P1 Chp2: Understanding Sustainability Issues Flashcards

Question

Why does Water & Wastewater Management matter?

Answer 1

Water scarcity leads to conflict WEF assesses water crisis as a top global risk for 9 consecutive years As of 2019, nearly 1.8 billion people across 17 countries face "extremely high" water stress

Answer 2

water use water consumption wastewater generation other impacts of operations on water resources

Answer 3

-how much water is being withdrawn -proportion of fresh water -proportion of withdrawals in regions with high or extremely high baseline water stress

Answer 4

--assessing water-main replacement rates (which relates to operating efficiency and quality of service) --volume of non-revenue real water losses (the volume of water not reflected on customer billings, which measures operational efficiency)

Answer 5

Addresses a company's management of solid waste in manufacturing, agriculture and other industrial processes and covers treatment, handling, storage, disposal, and regulatory compliance. Physical waste generated by a company other than emissions and water.

Answer 6

Food waste contributes to methane emissions in landfills and represents a loss of natural resources and inventory. Reduction of food waste in specific geographies may also improve food security, leading to a focus for Food Retailers & Distributors on percentage diversion from the waste stream. Semiconductor industry has hazardous waste from electronic equipment contributing to highly toxic forms of pollution under close regulatory scrutiny, which can evalute the extent to which waste management practices contribute to the company's risk profile.

Answer 7

Natural ecosystems provide services like crop pollination, clean air, water filtration, waste decomposition and fiber production. Productivity of our natural environment is directly linked to biodiversity and must be protected and sustanably managed to ensure they continue long term.

Answer 8

use and modify significant areas of land as a main input for value creation, such as natural resource extraction and cultivation, project development, constructiobn, and other activities

Answer 9

Having an effective environmental management plan which may minimize compliance costs and legal liabilities, face less resistance in developing new projects, and avoid difficulties in obtaining permits and accessing reserves as well as delays in project completion.

Answer 10

Engineering & Construction Services may look at the number of incidents of non-compliance with environmental permits, management of environmental risks associated with project design, siting and construction, and may face significant fines for violating environmental laws. Forestry Management own and/or manage natural and planted forestry lands and timber tracts, so may look at the company's ability to manage the financial impacts of ecosystem management by looking at a company's total forestland area that is certified to a third-party standard, any land that has protected conservation status or is home to endangered species, and a discussion on the strategy to optimize ecosystem services.

Answer 11

Social capital relates to the expectation that a business will contribute to society in return for a social license to operate Addresses the management of networks and relationships with key EXTERNAL stakeholders, such as customers, local communities, the public and governments

Answer 12

Relates to t he relationships between businesses and the communities in which they operate, including the management of direct and indirect impacts on human rights and the treatment of Indigenous peoples.

Answer 13

--rely heavily on land use --conducting clinical trials --pose risk to surrounding communities in the form of pollution or other harmful by-products

Answer 14

--inability to obtain permits and leases to conduct activities without disruptions --protests or restricted access to assets from community resistance --litigation fees or increased cost of regulatory compliance if not abiding by laws

Answer 15

--socioeconomic community impacts --community engagement activities --environmental justice concerns --cultivation of local workforces --impact on local businesses --environmental and social impact assessments + --events that may impact social license to operate

Answer 16

O&G Exploration & Production engages with local communities to gain their consent and address their concerns, such as percentage of proven and probable reserves in or near Indigenous land, discussion of engagement processes and due diligence practices with respect to human rights, indigenous rights, and operations in areas of conflict Biotech & Pharma focused on ensuring patient safety during clinical trials, the number of inspections conducted by the local health regulator that resulted in voluntary or official actions, and total monetary losses as a result of legal proceedings associated with clinical trials in developing countries

Answer 17

As digital technologies are adopted at accelerating rates, the data consumers generate creates an opportunity to get business advantage as well as a responsibility to keep the data safe Services that require a personal account can get data generated to understand customer pain points better and deliver more relevant products & services, but may breach trust if they are not properly using or selling that data without their consent.

