more fish than the earth can provide in a year. It is also the day when human activity will emit more carbon than forests and oceans. Today, we would need 1,7 earths to support ourselves.

 In a sustainable economy, the Earth Overshoot Day should be no earlier than December 31th. In the beginning of 1970, the date was December 29th. In 1987, it was October 27th, and in 2019 it was August 1st! This is the earliest date ever recorded.

Our lifestyle has a direct impact on the ecosystem and the consequences are irremediable: We are disrupting the climate

 The big goal of the Paris Climate Agreement (COP21) was to keep the average global temperatures from rising beyond 1.5ºC. 

The Intergovernmental Panel on Climate Change (IPCC) is a UN body for assessing the science related to climate change. Recently, in a special report, IPCC claimed in stark terms that humans have at the most 12 years to fix their addiction to fossil fuels and drastically reduce total carbon emissions if we are to have any chance of staying below 1.5ºC and avoiding an irreparable disaster. 

12 years…isn’t that tomorrow? The probability that the project you are building now will be useless, unproductive, inefficient, uncompetitive and obsolete – in other words, unsustainable, is increasing. How will you cope with this information?

We are all concerned by these threats and will all need to change. This is the best time to create a new paradigm and new dynamics for virtuous growth.

Many CEOs, managers and employees couldn’t make the connection between Corporate Social Responsibility, Environmental Social Governance criteria, and business activities. Many of them believe that Corporate Social Responsibility is a communication strategy and must only generate a philanthropic response. As a result, companies are accused, in their CSR efforts, of carrying out greenwashing operations – a marketing practice that portrays businesses as an eco-responsible entity, which is most of the time far from reality. It’s an outdated concept which won’t fool anyone. Instead, it will multiply negative reputational risks.

Wanting to save face rather than the planet is like chanting incantations to cure cancer. It is grotesque and a waste of time and money.  

Few of my clients understand that Corporate Social Responsibility should be their company’s strategy. It must be applied to the business lines with a direct impact on the company’s culture.

The truth is, sustainable development proposes establishing a model that reconciles the environment, humans, and economic system in order to develop a viable and desirable society. This is not a utopian fantasy. This is a reality to which we are all exposed and which we must each consider at our own level and according to our own possibilities. 

Admittedly, it is a complex subject. The main difficulty is how to approach it for simple and effective implementation. There are a multitude of profitable solutions for each company in the short, medium and long term.

First, some language science: sustainable development requires a paradigm shift. In the corporate world, it means Corporate Social Responsibility and in the economic world it means ESG criteria.

Second, to have a strategic vision including sustainable development, you need to develop a holistic approach and have the expertise to develop internal skills and stakeholder relationships, and create synergies or partnerships.

Third, the board and teams have to be trained to translate issues in business opportunities aligned with their company goal. This is an opportunity to launch new markets, to think outside the box and to work differently. But most of all, this is a necessity in terms of risk management.

CSR management risk features among the top 10 in the Business Risk Report of Ernst and Young in 2010. “Social acceptance and corporate social responsibility (CSR) have become increasingly important over the last decade and it is not a surprise to find this risk entering the top 10 this year. In the current business climate, where there are continuing reputational threats and a rising political backlash, firms will need to tread carefully to maintain (or rebuild) the trust of the public.”

In its 2015 report, after analysing 2500 listed companies worldwide, VIGEO notes that one in five had been subject to a sanction related to at least one social responsibility factor. Some even had to suffer several procedures on different topics involving their CSR. These lawsuits amounted to €95.5 billion. The subject is, therefore, an important issue for risk management policies. 

To help companies achieve the target of sustainable development, two types of skills exist today, a little like in medicine: 

Generalists in sustainable development. They will master many subjects but not necessarily in-depth, and will be able to make the links, think transversally, propose a holistic vision, innovate, and above all, direct you to the right experts.

Specialists with expertise in a field such as building efficiency, regeneration of polluted soils, agri-food, energy efficiency, green energy, water resource management, transportation, social innovation, health, population trends, etc.

It is an opportunity for companies to recruit trained and experienced professionals to understand the core business, to help develop new strategies and to implement their sustainable development in order to have tangible results. It is a profession that, although can be learned and passed on, cannot be improvised. Or, it takes more time, and time is the first resource that we lack!

At Ergapolis, we care about a healthy and sustainable earth. If you have any questions regarding corporate social responsibility and risk management, do get in touch.

You can also visit our website to learn more about what we do.  

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