What are the best ways for boards to manage social and environmental risks?

(i) define materiality of environmental and social risks from the perspective of clients, shareholders, workers and communities, (ii) ensure accountability and capacity in the senior management, (iii) develop effective strategies that focus on managing material risks and opportunities, (iv) maintain oversight of quality and transparent reporting.

The first and foremost step towards the ESG journey for an organization starts with identifying material parameters and defining the boundary for impact assessment. A thorough understanding of operations and interlinked sectors that organization directly or indirectly impacts is required. Data analysis, consultations with employees and external stakeholders and review of the operations helps in giving valuable insight in identification of material risks and their intensity.

Operational Risks: Risks associated with day-to-day operations, processes, and systems. Financial Risks: Risks related to financial management, market fluctuations, currency exchange, and investment decisions. Compliance Risks: Risks that can impact the achievement of strategic objectives and the overall success of the organization.

é muito comum que os Conselhos olhem para riscos que já est?o no espectro setorial ou que s?o bastante intrínsecos ao negócio. Também vemos boa vontade de parte dos conselheiros em ouvir consultorias e porta-vozes trazendo informa??es sobre expectativas dos stakeholders. Algo importante sobre a defini??o de riscos socioambientais é saber diferenciar uma perspectiva 'inside-out' da perspectiva 'outside-in'. Para isso, é preciso localizar os riscos e impactos de maneira precisa e específica, buscando referências diversificadas. O rigor técnico e científico para determinar um risco deve ser potencializado quando se agrega uma perspectiva qualitativa sobre a relevancia que os stakeholders atribuem aos impactos associados ao risco.

Establish Clear Governance Structures: Boards should establish clear governance structures to oversee social and environmental risks, including assigning responsibility to specific committees or board members (like cybersecurity). Integrate into Corporate Strategy: Social and environmental risks should be integrated into the organization's corporate strategy. Boards should ensure that sustainability goals and initiatives align with the company's overall mission, values, and long-term objectives. Risk Assessment and Management: Conduct regular risk assessments to identify and evaluate social and environmental risks facing the organization. Boards should work closely with management to develop strategies for mitigating these risks.

Effective risks Governance should start with Boards diving into social and environmental risks. First hand, not filtered through power point presentations. 3 easy steps to kick it off: 1) Visiting operating sites: to appreciate complexity and scale 2) talking with social parties: to understand their reasons and concerns 3) benchmarking and engaging with peers: because your failures are my learnings!

Integration is an important part to effectively manage the risks, when the board will make it integrated so performance will ultimately be improved, and it's a continual improvement.

Governance and decision-making should have more emphasis on environmental sustainability and address the climate issue, otherwise there will be no future for the business, for the boards, for us…

?? Les CA doivent intégrer proactivement les risques sociaux et environnementaux dans leur gouvernance, nécessitant une compréhension de ces risques et de leur impact potentiel. ?? Plut?t que de réagir aux problèmes, les CA devraient anticiper et atténuer ces risques, ce qui pourrait impliquer l’adoption de nouvelles technologies ou pratiques commerciales. ?? Les CA devraient également exploiter les opportunités découlant de ces risques. Par exemple, en adoptant des pratiques plus durables, une entreprise peut améliorer sa réputation et attirer de nouveaux clients. ??

A good example of environmental risk management is the case of Unilever’s Sustainable Living Plan. Unilever aimed to decouple its growth from environmental impact while increasing its positive social impact, leading to a significant reduction in CO2 emissions, water use, and waste.

La gestion des risques en matière sociale et environnementale nécessite pour une entreprise d'instaurer un dialogue permanent avec ses parties prenantes : les salariés, les clients, les fournisseurs, les sous-traitants ou encore les communautés locales. Concrètement, des actions peuvent être menées pour limiter les risques, par exemple la mise en place d'une charte d'achats responsables ou la sélection de fournisseurs labellisés. De manière générale, une cartographie des risques doit être réalisée chaque année au sein de l'entreprise. Concernant la méthode, il est essentiel que l'entreprise informe et consulte régulièrement les parties prenantes sur ses initiatives en matière de durabilité, en utilisant des canaux adaptés à chaque groupe.

Boards can effectively manage social and environmental risks by integrating ESG considerations into the company's overall strategy and ensuring robust risk management frameworks that include regular assessments and transparent reporting. Engaging with a broad range of stakeholders and adopting transparent reporting practices are essential for informed decision-making and enhancing stakeholder trust.