Answer 18

concerned with the management of risk related to the use of personally identifiable information (PII) and other customer or user data for secondary purposes, including marketing through affiliates and non-affiliates

Answer 19

Consumer Finance industry has a legal and social responsibility to ensure the security of personal financial data to avoid exposing customers to fraud, identity theft, and other harmful misuse. Looking at the number of account holders whose information is used for secondary purposes, as well as the monetary losses associated with legal proceedings associated with consumer privacy indicates effectiveness of management Advertising & Marketing uses location, shopping, search and web view data to target advertising. Mobile devices provide unprecedented ability to target, and by evaluating companies' policies and practices related to behavioral advertising and customer privacy, the percentage of online ad impressions targeted to custom audiences, and any related monetary losses from legal proceedings, y ou can understand exposure to risks of regulation and/or customer backlash

Answer 20

how a company protects data from being compromised by external threats strategies, policies, practices related to IT infrastructure, staff training, record keeping, cooperation with law enforcement, and other mechanisms used to ensure customer and user data is secure in the event of a cyberattack

Answer 21

--decreased revenue from decreased customer confidence and churn --data breaches expose companies to costly and lengthy litigations and potential monetary losses

Answer 22

E-Commerce must securely process electronic payments and have a reputation as a secure company to gain market share Managed Care (health insurance products) have regulatory requirements for the use, disclosure, storage and transmission of patient health information and have very significant civil and criminal penalties for disclosure

Answer 23

Where companies provide products and services to meet universal needs, their ability to ensure broad and equitable access to those products and services can significantly impact financial performance and perceived value. Failure to do so may threaten their license to operate in some cases. There's often an opportunity to enchance performance where new or improved revenue streams are realized among underserved populations.

Answer 24

health care, financial services, utilities, education and telecommunications

Answer 25

Biotech & Pharma develop, manufacture and market a range of brand-name and generic medications; so by assessing the strategic approach to access to medicines, can gain insight into how well it is posed for growth and can innovate. Electric Utility providers typically operate as natural monopolies and are legally required to provide reliable access to an essential public good in exchange for certain financial protections from regulators. Can look at customers disconnected for non-payment, awareness of the impact of external factors such as economic conditions may impact affordability as a key component for overall risk profile.

Answer 26

addresses a company's ability to offer manufactured products and/or services that meet customer expectations with respect to their health and safety characteristics to manage against unintended consequences that harm customers health and/or safety

Answer 27

--reputational harm and limited business prospects --financial implications related to recalls and other adverse events --increased regulatory scrutiny and quality control costs --costly fines

Answer 28

Automobiles industry can impact loss of human life and severe accidents, so measure number and severity of safety-related product recalls, the percentage of vehicles with high safety ratings, and the number of safety-related defect complaints Cruise Lines industry can focus on the number of crime incidents involving passengers and employees, the sanitation program inspection results, and the number of serious injuries and gastrointestinal illnesses experienced during voyages.

Answer 29

Benefits a person derives from consuming a particular good or service and can pose a risk where customers are negatively impacted or negative externalities are created. Customer Welfare is different from quality and safety which is on the malfunctioning of the manufacturing process for products and services, and instead is on the inherent qualities to the design and delivery of products and services.

Answer 30

Food & Beverage Controlled Substances Products subject to counterfeiting Companies that provide goods for consumption

Answer 31

Restaurants have expectations given growing global health concerns to obesity and face pressure to offer healthier menus, particularly to children; might be measured by improving the nutritional content. For For-Profit higher Education providers, the welfare of the customers / students is quality of education and gainful employment, measured by number of students completing degrees on time, placement into quality jobs, and low levels of debt relative to annual earnings; they risk losing their social license to operate

Answer 32

Information a company does or does not communicate about its products can mislead and even harm. May arise from a company's failure to manage the transparency, accuracy, and comprehensibility of marketing statements, advertising, and labeling of products & services

Answer 33

This issue is often material where selling and advertising constitute a key operating activity. You can assess a company's ability to abide by advertising standards and regulations, ethical and responsible marketing practices, misleading or deceptive labeling, and discriminatory or predatory selling and lending practices.

