Building Resiliency into Your Sustainability Strategy: Assessing Emerging Risks, Stakeholder Issues and Materiality

The Issue: The world is increasingly becoming a complex and volatile place.
This creates a high degree of uncertainty in corporate decision making when turbulent economic, social, and environmental conditions arise. Companies are increasingly getting better at assessing sustainability risks and materiality—as evidenced by the 2012 EXCEL Partner Reporting Reviews and interviews conducted for this Spotlight with Bombardier and Bell; however, the Financial Times recently released a study that suggests not enough companies are focusing on potential threats and emerging global risks because they are seemingly unrelated to their business. This quarter’s
EXCEL Spotlight is focusing on this theme of long-term emerging risks, stakeholder issues, and materiality. Sustainability practitioners/ teams may be best positioned to help steward in a process for identifying, assessing, and managing these emerging risks, due to the longer term, interdisciplinary, and performance driven approach of corporate sustainability strategy. Intelligent businesses of the future will have this resiliency built into their corporate strategies.
The Definition: Emerging Risks—newly developing or changing risks/opportunities which are difficult to quantify and which may have a major impact on an organization. Long-term emerging risks should been seen as ones with potentially material impacts paired with a high degree of uncertainty. Companies should investigate these risks because of the potential unanticipated major impacts they could cause to the business.
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The Framework:
Framework for identifying and managing emerging risks has been developed for this Spotlight (Figure 3). In addition, a questionnaire was created to help
EXCEL partners determine if they have the appropriate system in place to identify, assess, and manage long-term emerging risks, opportunities, and stakeholder issues (Figure 6).
Building Resiliency into Your Sustainability Strategy: Assessing Emerging Risks, Stakeholder Issues and Materiality

We currently live in a very turbulent economy, society, and ecosystem where one day a major hurricane (i.e. Sandy—$65 Billion) can disrupt global supply chains and business operations and the next, unanticipated protestors are shutting down major transportation corridors
(Idle No More Ambassador Bridge Shut Down—$176 Thousand for 2 hour, not including costs of delayed deliveries 2 ). While it can be difficult to anticipate these types of events—it is critical that businesses are prepared for them as best as possible or at a minimum they have a resilient system in place that has an adequate, proper, and timely response.
USA Today
Intelligent businesses of the future will have capacity to deal with emergent risks, opportunities, and stakeholder issues.
Many of the planning tools already exist to help support companies in their attempt to quantify and prepare for unanticipated risks (i.e. Enterprise Risk Management), but are sustainability practitioners adequately integrating them into their sustainability strategies to maximize successful outcomes?
In this, our first quarterly spotlight of 2013, we would like to investigate how companies are identifying/quantifying emerging risks and stakeholder issues that are constantly evolving. Furthermore, we would like to understand how this information is incorporated into materiality assessments in order to identify major short-term and long-term priorities. We will begin our spotlight with an assessment of how EXCEL partners currently assess materiality and any lessons learned gleaned from EXCEL Partner interviews.
Key Words: Key Questions:
1.
How do companies assess and quantify long-term emergent risks and stakeholder issues?
2.
How is uncertainty regarding these emergent risks and stakeholder issues dealt with?
3.
How is the assessment of emergent risks then integrated into materiality assessments and the overall sustainability and corporate strategy?
2
Rice, Doyle. USA Today. http://www.usatoday.com/story/weather/2013/01/24/global-disaster-report-sandy-drought/1862201/ Sourced: February 25th, 2013.
LaFleur, Steve. Huffington Post. http://www.huffingtonpost.ca/steve-lafleur/idlenomore_b_2497322.html
Sourced: February 25th, 2013.
Building Resiliency into Your Sustainability Strategy: Assessing Emerging Risks, Stakeholder Issues and Materiality

After having reviewed the CSR or Sustainability Reports from last year’s Reporting Review exercise, EXCEL partners that had undergone a materiality assessment and publicly disclosed this assessment in their reporting were identified. This was done to develop an understanding of how EXCEL partners assess and prioritize sustainability risks and test these risks with stakeholders. Specifically, a review was undertaken to find if risks/issues had been identified, assessed, stakeholder tested, integrated into the overall corporate risk management process (including enterprise risk), and prioritized as material issues.
Note, only companies publicly disclosing a materiality test were included.
It was found that the majority of EXCEL partners who disclosed a materiality test had identified their major issues/risks, and that many had a process in place to characterize and assess these risks. Many EXCEL partners had directly tested these issues/risks with stakeholders via working groups, review panels, and surveys while some used secondary research to understand stakeholder perspectives. Only a handful of EXCEL partners had discussed fully or partially how their risk testing had been considered in the overall corporate risk management process—including ERM. All companies had prioritized their material issues (explicitly or implicitly), which was used as a basis to help inform the sustainability strategy, KPIs, and public reporting.
The following is a summary of how EXCEL members assess materiality and publicly disclose the results.
Table 1: EXCEL Member Materiality Summary
EXCEL
Member
Issues/ Risks
Identified
Risks Assessed/
Quantified
Stakeholder
Tested/
Feedback
Integrated into
Corporate Risk
Management
Bell
Bentall Kennedy
Bombardier
Cenovus
DuPont
Enbridge
Encana
Holcim
Nexen
Suncor
Teck
TransAlta
Reported on partially or fully disclosed Not specified, no information
Material Issues
Prioritized
Building Resiliency into Your Sustainability Strategy: Assessing Emerging Risks, Stakeholder Issues and Materiality

