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Failure to Manage Natural Resources Puts Businesses at Critical Risk, According to New Allianz ReportNatural resources are vital for businesses - and at the same time massively at risk across many industry sectors. Failure to manage the earth's natural resources or "natural capital" has consequences that extend beyond direct effects on the environment. For businesses, it can bring new interruption and liability scenarios that wipe out profits as resource scarcity, regulatory action and pressure from communities and society grows. Allianz Global Corporate & Specialty (AGCS) presents these findings in its latest report Measuring And Managing Environmental Exposure: A Business Sector Analysis of Natural Capital Risk. This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20180612005260/en/ Oil & gas, mining, food & beverage and transportation sectors are in the Danger Zone, ranking highest in risk exposure based on these five factors (Graphic: Business Wire) "Companies around the world are increasingly confronted with the negative implications of natural capital depletion," says Chris Bonnet, Manager, Environmental, Social and Governance (ESG) Business Services, AGCS. "Sustainable use of natural resources is critical for the future success of most businesses. Yet while corporate awareness of their natural capital footprint is growing, many still need to gain a better understanding of the specific threats that can impact their industry sector and company in particular, as well as the mitigation options available." NATURAL CAPITAL RISK ANALYSIS BY INDUSTRY SECTOR Danger Zone AGCS analyzed data on 2,500 companies from research provider MSCI ESG Research in order to assess the natural capital risk exposure in 12 industries. The oil & gas, mining, food & beverage as well as the transportation sectors rank highest in risk exposure, based on five factors - biodiversity, greenhouse gas (GHG) and non-GHG emissions, water and waste. All are in the "danger zone," of natural capital risks as these risks are, on average, greater than the mitigation options currently employed.
THREE PHASES OF NATURAL CAPITAL RISK According to the report, natural capital risks evolve through three phases before impacting the bottom line of a business:
"The key question is how risks can be mitigated as early as possible - both on a technical operational level and in regard to overall enterprise risk management (ERM)," explains Bonnet. "Local water scarcity, for example, can be addressed by rainwater harvesting in day-to-day management or, on a more strategic level, by deciding not to expand an existing plant due to risk of water shortages." MANAGING NATURAL CAPITAL RISK A significant number of companies have begun to address natural capital risk in their ERM. Factoring natural capital costs into business decision-making can also help companies anticipate potential threats. For example, when opening a new factory, factors such as future water availability and the administration of emerging emissions should be considered. However, balancing risk management focused on today coupled with the management of emerging risks is challenging. Future and non-financial risks can easily be overlooked as companies focus on short-term targets. It can be difficult to measure, quantify and monetize these risks. Yet in the future it is expected that companies will have to actively disclose their natural capital risk exposure to governmental agencies and investors as standards evolve. "With threats to the environment coming from many different areas, there will be no such thing as business as usual in the future," says Bonnet. "Companies need to understand, quantify and even monetize their dependence on natural capital and the impacts their operations have on it to ensure their organizations are resilient and future-proof." About Allianz Global Corporate & Specialty Allianz Global Corporate & Specialty (AGCS) is the Allianz Group's dedicated carrier for corporate and specialty insurance business. AGCS provides insurance and risk consultancy across the whole spectrum of specialty, alternative risk transfer and corporate business: Marine, Aviation (incl. Space), Energy, Engineering, Entertainment, Financial Lines (incl. D&O), Liability, Mid-Corporate and Property insurance (incl. International Insurance Programs). Worldwide, AGCS operates with its own teams in 34 countries and through the Allianz Group network and partners in over 210 countries and territories, employing almost 4,700 people of 70 nationalities. AGCS provides insurance solutions to more than three quarters of the Fortune Global 500 companies, writing a total of €7.4 billion gross premium worldwide in 2017. AGCS SE is rated AA by Standard & Poor's and A+ by A.M. Best. For more information please visit www.agcs.allianz.com or follow us on Twitter (News - Alert) @AGCS_Insurance, LinkedIn and Google+. Cautionary Note Regarding Forward-Looking Statements 1 MSCI ESG Research Industry Report: Non-precious metals, mining and steel, March 2017 2 MSCI ESG Research Industry Report: Road and rail transport, May 2017 3 MSCI ESG Research Industry Report: Food products, February 2017 View source version on businesswire.com: https://www.businesswire.com/news/home/20180612005260/en/ |