In this new normal, companies must evaluate the impact of issues around natural resources on their profits, growth potential, and relationships with suppliers, partners, customers and the local community. Issues around resources create risks but also bring many new opportunities in terms of the impetus for resource efficiency and the creation of new revenue streams.
The Risk Management Matrix
Businesses should be conducting thorough studies of their reliance on key raw materials and asking themselves questions such as:
- Are supplies of key materials from domestic or imported sources? Imported resources may be at risk, due to geopolitical issues, or protectionist policies from key supplying countries;
- How do global patterns of supply and demand impact on the business? Demand is global, so knowledge of international patterns of supply and demand, therefore, is crucial;
- Are supplies of key materials sustainable? Sustainability continues to be prominent on the agenda of governments and consumers alike. Businesses that do not consider sustainability of supplies risk supply shortages and also reputational damage;
- How do resource risks impact the supply chain? A business may act to protect the security of its supplies, but how well versed in risks are key suppliers? How would disruptions down the supply chain impact on the business?
- How will future market trends impact on the security of supplies and risk? For example, increased use of green technologies may necessitate a greater reliance on critical raw materials such as minor metals and rare earths;
- Is there a constant monitoring and evaluating process focused on the reliance of critical materials? And in doing so, have strategies been implemented to cope with supply disruptions?
- Are the supply risks of raw materials taken into account at all levels of the company, including product design?
In addition, business should also track the external environment in terms of regulation, consumer demands and reputational risk:
- How effective is the Corporate Social Responsibility policy? Is it embedded in everything the business does? And every organisation the business deals with?
- How might impending government legislation or voluntary initiatives (positively or negatively) affect the business?
- Is the business aligned with government strategy in the countries in which it operates?
- What is the business impact on the local communities in which it operates?
- What is the business impact on the environment at a local, national and global level?
- Is the business doing everything it can to mitigate its environmental footprint?
- Which resource-led issues are important to the business’ consumers and the wider public?
Native Alimentos’ Green Cane Project a Win-Win Scenario
The Native Alimentos Green Cane Project encompasses all aspects of sugarcane production, from soil preparation, planting and pest control to industrial processing. One of its major achievements was a mechanised method for harvesting green sugar cane in 1987 – previously sugarcane fields had been burnt prior to harvest. Achieving this meant collaborating with a manufacturer in the development of a raw sugarcane harvester. The project has successfully increased yields while at the same time restoring biodiversity, soil health and water resources. The project has proven that large-scale sustainable sugar production is both possible and profitable.
Sustainability: A Core Business Objective
In short, sustainability risk management is about making sustainability a core business objective fully aligned with profit targets. With the UN’s Sustainable Development Goals, which will rewrite the role of the private sector, this is becoming ever more crucial for any business.
SABMiller Aligns Strategy with the Sustainable Development Goals
SABMiller has instigated a sustainable development strategy, which it calls Prosper. This strategy, which incorporates five “shared imperatives” (a thriving world, a sociable world, a resilient world, a clean world, and a productive world), is aligned with 12 of the UN’s Sustainable Development Goals (SDGs). This allows the business to track its contribution to the SDGs. This is significant, as it enables SABMiller to be ahead of the curve in terms of future government legislation by aligning with government goals, and also to meet consumers’ demands. According to the PwC SDG Engagement Survey in 2015, 90% of citizens feel it is important for business to sign up to the SDGs.
One of SABMiller’s targets under Prosper is to reduce water consumption to 3 litres of water per litre of beer produced by 2020. This has been achieved in Europe, representing a 29% drop in water use since 2010, but globally work continues. So far, SABMiller has seen a reduction in water use of 23 billion litres per year – compared to 2008. In addition the brewer has implemented programmes aimed at improving water security for its breweries and the local communities, in which it operates. As well as supporting the environment, and boosting its CSR profile, the target brings with it cost-efficiencies in terms of reducing the energy required to heat water, as well as other savings involved in the reduction in water treatments.