Severity In ESG Risk Matrix 5x5

From my previous post about ESG Risk Matrix 5x5, the explanation about 'severity level' still considered too qualitatively common. Without a vast experience of ESG, it may be misinterpreted. The previous severity levels ESG matrix:

1. Negligible (1): Minor non-compliance with no significant impact on the environment, society, or governance practices.

2. Minor (2): Isolated incidents or non-compliance that have a limited impact and can be managed through normal operational procedures.

3. Moderate (3): Issues that result in noticeable non-compliance with ESG standards, leading to moderate adverse effects that require management attention.

4. Major (4): Significant non-compliance with ESG requirements causing serious environmental damage, social repercussions, or governance failures with potential legal and financial implications.

5. Catastrophic (5): Severe breaches of ESG practices leading to widespread environmental catastrophe, major social unrest, or governance breakdown, possibly incurring major financial losses and irreparable reputational damage.

To avoid misinterpretation, the more in-depth qualitative explanation for severity level in risk matrix is needed. Here is the more thorough explanation of Severity Level in ESG (specifically for environment aspect) that you can refer:

Severity Levels – ESG :

1. Negligible (1): Minor non-compliance with no significant impact on the environment, society, or governance practices.

Note:

?? - Decarbonization: No additional greenhouse gas (GHG) emissions beyond what is typically expected from a business-as-usual practice. The carbon footprint remains consistent with existing baselines, and no escalations in carbon intensity are observed.

?? - Environmental Footprint: Operations do not extend waste generation or resource usage beyond the approved limits. There are neither excess emissions nor discharges into the environment, and resource utilization remains within the sustainable capacity of the systems in place.

?? - Biodiversity: Activities refrain from disrupting local ecosystems. No significant habitat alteration or loss occurs, ensuring that the existing balance of species and ecological functions are maintained.

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2. Minor (2): Isolated incidents or non-compliance that have a limited impact and can be managed through normal operational procedures.

Note:

?? - Decarbonization: Emissions may rise slightly due to non-routine activities, but these increases are minimal and not a regular occurrence. The overall carbon strategy remains on track, with these minor deviations being promptly addressed through standard operational remedies.

?? - Environmental Footprint: There might be instances where waste water discharge levels momentarily and insignificantly exceed standard parameters, but such occurrences are brief and duly managed without causing harm to the surrounding environment.

?? - Biodiversity: Small-scale activities may necessitate limited land alteration, yet they avoid critical habitats or conservation areas, ensuring negligible disruption to the biodiversity integrity.

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3. Moderate (3): Issues that result in noticeable non-compliance with ESG standards, leading to moderate adverse effects that require management attention.

Note:

?? - Decarbonization: A noticeable increase in GHG emissions is recorded, perhaps due to new, yet continuous, operational activities or persisting irregular emissions. These are cause for concern and necessitate managerial interventions to align with ESG standards and commitments.

?? - Environmental Footprint: Waste discharges exceed permitted levels to a degree that necessitates regulatory engagement and potential modifications to permits. The problem is consistent overruns point to systemic issues that require thorough resolution plans to mitigate ongoing environmental impact.

?? - Biodiversity: Activities begin to shape the landscape, with measurable impacts on local flora and fauna. While not leading to widespread destruction, these activities result in a decrease of biodiversity index, hence calling for strategic conservation actions.

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4. Major (4): Significant non-compliance with ESG requirements causing serious environmental damage, social repercussions, or governance failures with potential legal and financial implications.

Note:

?? - Decarbonization: Activities lead to a substantial and sustained increase in emissions, flagrantly diverging from ESG targets and potentially triggering regulatory penalties or investor concerns due to the significant impact on climate change mitigation efforts.

?? - Environmental Footprint: Waste outputs significantly surpass regulatory limits, causing discernible environmental degradation and necessitating not just revised permits but also potentially comprehensive remediation efforts to address the contamination.

?? - Biodiversity: Extensive land use changes or exploitation practices precipitate a steep decline in biodiversity index, possibly leading to the eradication of certain species within the affected area and harming the ecosystem's resilience and function.

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5. Catastrophic (5): Severe breaches of ESG practices leading to widespread environmental catastrophe, major social unrest, or governance breakdown, possibly incurring major financial losses and irreparable reputational damage.

Note:

- Decarbonization: Activities leads to GHG emissions skyrocket, potentially doubling or tripling baseline levels due to uncontrolled or large-scale releases. This level of carbon output significantly contributes to climate change and exposes the entity to high-stakes legal and financial repercussions.

?? - Environmental Footprint: The release of pollutants far exceeds any permissible levels and the capacity of the environment to assimilate, leading to potentially irreversible damage. These incidents could prompt severe regulatory action and demand costly, long-term environmental recovery plans.

?? - Biodiversity: Sweeping land conversions or exploitative practices obliterate critical habitats, pushing the biodiversity index towards zero (or almost zero). The resulting ecological crisis could lead to species extinctions and breakdown of ecosystem services, incurring public outcry and long-lasting reputational damage.