#CSRFW: Beyond Investments: Promoting Business Growth through Impact Assessment, and Effective Business Risks Management

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Strategic focus on Investments

Modern economies and societies thrive when investments in innovation and infrastructure are upheld as the crucial drivers of economic growth and development (UNSDGs 9). Urbanisation and heightened incidences of rural to urban migration has increased the need for the emergence of new technologies, and innovations especially in areas like transportation, renewable energy, and information and communication technologies. It is estimated that by 2050 two-thirds of all humanity will have migrated to urban areas, increasing the urgency for advocating for sustainable development in these areas, more so if we want to record significant transformation in the quality of life of people living in these spaces.

However, beyond investing in interventions, organisations need to move to more profound levels of sustainable practices by assessing the impact of these interventions. Impact assessment goes a long way in ensuring that the effects of interventions are not only achieved but also sustained. Social impact assessment lies within the purview of analysing, monitoring and managing the intended and unintended social consequences, both positive and negative, of planned interventions (policies, programs, plans, projects) and any social change process invoked by those interventions according to the International Association for Impact Assessment. The major focus for businesses that seek to invest in social interventions should be to also ensure impact assessment is factored in the overarching goals of any sustainable project as an imperative and not merely a ‘nice-to-have’; this guarantees that these interventions are not just being promoted to secure goodwill, but more importantly to see that more sustainable social solutions are provided for human and economic development.

The Nature and Context of Social Impact Assessment

Between 1969 and 1970, the United States National Environment Policy Act (NEPA) was presented as a means of ensuring that federal actions that were being introduced into systems were making meaningful impact to the quality of the human environment, thus forming a legal basis for the implementation of Social Impact Assessment (SIA). The first incidence of a social impact assessment was witnessed in the Mackenzie Valley Pipeline Proposals. In the wake of a proposal of this magnitude (the development of a pipeline corridor from the Mackenzie River delta which was supposed to run through Alberta to the United States), there emerged government policy guidelines on pipeline development, engineering and environmental studies, public policy reviews and economic analysis such as has never been rivalled in Canada’s history. Subsequently, a commission was set up to consider the proposal based on environmental, cultural, social and economic impacts on the affected communities.

Needless to say that the commission marked a revolution in the ‘history of resource development in Canada’. The detailed process that went into the public consultation process was unparalleled. Furthermore it had been claimed that the commission’s report bought to the fore the complexities in the concerns about the cultural and environmental impact the project would have had on Northern Canadian aboriginals.

In understanding how social impact assessments are conceptualised, the following factors need to be put into consideration;

  • The current state of people’s existence – how they work, live, interact one a daily basis. Will the planned intervention in any way directly or indirectly affect the people’s ability to live and work in an environmentally conducive space which will not have adverse effects on their health or quality of life?
  • Their culture and belief system – interventions should take into consideration the diversity between cultures and the diversity of stakeholder interests in the planning and execution of these interventions.
  • The political systems – proposed interventions and the assessments should put into consideration the capacity to build the social and human capital of indigent communities and their ability to ‘strengthen democratic processes’.
  • The environment – in considering the environment, interventions should factor in the broad spectrum of social and human dimensions and is expected to ensure that adequate attention is paid to the social realm.

Understanding Business Risk from a Sustainable Perspective

Businesses that desire to maintain sustainable practices in their dealings are disposed to espouse strategic intelligence for managing social risks. These risks are essentially presented either as threats, vulnerabilities, controls and countermeasures. In order to properly manage or mitigate risks in business operations, companies should consider developing adequate risk management systems that will address avoidable mishaps from occurring. Putting in place risk management measures will go a long way in eliminating fatal loss or damage on businesses and relatively shorten the recovery time in the event of unwarranted occurrences.

Approach to Business Risk Assessment

A recent research conducted by The Drangonfly Initiative (TDI) in collaboration with Drive Sustainability and the Responsible Minerals Initiative (RMI) at the OECD Forum on responsible mineral supply chains covered a risk assessment study that focused on the following;

  • Assessment of 37 materials used in the manufacture of automobiles and electronic products
  • Top 17 material profiles for highest risk in countries selective by Drive and RMI members.

The study was carried out using a set of standards to assess the risk of the materials used in the manufacturing processes based on the importance to the automotive industry and its association with Environmental, Social and Governance (ESG) risks and effects.

The objective of the whole process was to “establish a process for continuous intelligence sharing, dialogue and – ultimately – collaboration with other sectors and initiatives that share [the] vision to bring positive change across supply chains”. These are the underpinning factors which forward thinking organisations should consider in approaching and resolving issues around business risk assessment.

For companies operating in the present day global landscape, managing traditional risks across these three categories – economic, technological and political has become familiar terrain. However, beyond making profits, investments and stakeholder engagement (economic risks) to managing automated threats, or novel technologies (technological risks) and managing public perception, government relations, regulatory policies and legalities (political risks), emerging risks are beginning to surface which more organisations are having to deal with.

These risks are termed “social risks” and they more often than not impact on companies’ bottom line in subtle and unassuming ways that can easily go unnoticed right before fatal damage is done. These social risks come in form of pressure exerted by civil societies and various stakeholder groups. As evidenced in popular scandal cases like Shell in Nigeria, Nike in Indonesia, and the Exxon Valdez oil spills, the extensive impact of social risks spreads across various operating aspects of businesses.

The irony of things is that most social risks arise when businesses seek to make what according to them may seem like perfectly sound business decisions. For instance in seeking cheaper labour which may ultimately help in reducing cost for a manufacturing business, it is easy to overlook the associated international labour laws and policies, which have the potential of inadvertently reflecting negatively on the company’s image.

In the case of Shell, the company has been frequently criticised for the adverse environmental impact its operations has yielded in its resident communities within the Niger Delta in Nigeria, with several oil spills that have resulted in pollution and devastation of huge proportions, and more recently the corruption scandal it is facing in relation to the Malabu case in Italy. This illustration underpins the fact that companies should be more attentive to issues that arise from a civil society perspective in order to avoid criticism for their social practices.

 

 

 

 

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