To see a more fulsome description of EXCEL partner materiality testing, please see
Appendices A & B. Additionally, the issues/risks that EXCEL partners had identified was reviewed according to low, medium, and high corporate and stakeholder important, which generated a list of 58 major issues. The issues were then grouped based on similarities and the lowest impact issues were removed. A list of 13 key material issues faced by EXCEL partners was then created.
Based on the magnitude of impact/importance to the corporation and magnitude of impact/importance to stakeholders (where 1= low, 2=medium and
3=high), a radar map was generated to highlight what the major priorities are and where there were areas of convergence and divergence betweenthe corporation and stakeholders (Figure 1). There was only one issue (Air Emissions) where stakeholders placed greater importance than corporations regarding magnitude of impact. This may due, in part, to corporations having a good handle on non-GHG related air emissions such as NOx, SOX, and VOCs and a more stringent regulatory environment in which stakeholders are not fully aware of.
Figure 1: Corporate Vs. Stakeholder Importance Radar Map of EXCEL Partner Key Issues/Risks
Aboriginal Relations
Land Use Management
Biodiversity
Waste
Economic Benefits
Health & Safety
Employees
3
2
1
0
GHGs / Climate Change
Community
Development
Governance, Ethics,
Transparency
Water
Air Emissions
Human Rights
Company Importance
Stakeholder Importance
Building Resiliency into Your Sustainability Strategy: Assessing Emerging Risks, Stakeholder Issues and Materiality

In an effort to understand more deeply how EXCEL members are dealing with and integrating longer-term emergent risks, opportunities and stakeholder issues into their sustainability strategies, we interviewed Bombardier and Bell. The following is a summary of the interviews:
Bombardier has a long product development cycle (7-10 years) and by the nature of their business must consider longer-term risks in order to ensure that their current and future products are properly prepared for future regulations, resource constraints, geopolitical issues, and stakeholder concerns.
Bombardier has the following systems currently in place to identify longer-term emerging risks:
1.
Design for Environment
Business Unit (within Core
Engineering at early design
stage): An Environmental
Intelligence Quarterly has been created which summarizes emerging issues (compliance, geopolitical issues, trends) around the world and sent out to
500-600 employees. It serves as an early warning system. This initiative has been so successful that the Technology group has emulated the quarterly in order to identify emerging issues with regards to technology.
2.
Business Intelligence System:
This is a system which conducts an overall competitor analysis and key environmental (including some sustainability) issues identified are included within the
Environmental Intelligence
Quarterly.
3.
Supply Chain Team: This team conducts a geopolitical analysis to understand where potential hot spots exist within the supply chain to prepare for the possibility of disruptions and to anticipate pockets of activity and potential human rights issues.
4.
Enterprise Risk Management
(ERM): The ERM team looks more at traditional business risks, but has a close relationship with the Strategy team. The strategy team works closely with the Sustainability team and through them can bring up any major issues.
5.
Corporate Sustainability Group
and CSR Committee: Currently there are employees across the company which have a good ability to identify emerging risks. The
Sustainability team tries to bring together the different business units and individuals in order to get a more accurate picture of longer-term emergent risks.Web site. Microsoft Word offers a simple way to convert your newsletter to a Web publication.
So, when you’re finished writing your newsletter, convert it to a
Web site and post it.
Building Resiliency into Your Sustainability Strategy: Assessing Emerging Risks, Stakeholder Issues and Materiality

1.
Streamlined Process across Organization: Although there are processes and people throughout the organization to identify longer-term emerging risks, the process is not completely consistent and streamlined throughout the company.
This is something Bombardier would like to work towards.
2.
Putting Longer-Term Risk on the Rader: Sometimes getting the Senior Team to see an issue as a longer-term risk can be difficult. Robust information and data is critical in helping to build an argument and strong business case in order to educate (and re-educate) some of the Senior Team to ensure that it gets onto the radar.
3.
Current Emerging Risks on the Radar: Human rights within the downstream supply chain, conflict minerals, product responsibility/end-of life.
Bell proactively looks at emerging risks, opportunities, and stakeholder issues through a robust system that helps them to identify major risks, assess them, evaluate the importance to stakeholders, and then integrate them into the sustainability strategy where necessary.
Bell is an active participant in an Consultations: After the
4.
Sustainability Leadership
Team: This is a cross-
International ICT Business exercise conducted above, Bell functional team, led by the
Partnership. In 2006-2007 this then conducted external and
Corporate Responsibility team, that prompts Subject Matter group collaboratively identified a expanded internal consultations
Experts (SMEs) throughout the list of 42 actual and potential to further identify, assess, and organization, three times a emergent sustainability prioritize key issues of year, to identify from a issues/risks. Each of the participating companies had to importance to the company and to external stakeholders.
Business Unit or Portfolio perspective any major trends take this list and assess which ones were relevant for their 3.
2010 Issues/ Risks Reassessed or new emerging issues that are relevant to the business or
Bell relationships. business. Bell took these issues Via Consultation: Through and created internal focus groups to understand which ones were internet surveys and phone interviews this issue/risk scan important for the success of the company and which ones would be important to stakeholders. was conducted again to update
Bell’s priority issues from an internal and external stakeholder perspective.
Building Resiliency into Your Sustainability Strategy: Assessing Emerging Risks, Stakeholder Issues and Materiality