One of the best practices I've recently noted among companies that take social and environmental challenges seriously is the creation of sustainability boards. Two or three times a year, the executive committee of the company takes time to share their environmental and social challenges with a board of external experts, who are seen as critical friends. Their role is to challenge and question the decisions made by the executive committee on these topics. Having been a part of several sustainability boards, I can only highly recommend this experience

In my experience, the knowledge of the supply chain is a key factor to understand how to mitigate the social and environmental impacts risks. Define top priorities is also a key element in the ESG.

Los consejos de administración deben mantener una interacción activa con sus partes interesadas, comprendiendo sus preocupaciones y expectativas. Además, deben divulgar de manera transparente los riesgos sociales y ambientales, así como las acciones y resultados relacionados, utilizando estándares reconocidos en la divulgación de información como la GRI, el SASB o el TCFD. Esto garantiza una comunicación efectiva y fomenta la confianza entre la empresa y sus partes interesadas.

Considering ESG reporting as a balanced scorecard, that reflects an organizations’ progress towards environmental sustainability and the needs of its stakeholders can help boards, understand which areas are seeing the greatest success and which focus areas require additional work. This should be reviewed alongside the P&L during every board meeting.

Another hot spot topic. Board meetings must be organized to keep the key corporate reports at center as the board is legally responsible for the corporation's performance. Externall audits by 3rd party respected organizations are very useful for a specific non-corporate line of info.

O monitoramento um aspecto importante para a tomada de consciência dos riscos existentes e o nível que eles representam para a organiza??o e a sociedade. A intera??o com as partes interessadas é importante no monitoramento porque representam um olhar externo. Só é possível quando se tem indicadores que servem para a avalia??o.

No hay dudas de que las empresas y la dirección de las mismas hacen un claro seguimiento de los indicadores financieros de la organización. Ese esfuerzo debería ser idéntico con los KPIs sociales y ambientales. De poco sirve evaluar las cosas si luego no se va a hacer seguimiento de las mismas. En ese seguimiento, los resultados de auditorías y verificaciones de tercera parte pueden ser de gran ayuda, pero no se debe olvidar la labor de las consultoras que estamos ahí detrás de todo ese trabajo de seguimiento y evaluación y que, al ver la organización "desde fuera" podemos aportar enfoques diferentes y nuevos KPIs de interés.

é fundamental monitorar e revisar os riscos regularmente. A matriz de risco, embora inicialmente elaborada, deve ser atualizada conforme a corpora??o modifica metas e objetivos. Essa prática garante um gerenciamento dinamico, adaptado às mudan?as do ambiente empresarial, assegurando a eficácia contínua das estratégias de mitiga??o.

One of the biggest mistakes boards make is to think of their jobs as one of "sitting" on a board. Boards must shift to a "serving" on a board mentality. This in turn means being more proactive, more willing to devote time, attention and wisdom and a greater willingness to apply lessons learned. The times of sitting back and enjoying board service are over. We live in multi-crisis, multi-risk times where challenges and opportunities present themselves faster and more furiously than ever. What does that mean? It means that boards need to be packed with people who want to learn, want to apply lessons learned and who understand what they don't know and thereby continually self-appraise and rejuvenate for missing skills.

Transformer les risques sociaux et environnementaux en opportunités d'innover : c'est le défi qui concerne chaque entreprise. Comment faire ? Utiliser les enseignements tirés de l'analyse des risques pour développer de nouveaux produits, services ou modèles d'affaires qui répondent aux défis environnementaux et sociaux identifiés. Cela peut consister à opter pour l'éco-conception des produits ou pour un approvisionnement local. Pour trouver de nouvelles idées, il est conseillé de travailler en collaboration avec des partenaires : entreprises, acteurs de la recherche, associations. Ces partenariats offrent des compétences et des ressources en matière d'innovation sociale et environnementale. Coconstruire pour innover, telle est la clé !

Es crucial reconocer que la diversidad en el Consejo de Administración es fundamental en la gestión efectiva de los riesgos sociales y ambientales. Al lograr una variedad de perspectivas y experiencias, se logra una vista 360 de los aspectos asociados al riesgo y a la exposición. Esta diversidad promueve la capacidad de aprender e innovar, explorando una amplia gama de enfoques y soluciones. Asimismo, fomenta una cultura de aprendizaje continuo y adaptación, donde se valora la creatividad, la experimentación y la colaboración. Al integrar esta diversidad en la toma de decisiones, los consejos de administración pueden abordar de manera más efectiva los desafíos sociales y ambientales, creando valor para la empresa y sus grupos de interés.

Los consejos de administración deben aprender e innovar a partir de sus riesgos y oportunidades sociales y ambientales. Esto implica fomentar una cultura de aprendizaje y creatividad, donde se valoren tanto los éxitos como los fracasos. Deben buscar y aplicar nuevas soluciones, internas y externas, para abordar estos desafíos, compartiendo sus experiencias para inspirar a otros y generar un impacto positivo en la comunidad empresarial.

