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3 Business Resolutions that Reduce Risk Exposure

Posted on 12-21-2018 by Lisa Thompson

 January may be hot or cold, rainy or snowy—it just depends on where you live. But whether you sport a windbreaker or a parka when you head back to work after the holiday season, January is the same everywhere when it comes to making resolutions. It marks a new year and a clean slate—which got us thinking. Why shouldn’t companies take part in this fine goal-setting tradition—especially if the goals can have a positive impact on the world AND mitigate reputational, regulatory, financial and strategic risk at the same time? That’s where programs aligned to Corporate Social Responsibility (CSR) or Environmental, Social and Governance (ESG) standards come in. 

The rise of CSR

Corporate social responsibility isn’t new. Well-known for its grassroots initiatives, iconic ice cream label Ben & Jerry’s commits nearly $2 million a year to fund initiatives designed to uplift communities, push social change or support environmental sustainability. Google met its 100 percent renewable energy target in 2017 and continues to provide grants for social impact initiatives. Unilever, which counts Dove and Lipton among its many brands, has consistently achieved a high ranking on the Dow Jones Sustainability Index since it was launched in 1999.

What’s different now? Sustainable Brands highlights the CSR opportunity that Unilever seized, and other companies are beginning to recognize, noting “Brands could become, in fact, an aspirational force for social good and address some of the world’s most pressing economic, social and environmental problems.” And evidence suggests that such CSR and ESG commitments can attract prospective employees, consumers and investors. “The bottom line for businesses large and small is that you get a competitive advantage regarding sales and talent recruitment by not only claiming that you support positive social outcomes but also by walking the walk and demonstrating it,” writes Wayne Elsey in Forbes

  • 63 percent of American consumers want businesses to take the lead on social and environmental change
  • 92 percent of Gen-Z’ers and 76 percent of Millennials say a company’s CSR engagement influences their decision to work for that organization.
  • Sustainable investment has climbed 38 percent since 2016 and now amounts to $1-in-$4 of total U.S. assets—$12 trillion total
One catalyst for the rise in sustainable investment may have been the “The Commonsense Corporate Governance Principles.” The 2016 letter—signed by Warren Buffett, Larry Fink, and some of the other largest institutional investors in the world—set forth a new standard of management valuing long-term sustainability over short-term financial gains and stated:

“More than 90 million Americans own our public companies through their investments in mutual funds, and millions more do so through their participation in corporate, public and union pension plans. These owners include veterans, retirees, teachers, nurses, firemen, and city, state and federal workers. We owe it to all of them – and to all our shareholders and investors who have entrusted us with their savings – to get this right.”

How resolutions can make a difference

When you stick with them, New Year’s Resolutions can have a profound impact. By committing to CSR and/or ESG, companies can realize risk management advantages too. Globalization has made it possible for procurement professionals to build a cost-effective supply chain but has decreased visibility into the many links across that chain. The result is increased risk exposure. By auditing supply chains based on CSR or ESG standards, companies can improve visibility into emerging risks and proactively manage those risks.

Along with the regulatory, financial and strategic risks associated with poor performance when it comes to the environment or social justice, the reputational damage that arises from media scandals can exact a heavy toll on companies. Plus, investors and consumers can weigh in with class-action lawsuits that seek to recoup losses when a company gets caught up in an FCPA investigation or forced labor is uncovered in the supply chain.

What three resolutions should you start with?

  1. Develop CSR and ESG initiatives to support your local community for immediate impact and U.N. Sustainable Development Goals for long-term impact. With 17 SDGs to choose from, you are sure to find goals that align with your organization’s own.
  2. Put words into action. A public CSR agenda may set the tone, but the proof, so to speak, is in the pudding. Everyone in your organization—from the top, down—needs to actively engage in moving the company forward with the commitment. For the procurement team, this could be realized through enhanced due diligence and ongoing risk monitoring to ensure that the suppliers and third parties your company relies on adhere to ethical standards.
  3. Join others on the CSR/ESG journey. Benchmarking with others in your industry—and outside of it—makes it easier to identify best practices. Collaboration also makes goals easier to achieve. (Just like having a friend or spouse on board for your “healthier choices” resolutions can help you stay on track.)
Welcome to 2019. A clean slate. A new page. A fresh start. And with real commitment to CSR and ESG, a chance to make sure that 2019 yields a positive impact for future generations. Happy New Year!

Next Steps:

  1. Access the 2019 Business Resolutions resource kit today!
  2. See how Lexis Diligence® and LexisNexis® Entity Insight work together to provide a more complete view of risk.
  3. Share this article with your friends and colleagues on LinkedIn to continue the conversation.

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