1.
Risk Advisory Group: If the Sustainability Leadership Team notices pressure building up in any of the 42 key issues/risks or others that have been identified, they provide a brief for the Risk Advisory Group. The Corporate Responsibility team and the Risk Advisory Group then conduct a joint assessment of the risk in order to determine financial, reputational and operational impacts using a risk matrix approach and differing scenarios. The Subject Matter Experts and applicable
Business Units are consulted to ensure accuracy. The joint evaluation with the Risk Advisory Group allows for an alignment with the Enterprise Risk Management framework (managed by the Risk Advisory Group), in order to ensure that there is proper uniformity and risk characterization within the evaluation criteria. The results of this evaluation is a
‘heat map’ which is presented to the Committee of Officers (Committee of Executive VPs) in order to keep track of the evolution of these risks. The Committee, in collaboration with relevant SMEs and Business Units, will then decide if
(sustainability) policies, strategy, processes, or programs need to be tweaked or improved and then the appropriate budget can be allocated to manage the issue/risk.
2.
Enterprise Risk Management: In parallel to the above process, the Risk Advisory Group assesses and reports to the Board the top business issues and risks to the corporation. One of the 5 categories of Bell’s risk universe is Governance and
Responsibility. Top risks identified through the above sustainability risk assessment are incorporated into the Enterprise
Risk Management report to the Board.
1.
Major Issues/Risks Haven’t Changed Substantially: Of the original list of 42 emergent issues/risks, Bell has noticed little change to the list, only minor differences in prioritization.
2.
Examples of Success:
► Conflict Minerals: Many years ago, conflict minerals came to the attention of Bell, it was monitored through the system described above. Last year when the SEC regulated financial reporting of conflict minerals Bell was prepared.
► Product Take Back: Through issue scanning, Bell realized that Extended Producer Responsibility for products would become very important for the ICT Sector. By working with sector peers and supporting various regional initiatives a national Product Take Back program was implemented, avoiding the need for regulation.
Current Emerging Risks on the Radar: Accessibility of products and services for people with disabilities.
Building Resiliency into Your Sustainability Strategy: Assessing Emerging Risks, Stakeholder Issues and Materiality

A recent study conducted by the Financial Times in 2010, of 650 international Corporate Executives with $1 Billion dollars in revenue or more, found that 62% of those companies surveyed rated their company as moderately effective or ineffective at integrating emerging risk information into business decision making. In addition the study found that:
► Few Companies Focusing on Emerging Risks: Less than 10% of respondents are focusing on potential threats that are seemingly unrelated to their businesses like climate change and pandemics.
► Board of Directors not Informed: Less than one-
► Strategy Groups not Connected Well to Risk
Groups: Half of strategic planning groups are infrequently informed of emerging risks and nearly one-third of respondents consider their third of executive committees and members of boards of directors receive information on emerging risks on an inconsistent basis. biggest challenge to be aligning risk data to strategies and operations.
► Inappropriate Resources to Manage Emerging
Risks: One-quarter believes their greatest difficulty is securing appropriate resources to manage emerging risks.
The study highlights that corporations may be inadequately prepared for emerging risks thus reducing the long-term resiliency of a corporation. The following section will attempt to characterize emerging risks, outline drivers for addressing these risks, identify some current global trends, and identify a framework to ensure that emerging risks are considered within the overall business and sustainability strategy.
The Definition: Newly developing or changing risks/opportunities which are difficult to quantify and which may have a major impact on an organisation; for example, Climate Change is a well understood long-term risk that fits this criteria.
Long-term emerging risks should been seen as ones with potentially high impacts and a high degree of uncertainty.
Companies should investigate these risks/opportunities because of the substantial potential impact on their business.
Although the focus of this section will be framed within the risk lexicon, we believe that risks and opportunities are interconnected. Examples of these types of risks can be characterized as follows:
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Multi-Stakeholder Impacts: Impacts affect not only the organization by multiple parties (peers, competitors, geographic regions, differing stakeholders, and/or sectors).
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High Degree of Uncertainty: Difficult to predict events beyond normal scenarios.
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Low Degree of Control: Difficult for any one party to control on their own.
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Large-Scale International Trends: Large-scale events with global trending and impacts.
3 Financial Times and Wynman, Oliver. 2010 . Global Emerging Risk Survey: Steering the Course, Seizing the Opportunity.
Sourced: March 18, 2013.
Building Resiliency into Your Sustainability Strategy: Assessing Emerging Risks, Stakeholder Issues and Materiality

