Being a sustainable organisation is becoming increasingly important for both consumers, employees and not least for the climate. Many organisations that start their sustainability work often forget the risk work connected to sustainability. In this blog post, we will go through how ESG (Environmental, Social, Governance) and GRC (Governance, Risk, Compliance) meet and how you can implement both in your current way of working.
Increased demands on managing risks linked to sustainability
Today, there are high demands on businesses to act sustainable. It is not only consumers and employees who make higher demands, but also society, investors and authorities. The requirements often concern the implementation of measures to reach set climate goals as well as the company's actions regarding, for example, social responsibility and business ethics. Identifying the organisation's activities that may have a negative impact on the climate or society should therefore be prioritized.
Events in our surrounding world affect organisations to the greatest extent, such as climate change or COVID-19. It may be about interruptions in the business's transport, which results in problems with delivering goods to customers. It could be that the organisation is forced to change quickly to a new way of working or different aspects of health. Changes in the outside world mean new risks for businesses, and it is therefore important to have proactive risk management.
ESG as part of GRC work
In order to be able to work proactively with risks linked to sustainability, they need to be connected to an overall picture of all the organisation's other risks. By integrating ESG work (sustainability work) into the organisation's overall GRC work (risk work), important synergies such as feedback mechanisms and cross-divisional measures can be implemented in a more time-efficient manner. An organisation does not have unlimited resources and it is important to work smartly, efficiently and towards the same goal.
The challenge of managing risks linked to sustainability
The reason why many organisations fail to work systematically with risks linked to sustainability is that risk and sustainability within the organisation are seen as two separate areas. This is where the big challenge lies, i.e. bringing about cooperation between ESG and GRC within the organisation, which is a prerequisite for the work to work.
Many organisations become aware of risks linked to sustainability only after doing a scenario analysis, something that is part of the Task Force on Climate Related Financial Discolsures (TCFD) framework. Analyzing and preventing risks related to climate change is thus often the starting point for risk management within ESG. By doing a double materiality analysis, other ESG risks are also discovered that should be taken further in the organisation's systematic GRC work. When identifying sustainability risks, two perspectives should be taken into account: from the inside out as well as from the outside in. That is, what impact do we have as a business on various aspects of sustainability and, conversely, what impact do the sustainability aspects have on us as a business.
How do you adapt the GRC working method to ESG?
If you already have a systematic way of working for GRC today, we recommend that you also implement risks linked to the ESG framework in the same solution. The risks that arise in the ESG work are lifted into the other risk management work and taken on in the same way as other risks. With a digital tool, the implementation of ESG to GRC can be facilitated and the overall picture needed can be achieved.
With Stratsys' tools, you can gather all your risk work in one and the same solution.
Some benefits of Stratsys tools:
- Get an overall picture by being able to clearly link all the organisation's risks based on different perspectives.
- Contributes to collaboration within the organisation through a common platform.
- Prevents ESG work from falling outside other risk management in the organisation.
- Get support to meet legal requirements and keep ESG and GRC together.
- Work together from different functions of the business with clear division of responsibility for tasks.
Do you want to know more about ESG risks and how you can get a better handle on these? Read more about Stratsys' tools for Risk & Control and ESG.