Sustainability Risk Management: An Exploratory Study

48 Pages Posted: 10 Apr 2020

See all articles by Padmini Srinivasan

Padmini Srinivasan

Indian Institute of Management Bangalore

Prabeetha Bolar

Indian Institute of Management Bangalore

Date Written: March 31, 2020

Abstract

There have been significant environmental changes, including climate-related events that are affecting the businesses in India and the world. The impact of these events is estimated to cost the global economy by 20 percent of its GDP over the next few years with serious economic consequences for the business. In spite of such an alarming risk, very little is known on how corporates deal with sustainability in general and environmental sustainability in particular and their linkages to corporate risks in a strategy setting.

This exploratory study attempts to understand the state of environmental sustainability risk disclosures of a select 200 companies listed in the National Stock Exchange of India (NSE). We use content analysis to study the disclosures made in the Annual Report, Business Responsibility Report, Sustainability Reports and other allied reports presented by the companies to understand the levels of disclosures. Further, we study the extent of disclosures by the companies to understand the present state of engagement with environment sustainability and climate change and their integration with the main stream risk management.

Our findings suggest that almost all companies have some basic general disclosures on risks this can mainly be attributed to the mandatory nature of disclosures in the annual report. However, companies do not disclose more than 37% of the total risk categories identified by the research. Only financial risks are discussed in detail. Environment Sustainability risk disclosure is poor, and the quality of disclosure is also low. Disclosures on climate change risks were even more opaque. It appears that the changes in the weather patterns have either not emerged as a significant cause of concern to be disclosed in the risk section or they companies have generally not disclosed the same. We also find that environmental disclosures are not integrated in a more comprehensive in the risk reports. We also find that companies had not integrated sustainability risk into the risk management framework and strategy mainly due to lack of understanding of the direct business impacts (quantification), lack of regulations and stakeholder pressure. Moreover, firms have a short term outlook and are more focussed on quarterly results and profitability in the near term. Though reporting on environmental risks and climate change are weak, companies are taking initiatives on matters such as energy conservation, water, and waste management.

Keywords: Risk Disclosure; Risk Management; Sustainability Risk; Sustainability Disclosure; Climate Risk

Suggested Citation

Srinivasan, Padmini and Bolar, Prabeetha, Sustainability Risk Management: An Exploratory Study (March 31, 2020). IIM Bangalore Research Paper No. 608, Available at SSRN: https://ssrn.com/abstract=3571257 or http://dx.doi.org/10.2139/ssrn.3571257

Padmini Srinivasan (Contact Author)

Indian Institute of Management Bangalore ( email )

Bannerghatta Road
Bangalore, 560 076
India

Prabeetha Bolar

Indian Institute of Management Bangalore

Bannerghatta Main Road, Bilekahalli
Bengaluru, Karnatak 560076
India

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
94
Abstract Views
591
rank
346,998
PlumX Metrics