Key Drivers: Key drivers of the changing risk landscape include new economic, technological, socio-political and environmental developments as well as the growing interdependencies between them which can lead to an increasing accumulation of risk. In addition, there is a changing business environment to consider: liability and regulatory regimes continue to evolve, stakeholder expectations are strengthening and risk perception shifting 4 . Companies should be considering these risks for the following reasons:
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Reduces uncertainty and financial costs of risk exposure;
 Shifts reactive approach to anticipatory approach;
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Translates high uncertainty into quantifiable measures;
 Increases competitive advantage;
 Translates risks into opportunities; and,
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Increases the overall resiliency of the organization in turbulent environmental, social, and economic times.
For the last seven years, the World Economic Forum (WEC) assesses global risks with a 10-year outlook. First a set of 50 high priority risks—divided into five categories: economic, environmental, geopolitical, societal and technological risks— are revised and identified through multi-stakeholder interviews and workshops. Then a larger group of experts (469 respondents) are survey to assess the likelihood and impact on a scale of 1-5. Respondents are also asked to identify which risk is the major risk within its category or as the WEC classifies it as a major, “Centre of Gravity.” For 2012 the 5 major risks are as follows (See Figure 2):
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Although these are macro level global risks, they can give indicators of major factors that could affect your business. In addition, the methodology used highlights important factors for helping your organization to assess risks directly related to your business; such as,
► Research: Conducting consistent research on major risk categories to your business—economic uncertainty, supply and value-chain issues, impending regulations, disruptive technology and technological security, resource constraints, and stakeholder concerns and issues—is critical to categorizing key risks and opportunities for your business.
► Stakeholder Consultation: Consistent engagement of key stakeholders is important to be able to assess the impact and likelihood of risks to your business. In addition, being engaged with key stakeholders can act as an early warning system should a major issue arise.
4 Swiss Re. Key Drivers for Identifying Major Risks. http://www.swissre.com/rethinking/emergingrisks/emerging_risks.html
Sourced: February 26th, 2013
Building Resiliency into Your Sustainability Strategy: Assessing Emerging Risks, Stakeholder Issues and Materiality

Figure 2: Global Risk Map 2012 5
As evidenced above, there may be a lack of discipline, integration, and rigor around the identification and management of emerging risks. If this is true, then it is important for companies to have a framework by which the can organize their efforts. The following framework (Figure 3) is based on the body of research conducted for this spotlight including current EXCEL efforts to manage emerging risks.
5 Building Resiliency into Your Sustainability Strategy: Assessing Emerging Risks, Stakeholder Issues and Materiality

Figure 3: A Framework for Identifying, Integrating and Managing Emerging Risk
1.
Identify Emerging Risks
Identification of emerging risks is the key first step in understanding how exposed your organization is to major global trends and uncertainties. The following is a systematic approach to ensure that risks are being identified and summarized regularly.
► Assign Responsibility and Accountability: There should be dedicated team across the organizations business functions tasked with the responsibility of regularly researching, identifying, and summarizing major emerging global trends and risks. Since issues of sustainability risk affect multiple business units within the organization, a cross-functional approach should be taken; however, the sustainability team in collaboration with the risk management group should be leading emerging risk identification and assessment efforts. If no such leading committee or group has this responsibility, one should be developed. Efforts should be made to align emerging risk identification and assessment with current risk management approaches in order to ensure that the evaluation criteria are robust and uniform.
► Conduct Research: There should be Subject Matter Experts throughout the organization that regularly conduct research into emerging global trends and risks. They should be characterizing and summarizing these risks and filter them into a leading team (as described above) which helps to collate and centralize the information gathered. There are many resources and organizations that already identify and characterize global trends and risks and they should be used in order to help increase efficiencies ( World Economic Forum-Risk Response Network, World Resource Institute, World
Business Council for Sustainable Development, United Nations Environment Programme ).
Building Resiliency into Your Sustainability Strategy: Assessing Emerging Risks, Stakeholder Issues and Materiality

