Living in the time of global covid-19 crisis, one cannot continue to deny that our failure to act responsibly to nature which is in crisis, is indeed failing humanity. Do you know that around 60% of all infectious diseases in humans are zoonotic, from animals to human, as are 75% of all emerging infectious diseases? According to an article from UNEP, Zoonoses reemerged recently are Ebola, bird flu, Middle East respiratory syndrome, Rift Valley fever, SARS, Zika virus disease and now, the coronavirus are all linked to human activity. Nature is threatened by biodiversity and habitat loss, global heating and toxic pollution. Human induced environmental changes modify wildlife population structure and reduce biodiversity, resulting in new environmental conditions that favor particular pathogens.
The relations of Socio-environmental Risks and Financial Value at Risk
Due to the increasing risks from socio-environment, different countries signed The Paris Agreement before in 2016 which is a commitment within the United Nations Framework Convention on Climate Change, dealing with greenhouse-gas-emissions mitigation, adaptation, and finance, that is one of the milestones that further leading regulations to be set up and also leading world-wide institutional investors to increasingly request corporates to put Environmental, Social and Corporate Governance (ESG) agenda on the board of directors and management level to minimize financial value at risk, which allows CSR policies to be fully implemented in the heart of organization, presenting an opportunity for internal audit to address major risk zones under the board’s radar and to scrutinize the underlying data in ESG reports. Financial value at risk is the possible financial loss that could incur, given the probability of risk on the ESG impact, such as:
- Loss of market share as customers move to low-emission suppliers;
- The increased cost resulting from fines and sanctions;
- Compensation cost to affected employees, communities or business partners;
- Failure cost from defective products;
- Increased cost due to staff turnover.
Game change with ESG factoring in societal expectations, governments, regulators, stock exchanges and investors are driving increasingly requirements and actions on environment, social and actions on ESG performance. These drivers challenge organizations to incorporate ESG factors into corporate strategy, management approach, performance analysis, disclosure and reporting. Most countries with policies of ESG reporting requirements adopt a combination of laws, listing rules “comply or explain” and/or voluntary guidelines to regulate the disclosure of ESG information. An important trend is that these policies are increasingly subject to higher levels of obligation.