Page 583 - COSO Guidance

2. Strategy and objective-setting for ESG-related risks

In some cases, substantial changes to the internal or external business context may lead an organization to
reconsider its business strategy or objectives. For example, in 2017, French food-company Danone responded
to shifting consumer preferences for healthier choices by developing a “One Planet, One Health” vision with a
strategy that focuses on brands that encourage healthier, more sustainable eating and drinking habits.
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In 1994, the founder of Interface recognized the need to take a more proactive stance on environmental
compliance, thereafter shifting the company from a petroleum-intensive carpet business to focus on a strategy
that included taking back and recycling used carpet, designing new products from recycled materials,
developing nontoxic adhesives and textiles, harnessing nature’s designs for products and experimenting with
leasing “flooring services” as an alternative to selling carpet.
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The approaches outlined in this chapter can be helpful for risk management and sustainability practitioners to
understand the potential ESG-related risks and impacts when evaluating alternative strategies or formulating
objectives. Practitioners may also consider impacts beyond those of their own operations to look at their
business within context the social and environmental systems that surround them. Guidance developed by
the Embedding Project encourages entities to consider context when setting sustainability strategies and
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objectives using four iterative steps:
• Understand key socio economic issues and their associated thresholds (the level at which resiliency
becomes threatened)
• Understand where the company has the greatest impact on these thresholds
• Determine the magnitude of change required to operate within these thresholds
• Commit to the allocation of the change that is required

Applying context to sustainability plan and goals at Mars Incorporated (Mars)

Mars considers the impact its business has on the environment and society in its decision-making,
and recognizes that this approach also lowers operational and reputation risk. Mars worked with key
stakeholders and the Planetary Boundaries Framework to prioritize five socio-ecological issues across
its full value chain. From each of these five broad impact areas, Mars has articulated long-term targets for
GHG emissions, water, water quality, wages and human rights, and how it plans to track progress using
scientifically credible metrics. 78

Additional guidance on setting ESG-related context-based goals is provided in sub-chapter 3c.

36 Enterprise Risk Management | Applying enterprise risk management to environmental, social and governance-related risks • October 2018