► Consult External Subject Matter Experts: In addition, corporations should tap the intelligence of external Subject
Matter Experts to help identify and characterize global trends and emerging risks that are relevant to your business.
This could include regular consultations with industry associations, partner organizations (NGOs, Sector Councils), and consultants.
► Summarize Results and Report: The results should be summarized and regularly communicated across the organization and with the group responsible for assessing these risks.
2.
Assess Emerging Risks
Assessing emerging risks will be one of the most difficult tasks with regards to the overall framework. The reason this can be difficult is because there may be a high degree of uncertainty, many untested assumptions, and lack of information to adequately quantify the risks (i.e. risks associated with costs of natural and social capital, reputational risk, strategic risk, disruptive technology risk, etc.). The following is an approach to help with assessing emerging risks.
► Develop and Align Evaluation Criteria: Develop a set of evaluation criteria in order to help assess the emerging risks. It will be important to gather an understanding of how risk is currently being assessed throughout the organization and to ensure that there is uniformity across business units so that the assessment of emerging risks is consistent with other risk evaluation criteria, protocols, materiality testing, and management systems with the company.
► Evaluate Emerging Risks: There are already many sources of information and tools that could be useful in helping to assess and characterize emerging risks; such as, scenario planning, carbon and energy pricing scenarios, WRI’s Water Risk Framework, Life Cycle
Assessments , commodity pricing and hedging, insurance costs, policy assessments, compliance costs, etc. Where tools have not been already developed and for many intangible risks and costs
(i.e. natural capital) creative calculations and well researched assumptions will need to be created and applied (See Puma, Baxter, Canadian Tire ’s financial evaluation of sustainability).
3. Prioritize Emerging Risks:
After a consistent method of assessing emerging risks has been applied, a process for prioritizing risks will to need to be developed. This typically has an internal focus of weighing magnitude, relevance, and importance to the company and an external focus which tests how important key issues/risks are for stakeholders. WRI has also developed a
Sustainability SWOT Analysis ( sSWOT ), which uses a conventional business tool in order to help prioritize emerging sustainability risks.
► Integrate Prioritization with Current Materiality Assessments: Most sustainability teams have a good understanding of how to assess materiality due to the significant achievements and standardization of sustainability reporting. Materiality testing within sustainability strategy and reporting is increasingly becoming important to determine Key Performance Indicators.
This is evidenced by the upcoming changes to GRI G4 Guidelines in which
Building Resiliency into Your Sustainability Strategy: Assessing Emerging Risks, Stakeholder Issues and Materiality

materiality testing will become the basis for reporting parameters replacing the GRI levels A, B, and C 6 . This process aligns well with current sustainability materiality testing and if possible priority emerging risks should also be incorporated into this materiality testing. See Appendix B for examples of EXCEL Member materiality tests.
► Prioritize Emerging Risks Internally: This can be accomplished through various methods including scenario planning and consultation with internal Subject Matter Experts. The information collected above (magnitude of risk and degree of uncertainty) should be used to help prioritize these risks by using the assessment of importance to the corporation juxtaposed against importance to stakeholders.
► Test Priority Emerging Risks with Stakeholders: It is critical to keep a pulse on stakeholder attitudes, beliefs, and perspectives on your business. This can be a challenging endeavour, but an important one, as it helps to inform emerging risks and materiality. Engaging key stakeholders regularly and effectively can help turn conventional risk management (traditionally reactionary) into an early detection/warning system (anticipatory) for key emerging risks and stakeholder issues. If done properly it can help to increase the strategic intelligence and creative solutions brought into the organization via credible stakeholder partnerships 7 . Please see Figure 4 for a list of questions on how to determine new and emerging key stakeholder 8 . Where budgets are minimal, some companies use secondary research to gather stakeholder perspectives.
Figure 4: Key Questions in Determining New and Emerging Key Stakeholders:
6 CSR-Reporting. The GRI G4 Exposure Draft explained. http://csr-reporting.blogspot.ca/2012/07/gri-g4-exposure-draft-explained.html
. Sourced: February 2013.
7 EPA, Ceres. FRP Guide to Stakeholder Engagement. November 2007 . http://www.ceres.org/resources/reports/facility-reporting-project-guide-to-stakeholderengagement Sourced: February 2013.
8 Adapted from ISO 26000 and EPA
Building Resiliency into Your Sustainability Strategy: Assessing Emerging Risks, Stakeholder Issues and Materiality

4. Communicate Priority Key Risks
In a report issued by the Financial Times, it appears that many corporations still struggle with how to communicate emerging risk-related information effectively (See Figure 5). Once key emerging risks have been prioritized and stakeholder tested, it is critical to effectively communicate the results internally so that the appropriate decisions and strategic planning can take place throughout the entire organization. The format of the communication will depend on the risk analysis (i.e. 2x2 Corporate vs. Stakeholder Importance matrices, heat maps, scenario plans, and/or radar maps—see Appendix B); however, it is critical that key executives, committees, and business units are informed so risks can be managed effectively and within a reasonable timeframe.
Figure 5: Regular Recipients of Emerging Risk Information 9
9 Financial Times and Wynman, Oliver. 2010 . Global Emerging Risk Survey: Steering the Course, Seizing the Opportunity . Sourced: March 18, 2013.
Building Resiliency into Your Sustainability Strategy: Assessing Emerging Risks, Stakeholder Issues and Materiality

