- July 14, 2019
- Posted by: fedefiore
- Category: Blog
Last week, I have been asked a tough question, from a prospect to whom I was suggesting to adopt the Embedded Sustainability Index® as the tool to drive her Company’s Sustainability Effort.
“We have already run a Risk assessment and we manage Risk through our Management Systems. What does your approach add to what we have already in place?”
At first glance this could sound as the tough question that is the nightmare of any salesperson: “We already have something that is the same as what you offer, thus why should we buy your service?” It’s the ultimate chance-killer for the salesman, indeed. And yet…
Although a very few Companies using an integration of ISO 31000:2018 and COSO ERM:2017 achieve a threat-opportunity management that can be somehow satisfactory, the majority of businesses that have a Risk Management in place (still too few, BTW) are fundamentally concentrated on the threat side, i.e. the downside of risk and the prevention of the negative effects of uncertainty on the Company’s capacity to achieve its objectives. This kind of approach is strictly defensive, aiming substantially to defuse potentially damaging circumstances and situations.
The fact is, this is half useless in a Sustainability perspective. At least if we stick to the definition of Sustainability as “the capacity of an organization to manage transparently its responsibilities for environmental stewardship, shared Value generation and social well being in the long term while being held accountable to its stakeholders”. As for me, I learned this definition from Bob Pojasek at Harvard years ago, and I still find it the best.
In today’s world the “opportunity seeking” and exploiting is crucial to the resilience of an organization. That’s why Sustainability is inescapable for businesses wanting to stay on the market in the future. Spotting trends, using creativity, information and knowledge to transform threats into opportunities, making the most of the human potential within the organization to invent new ways to deal with the pressure from climate change, stakeholders value-motivated activism, increasingly strict legislation is something that no defensive attitude will ever deliver. The risks associated with such factors are too often too intangible to be intercepted by a simple threat-oriented Risk Management, traditionally run.
Performance Frameworks, fundamentally based on Leading Indicators, are much better equipped for the kind of strategic challenge that Sustainability poses. Moreover, embedding Sustainability in every process of a Company, which is a necessity if you want to reap all the benefit of this paradigm, is really insufficiently when done by the sole focus on Threats, or the downside of risk.
Therefore what we have done in developing the Embedded Sustainability Index® is to give a structure to the strategic approach to the “opportunity watchout” that a visionary leadership pursuing Sustainability must continuously perform. In the Index® there are both the Risk assessment and threat minimization and the opportunity seeking and maximization. The focus, and the ultimate objective of the Index is to give to the leadership of an organization the best strategic insight and perspective to steer the Company successfully towards a sustainable future. The unique mix of snapshot-taking of the current risk portfolio of an organization and measurement by Leading Indicators of its decision making and leadership processes gives crystal clear indications about what is to be improved and by exploiting what opportunities this can be achieved.
Thus, finally, the answer to the prospect was not so difficult to give. It could also be countered by a question in the prospect’s direction: “Do you want to continue to defend yourself from the future coming in your face, or are you ready to be proactive and equip your organization with what is needed to seize the opportunity of a more prosperous future?” I’ve given her some days to think about this “tough question” but, again, the answer should be quite easy…