The European Forum for Risk and Insurance professionnals
Are you confident in your understanding of how to apply Enterprise Risk Management (ERM) to Environmental, Social & Governance (ESG)-related risks?
Back in October 2018, COSO together with the World Business Council for Sustainable Development (WBCSD) produced a guidance intended to help organisations to better understand the full spectrum of these risks in order to manage and disclose them effectively. If you were at our FERMA Seminar last year, you will remember that this was previewed there in Antwerp.
Rodney Irwin, Managing Director of WBCSD, ran a well-attended and well-received session on this topic at the Seminar – and we are excited that he is once again joining us to run a masterclass session at our Forum this year.
At this year’s session, risk managers will learn how they can integrate ESG risks – often referred to as sustainability and non-financial risks – into ERM as a true business methodology. Rodney will help attendees to understand what is meant by ESG, the gap in risk and sustainability disclosures and how to address this, and to be able to explain the need for an increased focus on ESG-related risks.
We caught up with Rodney at the Seminar to hear more about his views on non-financial reports.
Rodney, how do you think non-financial reports will be used most effectively by risk managers?
I think the rush to disclose and report information is a step too far. The risk management community can best serve the organisations they work for by using their unique skills to identify, prioritise and communicate internally environmental, social and governance risks to management, so that they can be managed before they need to be disclosed.
Whilst I appreciate that there is a lot happening around the world with respect to disclosure of sustainability information or ESG information, the real area of interest, and, I suppose the sweet spot, is getting this information into the hands of decision makers within the organisation, so that they can manage these issues.
Will there be any sanctions if the company doesn’t live up to what it says in its non-financial reporting? Is this a reputation risk?
Probably, possibly and maybe: there is no right answer to this. I think it depends on what the company is saying, to whom they are saying it and whether they can back up what they are saying or not. At a very simplistic level, disclosure in sustainability reports has not been subject to the required disclosure in legal documents like the annual report. Whether statements in the non-financial report, whose contents are not always subject to audit, would open the company to litigation or not is a moot point.
At the WBCSD, we believe that sustainability communication, particularly material ESG issues, needs to be at the highest levels within the organisation. They need to be subject to rigour, they need to be embedded into business culture and into the outcomes of strategy, and not something that is bolted on to the side. Therefore, if a company is really serious about sustainability, it should be embedded into its decision making, it should be disclosed in a manner that is palatable and receivable by the audience, and they should be able to confirm that what they are saying is to the best of their knowledge, true and fair.
When it comes to ESG, do you think that responsibility falls on the management from the top down?
Absolutely, within any organisation, the board, and here in Europe sometimes the supervisory board, has the responsibility for ensuring that the company is sufficiently well-managed and that investors and other stakeholders are informed in a reliable manner that is free from material misstatement. Therefore, the tone at the top is all important within this regard and oversight of ESG and risk management needs to be stronger and more aligned.
Hear more from Rodney at FERMA Forum
To gain valuable insight and understanding from Rodney himself, sign up for this year’s FERMA Forum and Rodney’s masterclass.
Find out more about Rodney’s masterclass on Applying ERM to ESG Risks here.
To catch up on our recent webinar on this topic with guest speakers Rodney Irwin from WBCSD and Paul Sobel from COSO, read our round-up.