5.
Manage Emerging Risks
It is important that once an emerging risk becomes a priority that it is incorporated into strategic planning efforts so that it can be monitored and managed. Where possible, transferring an emerging risk into an opportunity can usually translate into competitive advantage. The following are some examples of how organizations manage emerging risks:
1.
2.
3.
4.
5.
6.
Monitor Emerging Risks
In order to fully integrate emerging risks into strategic planning it is important that a system of continuous improvement and monitoring is established. There are three things that should be monitored within this system:
1.
Identify New Emerging Risks: A system for escalating new emerging risks into the evaluation framework should be established throughout the organization, with the appropriate responsibilities and accountabilities assigned.
2.
Monitor Risk Profile of Priority
Emerging Risks: Of the emerging risks that have been identified, it will be important to establish KPIs that monitor how the risk is being managed.
Aligning risk measures with current KPIs ensures that information is more easily integrated into the operational and strategic decision making.
3.
Test for Corporate Resiliency:
Regular assessments of how resilient the organization is with regards to emerging risks should also be conducted. A good example of quantifying resiliency comes from The
Development Bank of Japan.
This bank became the first in the world to offer more advantageous borrowing terms to companies that took steps to increase their corporate resiliency. The bank screens 18 metrics on business continuity, preparedness and mitigation before deciding on loan premiums 10 .
10 World Economic Forum. Global Risks 2012, Seventh Edition. http://media.swissre.com/documents/Global-Risks-Report-2012.pdf
Sourced: February 28, 2013.
Building Resiliency into Your Sustainability Strategy: Assessing Emerging Risks, Stakeholder Issues and Materiality

The world we live in has become increasingly turbulent, volatile, and uncertain. Many companies are not adequately identifying, assessing and communicating long-term emerging risks internally and therefore these risks not being sophisticated in identifying shorter-term sustainability risks, opportunities, material issues and stakeholder concerns. Companies are looking at these risks through traditional financial risk frameworks; but it is very uncertain how risk due diligence undertaken in sustainability strategizing is considered in these traditional risk management frameworks.
Furthermore, sustainability strategy has become too short-term focused in order to demonstrate a high rate of return on investments and therefore be competitive with other business units.
There is a strong argument that long-term emerging risk and stakeholder planning is very compatible with the interdisciplinary and longer-term focus of sustainability planning. The opportunity is to leverage long-term sustainability planning (identifying emerging risks, stakeholder issues, and materiality assessments) in order to make your corporation more resilient
(anticipatory versus reactionary) towards turbulent economic, social, and environmental conditions. The key drivers for doing this include: reducing uncertainties and financial costs of risk exposure, increasing competitive advantage, translating risks into opportunities, and increasing the overall resiliency of your corporation in an era of high volatility.
The following are a set of key recommendations to help build capacity within your organizations in order to deal with the complexity and uncertainty of long-term emerging risks:
How resilient is your company?
Please see Figure 6 which provides a brief questionnaire to assess how resilient your corporation is with regards to emerging risks.
Building Resiliency into Your Sustainability Strategy: Assessing Emerging Risks, Stakeholder Issues and Materiality

Figure 6: Questionnaire
EXCEL Questionnaire: How Resilient is your Corporation?
Question:
1.
Do you have a process in place to identify emerging risks, opportunities, and stakeholder
2.
3.
4.
5.
6.
issues?
Is there a team, committee, or business unit in charge of identifying and assessing emerging risks?
Do you have a tools and/or evaluation criteria to assess emerging risks?
If you have evaluation criteria, are they aligned with other risk management approaches within the organization?
Is there a process in place to communicate the information across the organization?
Is emerging risk information then incorporated into the strategic and operational planning process?
7.
Does the emerging risk information/assessment provided allow for adequate business decision making?
E.g.
1 : a) Drivers of long-term value b)Variability in financial performance due to risk. c) Future impact on success of corporate strategies. d) How risk interacts under multiple future scenarios.
8.
Are the proper resources allocated to identifying, assessing, and managing emerging risks?
Yes No Notes:
Describe process(es):
Describe Teams and Roles:
Which Tools/ Criteria:
Describe Communication Platforms & Audiences:
1
Financial Times and Wynman, Oliver. 2010 . Global Emerging Risk Survey: Steering the Course, Seizing the Opportunity . Sourced: March 18, 2013.
Building Resiliency into Your Sustainability Strategy: Assessing Emerging Risks, Stakeholder Issues and Materiality

EXCEL Contact Details
The GLOBE
Foundation of Canada
World Trade Centre
Suite 578
999 Canada Place
Vancouver, British Columbia, V6C 3E1
Tel: (604) 695-5001
Fax: (604) 666-8123
Web: www.globe.ca
Email: info@globe.ca
EXCEL Secretariat: The Delphi Group
428 Gilmour Street
Ottawa, Ontario
Canada, K2P OR8
Tel: 613-562-2005
Building Resiliency into Your Sustainability Strategy: Assessing Emerging Risks, Stakeholder Issues and Materiality

EXCEL
Member
Issues / Risks
Identified
Risks Assessed /
Quantified
Stakeholder Tested /
Stakeholder
Feedback
Integration with
Enterprise Risk
Management
Priority
Material
Issues
Bell
Bentall
Kennedy
Bombardi er

Through
Participation in
Global e-
Sustainability
Initiative
(industry
/stakeholder group)

Interviews with global opinion leaders, academics, and clients used to understand material issues for reporting

Interviews with key senior management staff

Internal interviews with subject matter experts

Informed through stakeholder engagement process to identify issues of concern for stakeholder groups

Risks are assessed, but quantification is not specified.
Includes:

Trend analysis,

Benchmark studies,

Monitoring of
CR performance
 Stakeholder feedback

Not clearly specified

Part of the risk identification and risk assessment process

Part of risk identification process/
 Stakeholder feedback on reporting

Issues prioritized base on:

