Too many companies put long term shareholder value at risk by failing to anticipate and manage new forms of liability. It will be increasingly untenable for business to abide by the letter of the law, and neglect its spirit. This is the view behind a new report launched today by SustainAbility with sponsorship from Swiss Re, Insight Investment and Foley Hoag LLP.
The report – The Changing Landscape of Liability: A Director’s Guide to Trends in Corporate Environmental, Social and Economic Liability – is launched on the eve of the twentieth anniversary of the Bhopal tragedy which occurred on 3 December 1984. It uses this, and other case histories -obesity, climate change and human rights – to highlight how society’s expectations of businessbehaviour are rapidly shifting, and how organisations are being punished not only in the courts of law, but also in the ever more global court of public opinion – through boycotts, erosion of brand
and reputation, loss of shareholder value and destruction of trust, credibility and goodwill.
As well as detailed case histories, the report includes insight into the opinions of the investment, legal and insurance sectors. There is growing pressure for business to revisit its conventional approaches to corporate responsibility and risk management, including due diligence, to better manage environmental and social risks. Strategic stakeholder engagement to understand and appraise the ethical environment and expectations of business will be central to this process.
SustainAbility director Geoff Lye, the report’s main author, says: “Many of the world’s largest and most progressive companies are failing to spot critical risks from new forms of liability. Some of these currently unaccounted risks may prove to be potentially uninsurable. This moves the challenge of corporate responsibility, meeting stakeholder and societal expectations of ethical behaviour, from its frequent home in the corporate affairs and PR department to the heart of the business and onto the desks of CEOs, CFOs and strategic risk managers.”
‘The report highlights a critical development – the convergence of escalating liability costs faced by companies and the role corporate responsibility can play in strategic risk management to lessen liability exposure.’, says Rick Murray, Chief Claims Strategist of report sponsor Swiss Re.