Module 4 Lesson 3 Overcoming Barriers PDF

Module 4 lesson 3 Overcoming Barriers ===================================== In this lesson we shall discuss strategies for addressing common challenges in integrating sustainability and ESG issues into risk assessments, in effect overcoming barriers to such assessments.. Introduction ============...

Module 4 lesson 3 Overcoming Barriers ===================================== In this lesson we shall discuss strategies for addressing common challenges in integrating sustainability and ESG issues into risk assessments, in effect overcoming barriers to such assessments.. Introduction ============ There is a range of barriers to the adoption of ESG and sustainability risk assessment and its integration to a risk management framework. These barriers come from internal and external factors. **Externally**, there is a **lack of standardisation** in ESG reporting leading to inconsistencies in data and metrics. **Reliable and comprehensive ESG** data can be hard to find, this makes risk assessment difficult and subject to inaccuracies. We have already seen that there is a range of **Regulations** and the expectation is that the **regulatory environment will undergo change** and evolution, this leads to confusion and misunderstanding leading to difficulty in the integration of risk assessment. **Internally** there may be **Cultural or Individual Resistance** to changes, perhaps viewing integration as a tick-box exercise rather than a driver of strategy. Also, a **Short-Term Focus** may lead to ignoring ESG and sustainability risks as short-term financial performance is chased. **Strategies to Overcome Barriers** In order to effectively integrate ESG and sustainability issues into risk assessments, the company should develop a coherent strategy. This will include developing a **robust ESG framework,** integrated to the company risk management framework in a standardised manner. Such a framework will ensure that the company defines **Clear Objectives** that the company aims to achieve, utilising **standardised metrics** such as those defined in GRI[^1^](#fn1){#fnref1.footnote-ref}, **Regularly Reviewing** these as regulation evolves. Gathering new data implies that a company may have to invest in **New Technology** perhaps engaging in the evolution of **analytics and new management software**. An alternative or additional approach will be to engage with **Consultants** to provide high quality data and information. These aspects imply that the Board will have to be aware of the importance of these new data and implement **Robust Data Governance Policies** to ensure accurate and sensible information being presented in the likes of double materiality reports. The company board will have the final responsibility to be aware and understand the **changing regulatory environment**, keeping up to date in all the regions where the company operates, participating in industry forums, and policy-making events. Ensuring that regulatory policies are flexible and will adapt as necessary. Considering **Cultural and Individual Barriers**, the responsibility of effectively addressing and managing belongs to the company board. In order to improve a sustainability culture, the company needs **Leadership**, **Employee Engagement** and **Incentives** matched to the ESG goals of the company, all under the watch of the Board of Directors. Lastly, these is the need for a strategy which balances **Short-Term and Long-Term Goals**. This can be achieved by aligning short-term actions with long-term sustainability. The tools available for this include: - **Integrated Reporting**: Combining financial and ESG reporting to provide a holistic view of the company's performance. - **Scenario Analysis**: Using scenario planning to understand the long-term impacts of ESG risks and opportunities. - **Stakeholder Engagement**: Regularly engaging with stakeholders to align business strategies with their expectations Conclusion ========== Integrating sustainability and ESG issues into risk assessments is essential for modern financial management. By addressing common challenges through robust frameworks, enhanced data management, regulatory navigation, cultural change, and balanced goal-setting, companies can not only mitigate risks but also seize new opportunities for sustainable growth. Some examples of good practice are shown in Appendix 1. Appendix 2 provides a checklist for planning for implantation. Assessment Question =================== Appendix ======== 1. **Summaries of approach undertaken by selected companies** **Name of entity** **Sector** **Area of good practice** **Link** --------------------- --------------- ----------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Telefonica Retail Integration, approach and communication [telefonica.com/en/communication-room/blog/double-materiality-its-importance-and-how-we-apply-it-at-telefonica/](https://www.telefonica.com/en/communication-room/blog/double-materiality-its-importance-and-how-we-apply-it-at-telefonica/) Unilever Retail Integration, approach and communication As promised, links to [Unilever approach](https://www.unilever.com/planet-and-society/sustainability-reporting-centre/our-material-sustainability-issues/). Instead of sending the pdf of the matrix, I\'ve sent the whole page on their website - more likely to be up to date.  If you scroll to the bottom you can access the matrix via their own links. Croda International Manufacturing Integration, approach and communication [Materiality assessment \| Croda](https://www.croda.com/en-gb/sustainability/our-approach/materiality-assessment) Breedon Manufacturing Communication [Our approach - Breedon (breedongroup.com)](https://www.breedongroup.com/sustainability/our-approach) Diageo Manufacturing Communication [Materiality \| ESG \| Diageo](https://www.diageo.com/en/esg/esg-governance-and-reporting-centre/materiality) Natwest Banking Integration, approach and communication [Our materiality assessment \| NatWest Group](https://www.natwestgroup.com/sustainability/our-purpose-in-action/our-materiality-assessment.html) Legal and General Insurance Integration, approach and communication [climate-report-final-high-res.pdf (legalandgeneral.com)](https://group.legalandgeneral.com/media/hf0ppmpl/climate-report-final-high-res.pdf) page 27 ISG Construction Impact materiality matrix Page 27 2. **Questions for Planning for implementation** - Does your current materiality process use a single or double materiality perspective? - Have you conducted a gap analysis against the materiality definition and requirements of the new framework - Does your materiality process identify time horizons for short, medium and long term risks, opportunities and impacts? - Have you identified the stakeholders that need to be involved in your materiality assessment to ensure all relevant perspectives are represented? 1. Have you made a plan for how and when to engage stakeholders and who is responsible? - Have you identified any changes you need to make to your materiality process to meet the new requirements (e.g. to implement a double materiality lens)?   - Have you aligned the impact materiality process with the financial materiality process to ensure the information is consistent? - Have you aligned your strategy and the content of your report with the results from the materiality assessment - Have you identified any capacity gaps for conducting your materiality assessment in line with the new requirements? 2. Do you have a plan to close the capacity gap ? eg upskilling staff, hiring consultants, changing the scope of consultant engagements etc. ::: {.section.footnotes} ------------------------------------------------------------------------ 1. ::: {#fn1} GRI - Global Reporting Initiative[↩](#fnref1){.footnote-back} ::: :::