Book Smart

The potentially treacherous understory in that jungle out there grows increasingly harder and more complex to negotiate.

For the business world this means that there no longer is a single, fiscal bottom line but three, Anderson says.

“They also include the company’s environmental record and the way it treats its workers, its community and its clients. If you ignore these last two components, escalating risks in the environmental and social justice areas ultimately will cause the company’s financial condition to deteriorate,” he says.

Anderson says that large companies, especially those with household name brands, are magnets for protests, negative news campaigns and boycotts.

“Boycotts produce reputation damage and resemble business interruption risks, yet no insurance is available to cover losses,” he says. “For example, the boycott against Nike for sweatshop conditions in foreign supplier factories adversely affected its revenues and stock prices. Nike now has developed strong sustainability initiatives, including its decision last year to disclose the names and locations of all its 700-plus supplier factories.”

Clearly, businesses ignore environmental and social issues at their own peril. For example, Anderson says that 1.6 million women are bringing against Wal-Mart the largest class action gender discrimination suit ever filed.

“They contend poor treatment, under-compensation and a general lack of promotional opportunities. Other companies paying sizeable gender discrimination settlements recently include Morgan Stanley, Boeing, Merrill Lynch and UBS,” he says.

On the other hand, sustainability risk management can be exceedingly good for the original bottom line, as well as for the environment and for society, Anderson says.

“The business opportunities associated with developing more sustainable operations are enormous. Some of the examples that I discuss in the book are General Electric, Toyota, Fed Ex, Costco, Swiss Re and many others,” he says.

Anderson says that environmental and social risk issues for business have fascinated him his entire career. “However, in recent years it became increasingly clear that sustainability risks were expanding, but I didn’t notice risk managers or corporations paying much attention. Neither the business world, nor the nonprofit environmental, social justice or scientific worlds seemed to be examining sustainability within a corporate risk management framework. I saw that void and tried to fill it with this book,” he says.

Anderson will speak to some campus groups on sustainability risk management this semester — the next one will be a class on systems thinking and sustainable businesses at 7 p.m. on Monday, March 27, in Grainger Hall — as well as to professional organizations aroundthe country.