Answer 34

--provide products for human consumption (alcohol, tobacco, pharmaceuticals, processed foods, etc) --healthcare products and service providers --public information service providers

Answer 35

Alcoholic Beverages industry have to consider the extent to which advertising reaches (or does not reach) people above or below the legal drinking age, how they promote responsible consumption of alcohol, and any incidents of non-compliance or litigation associated with marketing or labeling practices toward minors. Media & Entertainment industry is on the truthful portrayal and ethical sourcing of news, fair and transparent sponsorship, and conflict-of-interest disclosure

Answer 36

defines human resources as key assets to delivering long-term value Good human capital management fosters workforce well-being and generates positive culture; can enhance personal development and social inclusion in the service of productivity and competitive employement.

Answer 37

Human Capital management

Answer 38

a company's ability to uphold legal and normative labor standards in the workplace, including compliance with labor laws and globally accepted norms and standards

Answer 39

company's ability to manage risk and optimize productivity through the dignified and ethical treatment of workers gain insight into the extent to which labor practices drive cost structure managed well, companies can reduce costs associated with workers' compensation, productivity, morale, and employee retention

Answer 40

ensuring basic human rights related to labor (including child labor, forced or bonded labor, and exploitative labor) compensation issues such as fair wages and overtime pay basic workers rights Minimum wage policies and the provision of benefits which may influence attraction and retention of staff Relationships with organized labor and freedom of association

Answer 41

Employees in industries with inherently physical demanding, hazardous work conditions often participate in collective barganing agreements (e.g. Waste Management, Coal Operations, Metals & Mining). Key to understand percentage of workforce under a collective bargaining agreement, the number and duration of union strikes and lockouts or idle time Industries where turnover rates tend to be high and compensation is low may evaluate performance by considering the average hourly wage and percentage earning minimum wage, voluntary and involuntary turnover rates, and incurred monetary losses as a result of legal proceedings associated with labor law violations.

Answer 42

a company's ability to create and maintain a safe and healthy workplace that is free from injuries, fatalities and illness captures how companies ensure the phsyical and mental health of their workforce through technology, training, corporate culture, regulatory compliance, monitoring, testing, and personal protective equipment

Answer 43

--implementing safety management plans --developing training requirements for employees and contractors --conducting regular audits of their own practices as well as those of their subcontractors Lends insight towards whether there is a strong culture of safety, the extent to which companies can enhance workforce productivity and minimize regulatory and litigation risks

Answer 44

Agricultural Products can be evaluated through upholding fair labor standards, including third-party certifications, which can open up additional markets, meet customer demands, benefit worker productivity / reduce turnover, and raise revenue. Health Care Delivery where staff can be exposed to illnesses or experience injury can reduce impacts to cost, productivity and quality of service by implementing quality training and safety programs, providing suitable PPE, and gathering employee feedback about health and safety issues to reduce incidences.

Answer 45

a company's ability to ensure that workplace culture and hiring and promotion practices embrace a diverse and inclusive workforce, such as staff composition reflecting the makeup of the local talent pools and customer base addresses the issue of discriminatory practices on the basis of race, gender, ethnicity, religion, sexual orientation, and other factors.

Answer 46

It is widely recognized that greater organizational diversity is linked to improved performance and even outperformance Higher retention often means lower costs and improved productivity which can improve margins

Answer 47

industries that compete on innovation or where a product or service quality depends on its ability to represent a diverse customer base

Answer 48

Internet Media & Services relies heavily on STEM for innovation and product development, which is a small pool of qualified individuals leading to intense competition. How well they manage to engage, have gender and racial / ethnic representation and the number of foreign nationals (managing a domestic pipeline of this workforce) can indicate superior ability to cater to a diverse customer base with market share and pricing power as well as reduce employee costs by reducing turnover. In Asset Management with a competitive environment for skilled employees too and a saturated investment sector, the ability to generate novel investment ideas can drive success, such as superior returns.

Answer 49

Explicitly addresses the integration of environmental, human an d social issues in a company's value-creation process. Such as process innovation around resource recovery, or product innovation including efficiency and responsibility in the design, use phase and disposal of products

Answer 50

The four stages are 1) minimizing costs 2) optimizing efficiencies 3) developing new products and technologies 4) developing new business models with differentiated value propositions The further along a company is on this "performance spectrum", the more effectively they can derive value from sustainability.

