Here are four takeaways about how companies can act on sustainability by addressing risk and building resilience.
Lesson 1: Identify all your risks
Because future events are likely to become more unpredictable, current risk thresholds are outdated. Businesses cannot entirely plan for the unknown, but the key is to comprehensively identify risk and build resilience into business models. This is the crux of sustainability.
According to GreenBiz's 2013 State of Green Business report, corporate leaders are increasingly watching, measuring and managing environmental and natural resource risks as they become more material and demand urgent attention. The report notes that there is growing interest in integrated reporting that presents both environmental and financial performance data. Investors, then, can see a more accurate balance sheet of the environmental risks for a company's performance.
WRI is working with companies to create the tools to identify and address those environmental risks. Aqueduct, a new, data-rich global water risk mapping platform, is designed to help companies better identify water "hot spots" around the world. We are also creating specific tools for companies that will help them better monitor deforestation rates (to be launched later this year); measure and manage greenhouse gas emissions throughout their entire supply chains; and evaluate ecosystem services' benefits and risks. The quest for consistently better data and information has to continue.
Lesson 2: Translate environmental risks into strategic actions
We need more companies to recognize the economic implications of environmental damage. Some, for example, are putting a monetary value on what nature does for their businesses. It helps them to understand significant costs and benefits that traditional financial analyses can miss. At the Rio+20 conference last year, several major companies, including Coca-Cola, Dow Chemical and Duke Energy, signed onto the Valuing Natural Capital initiative. They agreed to develop a methodology to assign value to the world's forests, freshwater and marine systems.
Addressing both environmental risk and economic interests as an integral part of corporate strategy is the next step. WRI recently updated a familiar business strategy tool to help companies better understand and translate sustainability. We worked with businesses such as Staples, Delphi and Danone Brasil to create a new twist on the traditional "SWOT" analysis. The sustainability SWOT, or "sSWOT", translates environmental challenges — like climate change and resource scarcity — into business risks and opportunities. The sSWOT is helping companies better identify their risks and illustrate new priorities for strategic planning in our changing world.
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