While social and governance mandates can vary by region, identifying challenges, mitigating risks and tracking progress for environmental issues is a common need for all customers. A lack of focus, and unchecked processes or protocols, can spawn unwanted risks and consequences. Primary risks associated with low ESG visibility and standards include:
Loss of Social License to Operate
A social license, though not formal, is granted by a community (network of stakeholders), and is based on factors such as legitimacy, trust and consent. The status of a social license can be difficult to measure, but it becomes quickly, and often painfully, obvious when it is lost. Failure to maintain a social license can happen for myriad reasons: failure to ensure a safe working environment; failure to maintain operating within governmental environmental regulations; failure to observe or honor individual rights and liberties; and other.
Negative Events
Negative events can manifest in a variety of ways. Each exerts a unique impact on company operations and finances. Lack of planning for ESG programs or poor visibility into operational procedures relating to ESG standards can lead to:
- Environmental and regulatory fines
- Missed production targets
- Shutdowns or loss of production
- Injury and/or loss of life