Stakeholder expectations and interests

Performance in a wider sustainability context

Economic, social and environmental impact around the world

Materiality topics and indicators that reflect our impact and influence on our stakeholders

Stakeholder engagement process helps identify key issues of importance

In 2012 formal stakeholder surveys will focus on CSR priorities to refine materiality matrix


Not specified
Comprehensive risk management includes strategic, operational, financial, social, environmental risks

Few specifics provided

Not specified


Not specified, although key issues can be inferred from identified risks and priorities

Risk assessment process leads to identified CR KPIs
CSR Reporting
Committee maps the results of the internal prioritization review onto a matrix of stakeholder importance v. impact on company over 3-5 years

Materiality matrix seems focused on reporting
Cenovus 
Research to identify key issues – stakeholder workshop to assessment was conducted as a workshop resulted in a reporting

DuPont
Encana
Holcim industry reports, reporting guidance

Support from external consultant

Environmental, economic, social, and governance

 issues included
Informed by risks and opportunity assessments at individual functions and business units
Industry issues
Enbridge 
Internal subject matter experts on the CSR
Expert
Reporting
Groups

Risk / materiality assessment conducted for
CSR Reporting purposes prioritize identified issues
 Evaluated based on stakeholder interest and business impact

Discussion based to determine priorities

Sustainability issues / trends prioritized based on impact to business success and importance to stakeholders
 stakeholder exercise
 Stakeholders prioritized issues according to both

Facilitated workshop by external consultant
Stakeholder feedback informs overall strategy and prioritization of issues

Specific details directly relating to materiality are not provided

Not directly specified, although risk assessment matrix is included as part of company’s
Sustainable
Growth Review process

Not specified
 materiality matrix: stakeholder interest v. business impact (low – high)
Not directly specified, although included in
Sustainable
Growth Review process
 Key issues align with Sustainable
Growth strategy

Input gathered through stakeholder engagement, including investor dialogue, stakeholder surveys and employee engagement
 Focused on
Reporting
 Corporate-wide
Business Risk
Management

Group
Company materiality reviews

External stakeholder interviews

Evaluated issues for stakeholder interest v. business impact
(low – high)

Took into account several factors in assessment, many of which are from GRI materiality guidance

Consider competitive strategy, stakeholder issues/concerns
, societal expectations

Environmental, social, and economic impacts

Details not specified
 Aggregate issues identified through the
BRM and Group company reviews

Evaluate based on business importance

Note

CSR Expert
Reporting Groups applied GRI recommended stakeholder tests to prioritized issues
 Outcomes of stakeholder engagement processes informed issues and assessment
 issues

Details directly

Stakeholder feedback informs the identification / prioritization of related to materiality not specified
External Review
Panel involved in materiality assessment
 External stakeholder interviews informs stakeholder views on issues


Not specified
Business Risks
Management is involved in materiality assessment



Assessment process resulted in materiality matrix for environment, social, and economic issues

Matrix used for
CSR reporting
Not specified, although outcomes of assessment process reflect issues reported in
CSR report
Prioritization process results in matrix of key issues and business importance (low to high)

Range of stakeholder views presented
Building Resiliency into Your Sustainability Strategy: Assessing Emerging Risks, Stakeholder Issues and Materiality

Nexen
Suncor
Teck

Informed from peer data,
 Industry initiatives,

Nexen employees,
 global sustainability trends,

Secondary stakeholder research

Led by external consultant
 Informed by:
Suncor’s objectives, programs and risk factors, media coverage, news releases, and internal newsletters of key issues

Ongoing stakeholder dialog
 Annual multistakeholder forum

Follow guidance from
GRI and
AccountAbility

Informed by review of policy, codes, standards

Financial and risk management documents

Peer company documents

Reports and research – including direct feedback – from communities of stakeholder and business perspectives on key issues

Issues prioritized based on gathered information, but specifics not provided

Considered recommendatio ns of 2011
Sustainability
Reporting
External
Advisory
Committee
 Cross functional team of Suncor employees conducted analysis

Evaluated issues based on
Suncor’s degree of control over each issues

Degree of impact

Level of concern of stakeholders

Prioritize issues according to importance to
Teck and to
COIs
 Assess issues based on ability to influence, control and manage;

Significance to business success, considering profitability and business continuity

Stakeholder views collected through research

External stakeholders not directly involved in materiality process
 Stakeholders informed

Not directly involved in materiality assessment

Stakeholders perspectives collected during issues identification
 External stakeholders not directly involved in materiality assessment process

Key stakeholder perspectives include
Communities and
Indigenous Peoples in areas of operation and employees

Not specified


Not specified
Not specified, although material issues drive sustainability strategy and focus areas



Final ‘heat map’ plots issues according to severity and impact and importance to our stakeholders
Materiality matrix geared toward reporting
Final materiality matrix prioritizing issues as concern for stakeholders and impact to
Suncor

