Marsh Study Examines Benefits and Risks of ‘Sustainability’

June 16, 2010

A new report from Marsh notes that “as demand grows from consumers, investors and governments for businesses to become more sustainable, companies are beginning to change their strategy and planning.”

The white paper, Sustainability – Managing Your Risk, notes that while there can be a number of benefits to business, “both to reputation and the bottom line,” there are also “considerable risk implications.”

Marsh points out that “businesses today are increasingly judged by stakeholders not just on financial results but also on their impact on the environment and society. The cost savings it can bring are now becoming more apparent, as are the risks of not doing so.”

Dr. Cliff Warman, Leader of Marsh’s Environmental Practice in Europe, the Middle East and Africa (EMEA) explained: “Adopting a sustainability strategy needn’t involve turning a business upside down. It can take the form of small incremental changes to processes, such as trimming the use of a particular raw material, keeping a closer eye on energy and water consumption and reusing or recycling more. At heart it’s the application of good housekeeping principles.”

The paper recommends that companies develop a “robust sustainability strategy that includes identifying and managing risks arising from the needs for changing processes, such as environmental, supply chain, reputational and operational risks.

“They then need to implement sustainability projects which can address these risks and which in turn have been fully risk-assessed. Strategies can include the increased use of renewable energy and green technology, more efficient waste management and recycling, progressive reduction in water usage, and achieving more utility from natural resources.”

Marsh listed the following as the principle areas in the approach to sustainability:

Strategy – Assess the environmental risks/opportunities, determine the commerciality of existing products and services, define the key actions to improve the environmental performance and promote sustainability within the business.

— Resources – Identify the flow of resources including raw materials, water and energy through the business, define the process improvements needed to optimise resource use and minimise waste. Consider options for recycling unavoidable waste streams and highlight areas where waste from one process may become a resource for another.

Liability management – Estimate the scale of environmental liabilities in a comprehensive manner and identify options for managing environmental risks in order to prevent environmental damage and future requirements for remediation.

Governance – Develop environmental risk assessment and environmental risk management processes, define roles and responsibilities for key resources, develop systems to allow environmental information to flow through the business as necessary and agree requirements and forms for reporting of environmental information.

Dr. Warman added: “Governments worldwide have set ambitious environmental targets, backed up by legislation such as the European Union’s Environmental Liability Directive. Under this legislation, the penalties for causing environmental damage can be severe, both to company finances and reputation. Sustainability is no longer about social conscience; it makes good business sense. Many investors, customers and regulators are making their own decisions based on a firm’s commitment to sustainability.”

To obtain a copy of Sustainability – Managing Your Risks, go to: www.marshatairmic.com.

Source: Marsh

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