The nature of business

Covid-19 is placing our relationship with the planet under intense scrutiny. Business leaders are now asking themselves just how ready they are to tackle a growing climate crisis. 

New research commissioned by MS&AD and conducted by Longitude, a Financial Times company, surveyed 541 organizations across Asia to find out about their sustainability strategies, hear their views on biodiversity and learn how they are facing up to the risks of an unhealthy planet.

The results show that awareness of climate risks is growing and action is underway. But they also show that a coordinated response will take time. 

Policymakers and organizations continue to set ambitious climate targets, so businesses have a lot to do. Acknowledging the scale of the task is the first step.

Material risks now loom larger

Sustainability is a critical management issue for the majority of companies, and Covid-19 has increased their sense of urgency. 

More than eight in 10 organizations (83%) say they are more aware that environmental degradation makes pandemics more likely. 
A similar number (81%) know they will need new skills to improve how they track potential risks. Asked about the greatest material risks to their businesses, they point to the quality of air and water. But with a loss of biodiversity and extreme weather events also a concern, an integrated response to these threats is needed.

Air and water are seen as the biggest risks to companies

Question: Which of the following risks, if any, are material to your company?

Efficiency drives sustainability strategies

For many organizations, their approach to sustainability is guided by common global language and goals, such as the UN Sustainable Development Goals (SDGs). 

The research, meanwhile, shows that three things drive them the most:

• The need to reduce waste and increase efficiency
• Increased awareness of environmental risks 
• Increasing the long-term viability of their business. 

So sustainability has to be meaningful to their organization.

Efficiency pushes businesses to pursue sustainability

Question: Which of the following are the main motivations behind your organization's sustainability strategy?

Businesses move toward sustainability

Setting strategies and targets is achievable, but translating them into practical techniques to achieve those goals is much tougher. 

For many organizations, this is a work in progress. Just a quarter say that their sustainability strategy has been fully implemented and communicated to key stakeholders.

What is stopping the others?

Question: How much of an impact do the following factors have in slowing down progress on low-carbon strategies? (Chart shows some impact + significant impact)

Next comes natural capital and biodiversity 

Organizations are starting to develop natural capital and biodiversity strategies in order to reduce their damage to the environment and natural habitats – and to protect their business from emerging risks. 

These are good intentions, but that does not mean they are making them a reality. Half of organizations say they have developed a natural capital strategy, and 42% are working on one. Only 7% have a fully scoped and implemented natural capital strategy.

“There is a perception that natural capital thinking is a very complex technical area, which can put organizations off. It gets labeled as too hard, and the conclusion is often that it is easier not to do it,” says Rosie Dunscombe, technical director of the Capitals Coalition. “But it is better to do something than nothing. Organizations that proactively make the investment before their hands are forced will realize broad benefits.”

Raw materials and the health of their people are businesses’ greatest concerns about biodiversity loss

Question: Which of the following potential risks from the loss of biodiversity do you see as most significant for your business/organization?

“Our business does not have a good track record of taking biodiversity into account when making strategic decisions”

“There is a lack of incentives to embed biodiversity principles and practices in our organization”

“Our organization needs to increase the awareness of the potential impact of biodiversity risks”

Data raises awareness of our ties to nature

Covid-19 has helped us to understand the link between the destruction of habitats and infectious disease. And smart use of data and technology can have a transformative effect on how we use natural and man-made resources.

“The first thing we need to do is to understand market impacts on nature,” says Niki Mardas of Global Canopy, a not-for-profit thinktank that focuses on nature-positive investments. “Transparency is not the be-all and end-all, but without understanding how we are connected to these impacts, we cannot begin to have accountability for them, and we cannot begin to solve them.”

In partnership with the Stockholm Environment Institute, Global Canopy has developed the trase.earth platform to understand these connections. The platform uses big data, including shipping records, to help organizations understand their exposure to deforestation-risk in their supply chains.

The importance of being able to predict and pre-empt threats is one of the reasons why MS&AD, through MS&AD Ventures, has invested in 40 technology start-ups over the past two years and encourages open innovation between industry, government and academia.

“We need to recruit new skills/expertise to enhance our risk impact reporting”

“We support ‘green recovery’ plans in order to create a low-carbon society in the wake of Covid-19”

“Climate-related risks are interconnected with other risks faced by our organization and need to be treated as such”