Answer 51

Product attributes related to the lifecycle impacts of products and services often address packaging material, circular economy principles, distribution resources, use-phase resource intensity, recyclability, and other factors that address externalities generated through the use and/or disposal of the product.

Answer 52

Companies that sell products that require significant packaging or that generate significant environmental or social externalities may be able to drive value through this issue category. E.g. growing revenue by addressing customer and societal demand for more sustainable products and services; recyclable food containers for environmentally conscious consumers This does not relate to environmental or social impacts of a company's operations, does not address health and safety risks to consumers from product use.

Answer 53

Appliance manufacturing has some portion of consumer demand driven by energy efficiency of the product sold, and recovering materials at end of life may represent an opportunity to minimize disposal costs. Can evaluate performance based upon percentage of products certified to standards such as EnergyStar or Assoc of Home Appliance Manufacturers. Biofuels have to focus on the product's lifecycle emissions balance, where they can go into a Scope 3 emissions disclosure. Biofuels companies that cost-effectively reduce the net carbon emissions of their products may gain a competitive advantage leading to revenue growth and increased market share.

Answer 54

Sustainability management is critical to the resilience of business Where a comprehensive and integrated understanding of what drives or erodes company value directly contributes to a company's ability to endure shocks or stresses and to adapt in the face of sustainability issues.

Answer 55

Companies with operations that will be impacted by the transition to a low-carbon and climate-constrained economy; evolving environmental and social realities may challenge companies to fundamentally adapt or may put their business models at risk

Answer 56

Home Builders work in physical assets (homes) that may be threatened by increased incidences of flooding and other physical impacts of climate change; the extent to which building stock is exposed to climate-related risks that impact property value, building integrity or livability directly shapes future value Coal Operations may be directly threatened where coal reserves are designated as "unburnable" as a result of clobal carbon markets or strict emissions regulations, leading to asset write-offs or negative impacts on asset evaluation; would want to assess the financial impacts of the issue by evaluating the price sensitivity of coal reserves based on future scenarios, and how climate regulation influences capital strategy for new assets

Answer 57

There is a correlation between financial impacts of supply chain and dominant ESG issues because of social and environmental externalities created by suppliers through their operational activities, such as environmental responsibility, human rights, labor practices, and business ethics.

Answer 58

For businesses that rely on complex global supply chain that span different jurisdictions, regulatory climates and geographies, risks can abound.

Answer 59

Supply Chain Management is through screening, selection, monitoring and engagement with suppliers. This issue has the potential to damage or enhance a company's reputation and influence cost structure over time.

Answer 60

Apparel Accessories & Footwear rely on a multi-tier system of suppliers, subcontractors, labor recruitment firms, and part-time workers meaning they are particularly susceptible to unfair and unethical labor practices (e.g. employee health & safety, fair pay, child / forced labor). Textile manufacturing also has major environmental externalities from water use and pollution from the discharge of chemical dyes. Solution is standards, monitoring processes, and engagement to address labor and environmental concerns. Pulp & Paper Products source large quantities of wood and fiber from forestry and logging companies, paper recyclers, and owned forests. Risks include biodiversity loss, runoff / pollution or impacts to forest-dependent communities and indigenous people. Solution is chain-of-custody standards to verify that materials originate from sustainable forests.

Answer 61

Resilience of materials supply chains to the imapcts of climate change and other environmental and social factors, which can affect the availability and pricing of key resources.

Answer 62

Manage through product design, manufacturing, and end-of-life management such as: -using recycled and renewable materials -reducing the use of key materials -maximizing resource efficiency in manufacturing -investing in the development of substitute / alternative materials -screening, selection, monitoring and engagement with suppliers -using certification standards

Answer 63

Product Design and Lifecycle Management captures performance on the environmental and social characteristics of the products Materials Sourcing & Efficiency manages the external risks that threaten the provision of products and services

Answer 64

Telecommunications Services Industry has a high growth of handheld devices and relative rapid obsolescence which has led to legislation for e-waste. With the customer relationship, they can recycle and recover materials which has cost savings and can also influence sustainable design within their supply chain such as limiting the use of harmful substances. Beverage Manufacturing relies heavily on water as a key input and ingredient. Ability for manufacturers to reduce risk from water scarcity avoids supply disruptions and reduces costs.

