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Home Knowledge hub Blogs What are macro sustainability risks?

What are macro sustainability risks?

Particular characteristics of risks derived from macro sustainability trends are that they are:

  • Difficult to define and the extent and time horizon of their impact is often uncertain
  • Interconnected, affect your business on many levels and affect multiple decisions
  • Outside your organisation’s control
  • Heavily influenced by actions by other parties that may not be assigned risk ownership
  • Difficult to predict as historical precedence may not be a reliable indicator of future trends
  • Require broad stakeholder input to identify the impacts effectively

These trends may impact a range of business decisions; from strategy, capital investment appraisal, mergers and acquisitions to new product and market development. Due to the nature of these risks, it can be challenging for many organisations to integrate them effectively.

How can organizations respond to risk?

For your organizations to respond effectively, consideration should be given to:

  • Managing uncertainty around how these global trends will manifest into multiple future scenarios
  • Looking beyond short time horizons to longer term impacts
  • Understanding risks and emerging issues across the entire value chain
  • Collaborating to identify, assess and address the implications of macro sustainability risk

Six tips to enable integration: 

  1. Adapt traditional risk management processes, rather than seeking to develop new, or parallel approaches. Consider risks arising from macro sustainability trends alongside ‘traditional’ financial risks as part of a holistic framework
  2. Bridge the knowledge gap by providing management with insight into key risks associated with macro sustainability trends
  3. Articulate the business case and commercial rationale for by highlighting the value at risk from inaction and associated costs e.g. rising insurance premiums and costs of supply chain disruption
  4. Adopt a longer term focus and plan for multiple possible outcomes and scenarios to accommodate the uncertainty associated with these impacts
  5. Source reliable data and contribute to the development of more robust information and commonly agreed approaches for addressing this uncertainty
  6. Collaborate with key internal and external stakeholders to ensure broad input and more informed decision making

You can download the A4S Essential Guide to Managing Future Uncertainty >
 

Accounting for Sustainability is a Charitable Incorporated Organization, registered charity number 1195467. Accounting for Sustainability is part of the King Charles III Charitable Fund Group of Charities.
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