- In This Issue
An Aon Perspective on Sustainability Opportunities and Risk Management
Businesses should view their impact on the planet as a chance to improve their bottom line by discovering new opportunities that provide unexpected market advantages
This article was published in the Q1 2008 issue of Aon One, March 2008.
Sustainability means different things to different people. To some, it is only a "green" buzzword, the latest fad to be presented as a must-do on the list of leadership challenges. To others, it represents the biggest imperative faced by humankind, with our near-term responses likely to shape all of our destinies.
Whatever your personal assessment, one thing all business leaders need to be aware of is that public perceptions of the environmental challenges we face have recently gone through a dramatic change. While scientists try to estimate where the tipping point for global warming lies, we already may have reached a tipping point in public opinion.
That's important, because those perceptions are driving new consumer behaviors, and those behaviors in turn are forcing organizations of all sizes to respond. The temptation is to view this negatively, as if sustainability will have a damaging effect on business, forcing organizations to change well-polished ways of operating. But as with all change, the degree and nature of its impact depend principally on how we respond. Sustainability brings with it great opportunities—not only to respond to consumer demands by changing the way our firms operate, but to develop improved ways of working as we embrace the challenge.
Because for organizations, sustainability is broader and deeper than "just" environmental issues, though they are by themselves big enough to command our attention. Being sustainable means reconciling the at times contradictory pressures of improving financial performance, reducing environmental impact and deepening the social networks within which the firm operates. It means understanding how we are going to find, motivate and reward the talented people we need to build successful businesses for the future. It means understanding that many of our stakeholders play multiple overlapping roles, as customers, shareholders, employees, neighbors, or a combination of all of them. It also means understanding that all our activities are more visible than ever before, and that what once might have been regarded as "good enough" is now no longer acceptable. For example, 99.99 percent compliance may not be enough if the 0.01 percent is an incident captured on a mobile phone and uploaded onto YouTube before staff on the ground have even had time to complete the incident report. Brands are exposed to public scrutiny to a degree never experienced before, and our responses have to move at the speed the Web dictates, not the pace we feel comfortable with.
This new world of sustainability can seem impossibly demanding. Shareholders demand financial performance, but other stakeholders may attach more weight to other factors—and they may be the people who buy the products and services that underpin the financial numbers. Fortunately, risk management provides some of the thinking and techniques we need to juggle these conflicting demands. Identifying potential risks, assessing their potential impact, and deciding whether to mitigate, transfer or finance them—the common steps in any risk-management process—are just as valid here. What's new is that some of the risks we face at a macro level are daunting, and that all risks have to be evaluated not only for their direct impact, but also for their brand impact when viewed through the eyes of a consumer base that is increasingly tuned in to questions of sustainability.
So new responses will be demanded, with new ways of working, decisions based on a broader set of criteria, and more transparent approaches to communicating and building relationships with the stakeholder groups that surround the organization. As environmental science evolves, as attitudes change, leading organizations will need to change too. The very best will not simply respond to the agenda, but will help to set it, becoming the destinations of choice for the brightest talent in the upcoming generation.
That generation will judge us with the benefit of hindsight, as every generation does. What's different this time around is that we can already see on what grounds they might make their judgment. Sustainability, they would say, is not optional.
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