What is sustainability risk management (SRM)?
Sustainability risk management (SRM) is a business strategy that integrates profit objectives with a company’s environmental, social, and governance (ESG) policies. Its main aim is to effectively manage potential risks while capitalising on opportunities presented by sustainability.
SRM is often a crucial part of a broader enterprise risk management strategy, shifting sustainability from a mere PR concern to a strategic priority that addresses various types of ESG risks.
Key Points
- SRM aligns profit goals with ESG policies to enhance operational sustainability.
- Identifies three main categories of ESG risks: environmental, social, and governance.
- Organisations are increasingly incorporating SRM into their long-term business strategies.
- Basic risk management practices include identifying risks, establishing objectives, measuring progress, reporting, and developing controls.
- Industries face unique ESG risks; for example, energy deals with greenhouse gas emissions, while healthcare includes data privacy concerns.
- Challenges in SRM include varying stakeholder priorities, lack of data clarity, regulatory pressures, and resource limitations.
- The 2030 Agenda for Sustainable Development supports a comprehensive approach to SRM, aligning with global sustainability goals.
Why should I read this?
This article provides essential insights into how organisations can effectively implement sustainability risk management as part of their corporate strategy. Understanding SRM is crucial for businesses aiming to balance profitability with ethical practices in a rapidly changing regulatory environment. The trends outlined in the article are particularly relevant to leaders seeking to navigate sustainability challenges while maintaining competitive advantage.