[Editor's note: WRI President Andrew Steer joined GreenBiz Executive Editor Joel Makower at the recent GreenBiz Forum in New York for a conversation about how the concepts of risk and resilience have entered the sustainability discussion. This article builds off that conversation and identifies four lessons for companies that want to address risk and build resilience in their operations.]
Sustainability has become a major business buzzword in recent years, but for many, it's still viewed as a philanthropic initiative, disconnected from a company's core goals, or even a burden that competes with other strategic priorities. That must change.
Fortunately, more leaders are recognizing sustainability risks. At the World Economic Forum in Davos last month, leaders in business, government, academia and civil society named climate change and water supply as two of the top 5 global risks facing companies today — and with good reason.
Extreme weather and climate impacts are becoming increasingly common and carrying a significant economic toll. According to the insurance group Munich Re, the number of weather-related loss events over the past three decades has quintupled in North America, quadrupled in Asia and increased in Africa, Europe and South America. In the United States alone, 11 events crossed the $1 billion mark in losses in 2012. Hurricane Sandy cost U.S. taxpayers more than $60 billion, striking at the heart of a heavily populated business and financial zone. And drought in the U.S. is expected to cost 1 percent of the annual GDP, making it one of the most expensive natural disasters in the country's history.
Likewise, water risks are increasingly on companies' radars. More than 1.2 billion people are already facing water scarcity. By 2025 two-thirds of the world's population will likely experience water stress. According to a 2012 report by the Carbon Disclosure Project, the associated costs of water events for some companies reached $200 million, up 38 percent from the previous year.
So how can companies link these risks to corporate strategy? How can they push the management of sustainability issues into the center of businesses' strategic decision-making?
Next page: Four takeaways