There’s no denying that environmental risk management is becoming a critical element of corporate sustainability strategies. The breadth of environmental risks related to business activity is broad.
With this in mind, companies are being called upon to not only minimise environmental impact from their operations but also manage emerging issues. Given the pressure, it is imperative for businesses to not only identify but manage environmental risks.
What is environmental risk management?
Environmental risk management refers to the identification, assessment, and prioritisation of environmental risks resulting from a company’s operations, services, or products.
This practice prevents and mitigates the impact of these risks through the implementation of new measures, compliance with environmental standards and regulations, and robust strategic planning.
Managing these risks is essential for any sustainable business as it not only helps them mitigate their environmental footprint but enhances their competitiveness and resilience.
What is an environmental risk assessment?
An environmental risk assessment enables businesses to assess the likelihood of their operations causing harm to the planet. This entails describing potential effects and hazards before taking precautions to minimise the risks. Some environmental risk management examples include areas such as emissions, hazardous substance storage, the environmental impact of raw materials and packaging, and waste storage and disposal.
Why is it important?
Managing the impacts of your business operations on the planet is both your legal and moral responsibility. Complying with legislation and demonstrating environmental responsibility is of the utmost importance when it comes to achieving compliance.
The various environmental regulations and legislation relevant to your business will be dependent on the industry you operate in and your business operations. For example, you may need to tackle areas such as water pollution or hazardous waste control.
Going above and beyond where compliance is concerned also gives companies a competitive advantage. Customers and clients alike want to support businesses that prioritise and care about sustainability. A survey from McKinsey & Co finds that 66 percent of respondents consider sustainability when making purchasing decisions.
Customers hold brands that tackle ESG issues in higher regard and are often willing to pay more for goods or services that have minimal impact on the planet. Companies that do not engage in effective environmental risk management could risk reputational damage.
They could lose loyalty and support from investors, stakeholders, customers, and the public. Moreover, this sort of reputational damage can take years to recover from. Environmental risk management also ties into health and safety, safeguarding your employees, customers, and members of the public.
Environmental risk management can also improve employee retention and have financial benefits through the likes of relief schemes and tax incentives. Beyond the above, prioritising it could potentially help businesses remain ahead of the curve and ensure they are meeting legal obligations and customer expectations.
Common challenges with environmental risk management
Implementing a successful environmental risk management strategy involves identifying risks, assessing them, creating a plan, monitoring progress, upskilling employees, setting objectives, communicating, and reviewing.
With this in mind, some of the most common challenges include communications issues, inadequate resources, uncertainty, regulatory complexity, short-term thinking, and the cost of implementation.
Conclusion – Taking action on environmental risks
There are two primary elements to successfully managing environmental risk. Firstly, companies need to understand what they are and how they affect the environment and their business. Once they have identified and quantified these risks, they can appropriately take action.
In terms of what action looks like concerning environmental risk management, it could be anything from altering a business strategy to operational changes and sustainability education. The bottom line is tackling environmental risks can help organisations boost their climate impact while also benefitting their business.