Answer 65

Company's ability to manage risks and opportunities associated with the direct exposure of owned or controlled assets to the physical impacts of climate change

Answer 66

Company value can be impacted when a failure to incorporate climate change into products and services, such as insurance policies and mortgages, results in socioeconomic issues for custoemrs.

Answer 67

Hotel companies may have large amounts of physical assets exposed, such as resorts in coastal areas more likely to experience inclement weather, flooding and beach erosion from rising sea levels which could result in uninsurable buildings and decreased tourist traffic. Mortgage Finance can result in direct financial impacts to banks and harm the solvency of borrowers if climate change is failed to be included in to mortgage origination and underwriting. E.g. in areas with prolonged extreme heat, a home's HVAC / cooling capacity and backup generation would be pertinent information to the underwriter.

Answer 68

Involves the management of issues that are inherent to a company's business model or that constitute common practice in the industry and that are in potential conflict with the interest of broader stakeholder groups and therefore may create liabilities or hinder a license to operate.

Answer 69

They are designed to produce information that companies do not already regularly report

Answer 70

Ethical conduct of business, including fraud, corruption, bribery / facilitation payments, fiduciary responsibilities, conflicts of interest, misrepresentation, bias, negligence and other behaviors that may have ethical implications can impact company value through management and compliance costs, legal and regulatory fines.

Answer 71

Companies with global, complex operations or those that rely on sensitive or high-value resources as critical inputs

Answer 72

Engineering & Construction Services companies with global operations, international contracts and management of multiple local agents and subcontractors is exposed to bribery, corruption, and anti-competitive practices before of its work in regions with lower enforcement and normative unethical behavior such as for large infrastructure projects. Solutions include labor codes of conduct. Casinos & Gaming have a risk of internal controls on money laundering, and being subject to anti-money laundering regulations. Solutions include disclosure of policies and practices as well as monetary losses from legal proceedings.

Answer 73

Anti-competitive business behaviors reduce or prevent market competition. Economic forces in certain industries can create exposure to social issues associated with monopolies.

Answer 74

-excessive prices -poor quality of service -harmful inefficiencies

Answer 75

Looking at the way companies manage legal and social expectations around monopolistic and anti-competitive practices, including issues related to bargaining power, collusion, price fixing or manipulation, and the protection of patents and intellectual property.

Answer 76

Oil & Gas Midstream companies transport and store natural gas, crude oil and refined petroleum products and tend to operate as natural monopolies; they are subject to regulation and can face significant fines and penalties related to price manipulation, unauthorized fees, and unlawful use of pipeline capacity. Software & IT Services Industry have monetary losses as a result of legal proceedings but for a very different reason. Anti-competitive behavior centers on IP protection, which is an inherent business model component for companies in the industry but can sometimes conflict with the interests of society. Patents can be used to restrict competition which reduces innovation, and can also aggregate in larger companies that have more resources to accumulate patents.

Answer 77

Company's approach to engaging with regulators in cases where conflicting corporate and public interest may have long-term adverse environmental and social impacts.

Answer 78

-a company's reliance on regulatory policy or monetary incentives (such as subsidies and taxes) -actions taken to influence industry policy (lobbying) -overall reliance on a favorable regulatory environment for business competitiveness -company's ability to comply with relevant regulations -alignment of management and investor views of regulatory engagement and compliance at large

Answer 79

Biofuels rely on government policies such as tax breaks, renewable fuel standards and mechanisms for feedstock production to create market demand. Companies thus do strategic political and regulatory lobbying, where if those activities have an adverse impact on the social good, it could erode the license to operate over time. Chemicals industry can provide insight into how a company's management of the issue can affect future performance or value. They often lobby against legislation that would adversely affect business in the short term despite long-term societal benefits (e.g. bans on specific substances).

Answer 80

Due to their industry, some companies must manage operational safety hazards to prevent high-magnitude accidents and emergencies that could damage facilities, injure workers, and affect the local environment and communities.

