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Today’s biggest business risk: Flying blind into chaos and disappearing markets

Peter Drucker, one of the greatest management thinkers of all time used to repeat, again and again, two basic things:

  1. “If you can’t measure it, you can’t improve it.”
  2. "The purpose of business is to create and keep a customer."

These are the fundamental drivers of ALL businesses, yet most businesses today are ignoring the realities of today’s world.

What do businesses need to measure?

Of course, businesses/organisations need to measure their profitability and ROI, FX risk, cash flows, etc., but many are not measuring (fully) the most important dimension in business today – the one that will determine whether their customers survive – is the impact of their operation on global warming. The world’s largest emitters – the oil companies, the energy companies are disgustingly poor:

  • Over 70% of them failed to disclose the effects of climate risk in 2020 financial statements
  • 80% of their auditors showed no evidence of assessing climate risk when reporting.

Not only this, many companies/organisations are not reporting fully (if at all) on their other ESG performances.

(Source: )

This is scary and irresponsible, but how does your company stack up? Do you really report on your full impact? Do you use meaningful metrics that investors and the regulators understand??

Managing the multi-dimensional complex ESG problem

There are a huge number of different dimensions to your company’s/organisation’s ESG impact, such as:

  • What ESG metrics to use?
  • How do you understand what is going on in wider impacts of your company, your markets?
  • How do you bring all of this together and understand your full impacts?

There are many different options that offer partial solutions for keeping up-to-date with ESG and understanding your impact, e.g. Amplyfi’s deep dark data, Business Intelligence 4.0 search engine offers amazing insights into what is going on – see.

One supplier, The Stakeholder Company, offers a much more ESG focused solution through Atium their Integrated Issue & Stakeholder Management Platform which uses AI, big data and statistical analysis to provide powerful Visual Insights that organisations manage complex business issues at scale, for example in their Narrative Tracking Framework which displays the issues and consequences, as shown below:

Source & Copyright©2021 - The Stakeholder Company

The ESG Playbook

From April 2020 to March 2021, McKinsey & Co., and organized a global listening tour over 25 countries, 75 companies and 98 ESG leaders, sustainability professionals, chief risk officers, chief sustainability officers and strategy heads. The mission — understand the key drivers, challenges and emerging themes within the ESG world. These ESG leaders sketched the outlines of a new ESG ‘Playbook’ for forward-looking companies. No one pretends to have all the answers, and this is a work in progress about the road ahead.

If you want to learn about how to manage your whole ESG programme, see here. (This book is an essential read for all corporate treasury departments.)

CTMfile take: ESG is a complex, multi-dimensional problem that needs huge resources and expertise and technology. The ESG Playbook and TSC would be a great start.

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