Matrix used for
Sustainability
Reporting

Results in spider matrix of material issues

Prioritized issues as low-high importance for both Teck and COIs
Building Resiliency into Your Sustainability Strategy: Assessing Emerging Risks, Stakeholder Issues and Materiality

interest (COIs) and interest and investors
TransAlta 
Process for
Sustainability
Report Content:
 Interviews with employees and external stakeholder representatives

Sustainable development team’s internal review of emerging issues

External industry groups, task forces, and policy groups

Enterprise risk management process

Not specified

External stakeholder consultations inform issues

Details not provided

Enterprise wide risk management identified as important to identifying key issues
 Details not provided

Not directly specified, although can be inferred through
Sustainability
Report content
Building Resiliency into Your Sustainability Strategy: Assessing Emerging Risks, Stakeholder Issues and Materiality

Identified Challenges and Opportunities:
► Reputation
► Environment

Transportation

Increased transparency demands

Improvements to multi-residential properties

Water

Climate Change
► Tenants

Technology and demographics

Green Buildings
► Clients - engagement
► Suppliers and Contractors - engagement
► Communities – engagement
► Employees

Changing demographics

Diversity

Measurement and communication
Bentall Kennedy’s comprehensive risk-management approach focuses on strategic, operational, financial, social and environmental risks – each with its own risk-assessment framework. On an ongoing basis, senior management identifies risks within these frameworks as well as within Board committee processes and develops risk management and sustainability approaches.
Building Resiliency into Your Sustainability Strategy: Assessing Emerging Risks, Stakeholder Issues and Materiality

Most Material Issues:
 Climate change: As a responsible organization, we must work to preserve the environment and strive to mitigate our impact on climate change. We believe that industries can and must play a constructive role in establishing meaningful emission reduction targets.
 Global talent management: Demographic changes are creating talent management challenges. Corporations need well-defined human resources strategies to ensure their sustainable growth. Because our employees are our greatest strength, we began implementing several short- and long-term initiatives to improve workforce stability and ensure that we have sufficient skilled workers. Our new Global Talent Management Roadmap will enable us to better manage our talent challenges worldwide, which include attracting and retaining skilled employees.
 Health & Safety: The health and safety of employees is a top priority and a constant concern.
 Labour practices: Corporations must uphold the highest standards of labour practices including freedom of association, elimination of all forms of forced and compulsory labour, abolition of child labour and elimination of discrimination in terms of employment and occupation.

Product safety: The quality and safety of our products is a prime concern for all users. A perceived lack of safety can have a disastrous impact on our business.

Supply chain: Responsible supply chain management ensures our long-term sustainability and helps improve business practices within our broader sphere of influence as well as reduce our reputational risk.
Building Resiliency into Your Sustainability Strategy: Assessing Emerging Risks, Stakeholder Issues and Materiality

Building Resiliency into Your Sustainability Strategy: Assessing Emerging Risks, Stakeholder Issues and Materiality

As part of the 2012 Sustainable Growth Review process we used a materiality analysis framework as a way to rank and prioritize sustainability trends for each business. Criteria that were used in our Sustainable Growth Review process to rank and prioritize the sustainability trends in relation to each other included: impact to business success (profitability, product acceptance, market demand, right to operate, ability to implement business strategy) and importance to stakeholders
(employees, customers, community, shareholders, NGOs, government).
Stakeholder Engagement Activities
► Global employee surveys
► Community Advisory Panels or interaction processes in place for almost every DuPont plant site around the world
► Biotechnology Advisory Panel
► Health Advisory Board
► Partnerships on global climate change with the World Resources Institute, Environmental
► Defense, The Pew Center for Global Climate Change and the Keystone Center
► Partnership on nanotechnology with the Environmental Defense
► Partnerships and collaborations with key science and technology organizations, institutions, and individuals to enhance societal value
► Ongoing discussions with the investment community, including the annual Investment
► Community meeting and DuPont Business Review Teleconference Series
The development of Sustainable Growth goals were guided by the DuPont sustainable growth mission, key interests expressed by stakeholders, relevant regulatory requirements, and concerns expressed by society
Building Resiliency into Your Sustainability Strategy: Assessing Emerging Risks, Stakeholder Issues and Materiality

Enbridge Economic Materiality Matrix
Building Resiliency into Your Sustainability Strategy: Assessing Emerging Risks, Stakeholder Issues and Materiality

Enbridge Environmental Materiality Matrix
Building Resiliency into Your Sustainability Strategy: Assessing Emerging Risks, Stakeholder Issues and Materiality

Enbridge Social Materiality Matrix
Building Resiliency into Your Sustainability Strategy: Assessing Emerging Risks, Stakeholder Issues and Materiality

Building Resiliency into Your Sustainability Strategy: Assessing Emerging Risks, Stakeholder Issues and Materiality

Building Resiliency into Your Sustainability Strategy: Assessing Emerging Risks, Stakeholder Issues and Materiality

Building Resiliency into Your Sustainability Strategy: Assessing Emerging Risks, Stakeholder Issues and Materiality

Building Resiliency into Your Sustainability Strategy: Assessing Emerging Risks, Stakeholder Issues and Materiality

Building Resiliency into Your Sustainability Strategy: Assessing Emerging Risks, Stakeholder Issues and Materiality