Answer 81

Using management systems and scenario planning to identify, understand, prevent and minimize such accidents improves financial performance, as damaged facilities can be inoperable for extended periods, resulting in lost revenues and large capital expenditures for repairs. Companies with a strong safety culture and operational safety oversight can more effectively detect and respond to such incidents mitigating potential financial risk and improving operational efficiency

Answer 82

Air Freight & Logistics with strong safety systems may mitigate mechanical failures and human errors, resulting in fewer accidents and better safety ratings and records. Not managing this well could result in a reduced demand for services and impair continued operations / shipments which reduces revenues and market share. Electric Utilities & POwer Generators are different for nuclear power plants which are typically investor-owned, jointly by multiple utilities. Nuclear incidents while rare have significant consequences on humans and the environment and historically have led to more regulation. Failure to comply with safety standards can result in higher operating costs, increase in capital expenditures to ensure safety compliance, and even impaired assets if they are deemed unusable before their expected end of life because of safety concerns.

Answer 83

Where a company is systemically important for financial, natural resource, or technological systems - meaning the failure of that compny triggers instability or collapse of an industry or economy - performance directly hinges on the company ability to reduce its contributions to systemic risks and to improve safeguards that may mitigate the impacts of systemic failure.

Answer 84

Financial institutions This includes a company's ability to absorb shocks arising from financial and economic stress to meet stricter regulatory requriements related to the complexity and interconnectedness of companies in an industry.

Answer 85

They are often highly regulated where failure to meet regulatory requirements could substantially raise future compliance cost and monetary penalties

Answer 86

Although there is often high upfront costs, companies can see long-term benefits in reducing their risk exposure, lowering remediation expenses and lowering their cost of capital

Answer 87

Commercial Banks have a combination of fixed debt and flexible assets, where they give fixed terms and interest rates on loans but provide deposit withdrawal, investment sales, and loan repayment at any time. This can cause liquidity and solvency risks for banks, and risk management provides direct benefits to society in the form of economic development and financial security. Telecommunications companies operate the infrastructure for modern communications and business processes, which can be susceptible to technology disruptions, which create systemic or economy-wide distruption if network infrastructure is unreliable or prone to business continuity risk. Managed well there are infrequent and low duration of any interruptions, downtime from technical errors, extreme weather events, natural disasters or electric grid disruptions.

Answer 88

Analyzing for ESG stems from highly interrelated issues that can be shaped by complexity of ecosystems, governments, relationships and market forces, resulting in some sustainability issues existing across multiple sustainability dimensions.

Answer 89

environmental issues exist in supply chain management human capital issues exist in critical incident management energy management and GHG emissions performance

Answer 90

employee engagement, diversity and inclusion can affect product design and lifecycle performance

Answer 91

An integrated report demonstrates robust integrating thinking of a company. Integrated thinking is more internal to the company, on the discipline of coordinating efforts to connect the organization's strategy, governance, performance and prospects in relationships between the various operating / functional units ("Capitals") that an organization uses to create value over short, medium and long term. Integrated Reporting brings together material information about an organization's strategy, governance, performance and prospects in a way that reflects the commercial, social and environmental context in which it operates

Answer 92

A bank transitioning from in-person to digital services had that process accelerated, which also, subsequently increased the importance of data security as it increased the probability and potential magnitude of data security breaches

Answer 93

Environment dimension captures issues that impact a company either through the use of nonrenewable, natural resources as inputs to production, or through the harmful releases generated by a company into its surrounding environment. Includes issues: GHG emissions; air quality; energy management, water and wastewater management; waste Social Capital dimension captures issues related to a business’s expected contributions to society in return for social license to operate. This includes managing stakeholders such as customers, local communities, the public, and governments. Issues includes: human rights and community relations; customer privacy; data security; access and affordability; product quality and safety; customer welfare; and selling practices and product labeling. Human Capital dimension relate to human resources (primarily staff and employees) as key assets to delivering long-term value, as workforce well-being operates in the service of productivity and competitive employment. Issues in this dimension include: labor practices; employee health and safety; and employee engagement, diversity, and inclusion. The Business Model & Innovation dimension captures issues related to the integration of ESG issues into a company’s value creation process. Issues in this dimension include: product design and lifecycle management; business model resilience; supply chain management; materials sourcing and efficiency; and physical impacts of climate change. Leadership & Governance dimension captures the management of issues inherent to a company’s business model that may conflict with the interests of key stakeholder groups or broader society. Issues in this dimension include: business ethics; competitive behavior; management of the legal and regulatory environment; critical incident risk management; and systemic risk management

