COSO and the World Business Council for Sustainable Development (WBCSD) are partnering to develop guidance for applying COSO’s 2017 Enterprise Risk Management: Integrating with Strategy and Performance to manage Environmental, Social and Governance (ESG)-related risks.
ESG-related risks are becoming more widespread. From small startups to large multinationals, companies have experienced instances of product safety recalls, worker fatalities, child labor, forced labor, polluting spills and weather-related supply-chain disruptions. Failure to manage these emerging risks proactively has translated into extensive financial and reputational harm – in some cases to the point of no recovery. For some companies, failure to take advantage of opportunities arising from the changing risk landscape has resulted in lost revenue or even obsolescence
As a result of these realities, expectations of key stakeholders are increasing for management to ensure they have processes in place for identifying, assessing and managing these complex entity-level risks and opportunities. As organizations continue to evolve their ERM processes, ensuring that those processes focus on ESG risks is an important step to integrating ESG-related risks into ERM enables organizations to realize long-term value.”
The supplemental draft Guidance is designed to help organizations worldwide respond to the increasing prevalence and severity of ESG-related risks, ranging from extreme weather events to product safety recalls. The guidance includes insights about identifying and assessing the severity of ESG risks and examples of methods to overcome ESG-related risk challenges. The proposed guidance also includes suggested responses for addressing ESG risks. While the comment period ends June 30, 2018, details about the project will be updated on COSO’s website. Read more.
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