The “E” Term

ESG risk assessment

By Astrid Wynne, non-executive director of Matterhorn

FIFA’s decision to award Qatar the World Cup was not without controversy.

There has been public criticism in the press and even from professional footballers over workers’, womens’ and LGBT rights. At the same time, the event has been held up by those advocating positive change as a way to hasten its arrival. Qatar is engaging with the rest of the world on a scale it has not done until now and is seeing the kind of positive effects outlined in a previous expert insight blog from an academic at the Social and Economy Survey Research Group.

For companies attending the World Cup, this represents an opportunity to support advocates for development and reform. We live in a time when companies need to show that their bottom line is supported by not just responsible but beneficial business practice. Investors, employees and stakeholders need to see that businesses generate a net positive for people, communities and the environment. Those that are able to execute this properly gain a competitive advantage over their competitors.

Conversely ESG risk is also increasingly important. It touches on almost other areas of business risk, including strategic risk (as it impacts on recruitment and partnerships), credit risk (investors are strongly attracted to triple bottom line economics), operational risk (the disruption caused by public protest), compliance risk (on carbon emissions and human rights) and, most obviously, reputational risk.

Delivering on this in familiar markets is difficult enough. When visiting new countries, the challenges are multiplied as teams struggle to execute codes of conduct through an unfamiliar supply chain in an unfamiliar social landscape. At a simple level, this affects carbon reporting, which is mandated in company reports in many countries. Organisations with a turnover as small as £36m in the UK need to report on transport emissions and energy usage year on year. They need accurate information on the types and engine sizes of vehicles used in business transport as part of this. Another example would be codes of conduct around labour, discrimination or governance issues.

Having on the ground partners can be helpful in this regard. Not only are they able to navigate language barriers, they are also able to form the types of relationships with local contractors to ensure accurate reporting. With an understanding of internal programs and processes relating to ESG and how these relate to Qatar, they are able to identify how these policies and frameworks can be implemented in the local supply chain. More than that, they are able to collate and interpret reliable local data to feed into management systems. Finally they are able to conduct audits in an effective and culturally sensitive way to ensure reliable results.

Those who work in ESG often talk about partnerships being the most reliable way of delivering successful outcomes. This is especially true when dealing with cultures that are very distinct from one another. It is important this is carried out in a sensitive as well as an effective way.

Share this post