Managing Sustainability Risks and Driving Value

Sustainability is a hot-button issue for modern businesses — it impacts everything from raw material sourcing to employee retention. By finding ways to manage sustainability risks, you can avoid costly problems and drive value where it's needed most.

Set Up Sustainability Metrics

Like any other part of your operations, metrics are a key part of managing sustainability risks. After all, if you don't have defined items to track, it's difficult to spot trends and potential problems. Before you do anything else, it's important to identify the factors that affect your company's sustainable practices and create a metric for each one. Start with material basics such as energy consumption, water use and emissions. Be sure to track conservation efforts, such as energy-saving efforts and carbon offsets, so you can calculate the net result. Other possible metrics include total environmental fines, violation notices, physical waste and recycling programs.

Merge Financial and Sustainability Reporting

Chances are, you run financial reports at regular intervals to keep an eye on your company's performance. Compare that to your reporting process for environmental and social issues. If you examine these numbers less frequently — or not at all — you could be missing out on valuable opportunities to manage sustainability risks. Integrate the two sets of metrics together, and run the reports at the same time. This strategy achieves two goals. First, it forces you to examine performance on both fronts. Second, it enables you to see connections between financial performance and sustainable practices, so it's easier to spot opportunities to drive value.

Keep an Eye on the Supply Chain

The sustainability risks for your business are not limited to onsite operations; problems far down the supply chain can trickle back to your company. If a raw-material provider is found to have serious environmental violations, for example, it can disrupt production and cast your products in a bad light. The only way to mitigate this type of risk is pay close attention to your supply chain. Establish relationships with each company, and check in frequently to learn about procedural and operational changes. In addition, conduct your own research. Set up Google alerts for supplier names, locations and industries to stay abreast of current events news items that might impact your suppliers and your business by extension.

Monitor Regulatory Changes

Regulatory compliance is a key part of managing sustainability risks. Violations can lead to high fines, revoked licenses and strict consequences that damage your ability to do business. To avoid accidental problems, make a point to track key governing bodies. Scan the websites of key agencies and subscribe to relevant news feeds to stay updated, and partner with your legal team to understand and interpret complex policy changes. This step takes time and effort, but it can pay off significantly in the long run.

Every company is vulnerable to sustainability risks, both in house and down the supply chain. With proper management, you can head off problems before they compromise operations.

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