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Continuity
Overview
Business continuity often falls within the sphere of governance and risk management. The foundation of business continuity is identifying, adopting, and putting into practice the standards, programs, policies, guidelines, and procedures needed to ensure a business continues with minimal disruption despite a major incident or disaster.
From a sustainability perspective, business continuity means incorporating into the analysis of potential disruptions a broad assessment of the environmental, social, economic, and legal systems in which the business operates. In present day terms, for example, it means that planning and activities would include the potential for extreme weather events related to climate change, civil unrest related to social discord, economic distress based on supply chain disruptions, or regulatory change in response to public pressure.
Business continuity includes planning and activities that ensure critical business functions continue to operate in the case of serious, disruptive incidents or disasters. Business continuity includes three key elements:
Resilience: critical business functions and the supporting infrastructure are designed in such a way that they are unaffected by most disruptions (e.g., redundancy and spare capacity).
Recovery: arrangements are made to recover or restore both critical and less critical business functions that fail.
Contingency: the organization establishes a generalized capability and readiness to cope with major incidents and disasters when they occur.
Succession planning
Succession planning that fails to include capacity for understanding and managing through the lens of sustainability can undo a sustainability program. Sustainability provides the greatest value when used as a management tool and embedded in business culture, both of which require strong management support. Identifying the sustainability knowledge, skills, and experience that are core capabilities for key management roles is vital to the organization’s ability to mature its sustainability program and protect and grow the value created through sustainability management. Organizations that are committed to sustainability incorporate sustainability capabilities into the succession planning process.
Planning cycles
Incorporating sustainability considerations and best practices into planning cycles can deliver better short, mid, and long-term strategies for new, evolved, or diversified products and services. Sustainability considerations highlight opportunities for longer and better product and services life cycles and innovation. Applying sustainability best practices within planning cycles can also capture competitive advantage. To achieve these results, individuals with broad and deep sustainability knowledge must be included in planning cycles.
Access to capital
Restricted access to capital can threaten an organization’s ability to make and execute strategic plans, pursue unexpected opportunities, make investments, and even, in some case, continue operations. Organizations with a strong commitment to sustainability build trust that gives rise to better access to capital, whether through issuing equity or borrowing under favorable terms. Using sustainability as a management tool provides a broader understanding of risks and opportunities, more well-developed and mutual relationships with stakeholders, and greater transparency in reporting. While sound financials remain a fundamental baseline, these sustainability factors go a long way to demonstrate strong management of high-value intangible assets and thereby improve access to capital.
Resources
Risk management
While risk management is a well-established practice in many companies, traditional processes often do no capture and properly analyze sustainability risks. In an environment where investors are weighing a company’s capacity for ESG-based risk management as a component of investment decisions, leading companies are working to incorporate sustainability issue assessment into enterprise risk management processes.
Resources
Resilience & crisis management
Resilience is demonstrated when an effective response to market shocks is immediate and occurs while maintaining continuous or near continuous business operations and safeguarding people, assets and overall brand equity. Businesses are better able to achieve these results by using a core attribute of sustainability expertise – systems thinking – to gain broader and deeper understanding of potential disruptions and an organization’s related operational risks and opportunities. Sustainability knowledge and expertise is put to good use in identifying and developing disruption scenarios, making recommendations for coping with the related risks, designing stakeholders preparedness trainings and processes, and implementing on opportunities.
Crisis management relates to how a company handles the most shocking and disruptive scenarios. With the advent of social media, companies may have just a 15 minute window to respond to a crisis and protect the company’s reputation. That means that companies must have a plan in place in advance of a crisis. Being able to anticipate and craft skilled responses to potential crises requires scenario-based crisis management. Having a plan that specifically addresses how events will be managed – in general and specifically with regard to highest ranked risks – can make all the difference in maintaining situational control and reducing negative impacts.
Law & regulation
If society were able to self regulate to avoid all negative environmental, social, and economic impacts, we would never experience a Tragedy of the Commons. Protection of the best interests of human civilization and the planet often falls to governments. Governments have long used regulations and laws to protect shared resources.
Governments use law and regulation to cope with big environmental, social, and economic problems like climate change, poverty, and potential market failures. As these types of problems become worse, society mounts pressure on governments to solve them. This can create regulatory uncertainty for the business community.
Businesses must deal with these uncertainties as best they can. Keeping abreast of these situations helps prepare for impositions and protect the interests of stakeholders. Businesses do well to analyze, anticipate, and adapt to changing regulatory and legal circumstances.
Sustainability provides a broad context for preparing for and responding to regulatory and legal changes. It allows an organization to get a fuller picture of future trends that may impact business operations. Preparing for new regulations positions businesses to turn sustainability risks into opportunities. Preparing for and responding early to emerging laws, regulations, risks, and public expectations helps an organization:
- Avoid fines and shutdowns for non-compliance
- Build trust and cooperation with legislators and regulators
- Achieve performance objectives
- Get buy in for sustainability initiatives
- Create a competitive advantage
- Protect reputation and brand
- Create long-term value
Sustainability management reveals how social, environmental, and economic challenges might give rise to laws and regulation that affect businesses. This sets the stage for coming together with diverse stakeholders to work towards solutions in an orderly process. Customers and investors will be more supportive and loyal to companies that communicate, prepare for, and mitigate emerging legal and regulatory risks.
Staying ahead of the curve
Many regulated industries have been particularly vulnerable to legal and regulatory changes in recent years. These include the healthcare, financial, telecommunications, and energy sectors. Many businesses in these industries have learned that it is better to prepare early by self-regulating than to wait until the changes occur.
Laws and regulations are always evolving as new data and information becomes available. An organization can stay one step ahead of the compliance and regulation curve by accounting for environmental, social, and economic impacts and risks.
For example, a company that anticipates the impacts of expected carbon regulation can start self-regulating. It can devise its own ways of diminishing carbon in its business operations and supply chain on a longer, less painful compliance timetable. It can optimize its change process.
Social license to operate
Social license to operate refers to the level of acceptance or approval a local community and/or other stakeholders grant a company so that it can engage in business operation.
The concept of a social license to operate is based on the idea that businesses need not only government permission [or permits], but also broad social support to conduct and succeed in their business endeavors. To cultivate such strong support, an organization must develop good relationships with all its stakeholders.
When crucial stakeholders fully withdraw their support, the social license to operate evaporates. The disapproval and resulting penalties are so severe that the business is destroyed and unable to continue operations. This can manifest in a company being abandoned by critical members of its workforce or by its customers. Suppliers or investors could refuse to provide the resources the business needs to produce its goods or services. Egregious corporate behavior in violation of law could result in government-imposed penalties or litigation awards that are so large that financial stability is destroyed and bankruptcy ensues.
The relationships that form the basis for a social license to operate cannot be based solely on providing material benefits to local communities or other groups of stakeholders. Best practices for maintaining a strong social license to operate involve engaging these important stakeholders in open and transparent discussions of the risks, costs, and benefits of operations. It requires recognition of the mutuality of needs and a frank and open discussion of trade-offs when interests are misaligned. Social license to operate encourages companies to interact with stakeholders on the basis of respect, inclusion, and meaningful participation.
Social license to operate is at the heart of sustainability’s inter-related environmental, social, and economic systems. It places business operations in a larger systems-based context. It is an important concept in support of meaningful stakeholder engagement for mutual benefit and long-term business viability.