Why ESG matters in the world of crisis management

Many of our clients are exploring the broader implications of environmental, social and governance (ESG) issues and sustainability on their risk management approaches. We have previously discussed how managing ESG risks is emerging as part and parcel of managing security risks, but there are also strong links between strong ESG performance and effective crisis management before, during and after a crisis.

By considering ESG alongside resilience, organisations can reduce the likelihood of a crisis arising, enhance the performance of their resilience structures when crises occur and ensure that crisis response and follow-up actions align within their broader sustainability vision.

Before

Integrating ESG principles into core business functions can first and foremost reduce the likelihood of crises occurring. We know that unaddressed or inappropriately managed ESG issues can grow into crisis events. Community grievances can escalate into violent protest, a worker welfare issue can spiral into a publicised scandal and localised pollution can spark environmental activism. Preventative identification and management of these issues can help reduce the likelihood of a crisis occurring in the first place.

Well-executed ESG frameworks often require and encourage long-term solutions that are proactive rather than reactive. This can make businesses less susceptible to rising tide crises in particular. It can also help organisations spread the cost of risk mitigation and crisis management over a period of time, instead of a costly, concentrated response effort. An example could be phased, long-term management of environmental impact; proactive, clear communication and relationship-building with affected communities; or the creation and implementation of a robust anti-bribery and corruption policy. Businesses with strong ESG performance are also less likely to be caught out by crises linked to scandal, reputational issues and changes in regulation – sustainable thinking can help futureproof organisations against such events.

During

Organisations that function more maturely during business as usual will also be more prepared when crises strike. Forward-thinking crisis managers use an ESG lens to help their organisation to understand the range of crisis scenarios they are likely to encounter, to strategise accordingly and to train business leaders and employees in line with that response strategy.

Further, strong management of ESG issues requires alignment and communication across organisations and teams that are used to working together to solve challenges – these relationships and skills are also core to effective incident and crisis management. For some organisations, strong relationships with the environment, community and workforce means that goodwill is established and assistance more readily available during crises. For instance, established goodwill with the local community can lead to better and faster local assistance during an incident.

Crisis preparedness needs an ESG perspective to ensure that when a response is activated, it does not counteract the organisation’s values and objectives: if underprepared, how an organisation operates under duress can be poorly considered and destructive to broader sustainability initiatives and responsible business practices.

After

Finally, as a business recovers following a crisis event, a post-incident review will help to clarify both the root causes behind the event and the effectiveness of the response. When done well, these types of reviews include a range of stakeholders and lead to learnings across the organisation; this should not be considered a narrow, crisis management-focused exercise. For those crises that are linked to or have ESG roots, a business should endeavour to learn lessons to both improve ESG performance and enhance future resilience.

By Sydney Gliserman, Associate Director at Control Risks