Pour innover véritablement, il est impératif de se libérer des modèles obsolètes qui entravent le progrès, en intégrant les limites planétaires et les normes sociales comme référence et objectif. Cela commence par : - Définir une vision d'avenir à long terme qui intègre les limites planétaires et les objectifs du modèle du Donut de Kate Raworth, visant à respecter à la fois les besoins humains essentiels et les limites écologiques de la planète selon les principes de la F.S.S.D. - Identifier les produits ou services néfastes à long terme afin de les questionner et les réinventer. - Développer l'imaginaire et encourager une pensée divergente - créer un nouveau écosystème qui partage les même objectifs

Pour diriger et plaider en faveur du changement social et environnemental, il faut commencer par définir des objectifs clairs et mesurables. Ces objectifs doivent être alignés avec la mission globale de l'entreprise et pleinement intégrés à sa stratégie d'affaires. Il également essentiel de mettre en place des indicateurs pour évaluer et mesurer les progrès réalisés d'une année sur l'autre. Véritable clé pour réussir : la RSE doit être intégrée à la culture de l'entreprise. Elle doit être portée par le dirigeant et son équipe, mais également par les managers et les collaborateurs. Pour cela, il est indispensable de communiquer, mobiliser autour d'évènements et mettre en place des salariés ambassadeurs de la politique RSE de l'entreprise.

What I found very helpful with the many companies I've worked with was to not only frame corporate sustainability as social and environmental risks, but as *business opportunities*. If it's just a risk, it's perceived as a burden, a barrier to business, not a window to grow and unlock potential. ??There's so much value in respecting and centring environmental and human rights within business models and operations (e.g. innovation, enhanced performance, reputation, competitiveness, justice). ?? Less sticks, more carrots

Boards need to solve for social and environmental risks, its not about 'managing', its about looking round the corners, proactively addressing what can be done within their remit/control and advocate and showcase how to 'address' and solve for equitable outcomes for the communities they work in, and their workforce practices, attitudes and culture they foster.

What I miss in this discourse is the question of ethics, responsibility, values. Of course it's not very sustainable to go bankrupt. So if you think that acting ethically will bankrupt your business, maybe you're better off without a moral compass. But is that really what we, collectively, want? And indeed there are many examples where a strong, visible investment in an ethical compass have strengthened rather than weakened the bottom line. As my new colleague, ChatGPT, writes: "By building trust with consumers and stakeholders, companies can create long-term sustainable growth while making a positive impact on society and the environment."

Recently while assisting a company to transition, a Board member said to me "How can I make decisions on environment and social aspects when I really do not understand them". There are two aspects to this comment. First related to a very real and common aspect where control is held tight at the top. Trust the people and management that you have employed, empower them to drive the company in ways that you could not imagine. Secondly, there is a real generational divide that is present in many Boards. Ensure that your Board is truly diverse. If environment and social aspects are material to your business and the Board does not reflect this in its composition/skills, then unfortunately the default may be to not stray from the historic path.

Ensuring that board members & senior management are well-informed about social & environmental issues is crucial. For a manufacturing company, we initiated a series of workshops & training sessions on global sustainability trends, regulatory changes & best practices in ESG, equipping decision-makers with the knowledge to navigate complex CSR challenges effectively Boards should employ scenario planning & stress testing to anticipate & mitigate potential social & environmental risks. In an energy sector project, we conducted scenario analyses to understand the potential impacts of climate change on operations and developed a resilience strategy that included diversification of energy sources and investments in renewable energy technologies.

I think the Chairman should first of all assess his board composition and ensure that everyone buys into the importance of ESG.

The AI answers fail to understand that the data needed on which to base strategy started with an understanding of what the environmental relationship is between the organization and context, such as where the organization is, where its suppliers are, its customers, etc. The data needs to be evolved into information, it needs to be discerned by knowledgeable people and the board needs to apply this with wisdom. Boards are there to devise strategy, not ‘strategic planning’. If you don’t understand the context, or if you start with not understanding the relationship between the organization and the environment, you cannot begin to design a successful strategy. I am not impressed by the AI bullet points.

The boards job is to ensure that sustainability strategy is the business strategy. When sustainability is integrated into the business strategy materiality, opportunities, markets, value chain of stakeholders all come into play as a whole and not just as a risk to be solved by one department. The board must make the effort to educate themselves periodically on trends and standards in ESG. The board must tie its own and the managements renumeration to the sustainability goals. They need to have a stake in it.

It is necessary to change the international accounting standards to influence decision making process, particulary make virtous taxes and social charges to consider them as non-financial data.