Answer 94

Both issues fall under the Human Capital sustainability dimension. Labor Practices encapsulates a company’s ability to uphold legal and normative labor standards in the workplace, including the ability to manage risk and optimize productivity through the dignified and ethical treatment of workers. SASB Standards metrics for this issue capture information related to wages and compensation, collective bargaining, strikes and lockouts, turnover, and more. Employee Health & Safety captures a company’s ability to create and maintain a workplace free from physical injuries, fatalities, and illness. It also applies to companies’ ability to ensure the physical and mental health of its workforce through corporate culture, technology, and other means. SASB Standards metrics for this issue capture information related to injury and fatality rates, processes to mitigate physical risks, and others

Answer 95

Ecological Impacts encapsulates information related to the productivity of the natural environment. Companies that modify natural resources such as clean air, productive soil, water, etc. as a main input for value creation or a byproduct of operations can experience operational risks and costs that harm long-term performance

Answer 96

Both issues fall under the Social Capital sustainability dimension. Customer Privacy relates to the decisions and systems companies implement when entrusted with consumer data. Consumers increasingly require companies to be transparent about how their data is being used or sold. Downside financial impacts related to this issue may manifest in the form of costs associated with regulatory oversight and reputational risk. On the upside, companies that perform well may be able to rely on more consistent revenue from returning customers and enhanced market share. The issue of Data Security relates to the way companies protect data from external threats such as malware, hacking, and other forms of cyberattack. The relevance of this issue increases where companies manage sensitive information, such as consumer financial or government information. Financial impacts related to this issue may manifest in the form of litigation-related monetary losses or declining revenues as a result of customer churn

Answer 97

Access & Affordability: ensure broad access to its services, which are particularly relevant when a company is in the business of providing universal needs such as electricity. In this case, the company’s practices imposed excessive prices, which contradicted social expectations during a period of crisis. Rate model adjustments lead to extremely high electricity costs for customers. Business Model Resilience: relates to a company’s ability to incorporate social, environmental, and political transitions into long-term business planning. It highlights instances in which social and environmental realities may challenge companies to adapt where new circumstances put their model at risk. In this context, the company increased its risk exposure because of a failure to account for changing environmental factors related to extreme weather within its core economic model, where rate structures and grid resiliency measures can protect against price volatility in the face of grid disruptions. Systemic Risk Management: relates to a company’s ability to manage risks resulting from large-scale weakening of the systems on which society depends, including technological systems. It typically addresses the systems and safeguards a company may have in place to mitigate the impacts of a systemic failure. In this case, a failure in systemic risk management is evidenced by the loss of a fundamental service to a large number of customers for an extended period of time, as distribution technology broke down in extreme weather. Despite the understanding that weather directly impacts revenue (e.g., extreme cold drives demand for heat), it appears that no significant safeguards were in place to protect physical assets and/or bring them back online in the face of snow and ice. Physical Impacts of Climate Change: ability to manage risks associated with the direct exposure of owned and controlled assets to the physical impacts of climate change, such as extreme weather, sea level rise, changes in precipitation and temperature, and other climatic affects. Despite evidence in support of the occurrence an increased frequency of severe winter storms in a geography that typically experiences mild weather, extreme weather damaged key distribution infrastructure

Answer 98

In this case, performance on one sustainability issue can directly affect performance on another. For one, the Physical Impacts of Climate Change has a direct impact on Business Model Resilience. In this instance, an ability to account for damage to physical assets as a result of extreme weather could inform transitional strategies, such as different rate structures or steps to improve the durability of infrastructure. In turn, the Physical Impacts of Climate Change and Business Model Resilience also impact Access & Affordability, as the company’s ability to consider and adapt to external environmental factors led to increased economic burdens on customers for an essential service. Systemic Risk Management also impacts Access & Affordability, as the magnitude of power outages directly corresponds with the magnitude of price increases as a result of extremely limited electricity supply

P1 Chp2: Understanding Sustainability Issues Flashcards

(122 cards)