Sustainability-related Risks Research Articles

Prepare for the sustainability era: A quantitative risk analysis model for container shipping sustainability-related risks

Environmental, social, and governance (ESG) issues have attracted global stakeholders' attention, reflecting the focus of sustainability development in this sustainability era. Container shipping is confronted with a wide spectrum of sustainability-related risks during the ESG transformation. Theoretically, this research identifies 36 sustainability risks of container shipping, establishes a customised evaluation framework for container shipping sustainability risks, and quantifies the risks regarding their threatening levels. The five most threatening risks are ‘reinforcement of international emission control policy’, ‘global climate change’, ‘shipping equipment failure’, ‘fuel price volatility’, and ‘ship violates the emission control policy in port area’. The results show that the long-term likelihood as well as environmental and profit impacts of sustainability risks are the most important criteria. Managerially, this research shows that environmental risks are generally the most prioritised risks, while social risks are not significantly impactful to container shipping companies. However, among the social risks, seafarer-related risks are worth paying attention.

Risk management strategy for supply chain sustainability and resilience capability

Supply chain sustainability-related risks that have an undesirable environmental, social and economic impact result in global supply chain uncertainty and complexity. This paper investigates the relationships between supply chain sustainability risks, global uncertainty and mitigating strategies to attain supply chain resilience capability. The paper suggests the supply chain resilience capability and four fundamental risk-mitigating strategies to cope with supply chain sustainability risks. Data collected via survey were employed for structural equation modelling and moderation tests to explore appropriate mitigating strategies for differing sustainability risk environments. The results suggest a structural procedure for better supply chain resilience under diverse sustainability risks. Inspired by the literature gap, the study empirically examines how sustainability risks and global uncertainty influence supply chain resilience and provides the most effective risk management strategies among accept, avoid, control, share/transfer according to different sustainability risks. There is a lack of empirical research investigating how to address the supply chain sustainability risk through the provision of effective mitigating strategies for better supply chain resilience capability. The results provide insight for future research in supply chain resilience and sustainability studies.

New Connections Between Integrated Reporting and Intellectual Capital: Future Research Implications in the Context of Sustainability-Related Information

Purpose: The objective of this study was to identify new links between Integrated Reporting (IR) and Intellectual Capital (IC) fields, useful for sustainability and climate change disclosures with ISSB standards. Theoretical Framework: The literature that has integrated IC and IR fields has been developed, mainly from the IC research perspective, addressing a wide range of thematic specializations that emerge when analyzing the research areas. Design/Methodology/Approach: We developed a Structured Literature Review (SLR) of articles indexed in Scopus, which allowed us to build a specific analytical framework from emerging categories; we rely on AtlasTi and VOSviewer software. Findings: We found that the literature converges towards the following research areas: Reviews and reflections on the IR framework as a means for IC disclosure; Proposals to improve the IR framework and IR disclosures through IR; The IR framework and definition, measurement, and management of IC within organizations; disclosures of CI in contexts of practical adoption of RI; Disclosure of IC through IR, its determinants, and effects. Research, Practical & Social Implications: We identified the need to advance research under a performative approach, research on stakeholder satisfaction by revealing IC through IR and the relationship of IC with information related to sustainability in the new ISSB context. The paper identifies previously unexamined connections between IC and IR and proposes future avenues of research. Originality/Value: This study raises the need for increased policy research to define a common language for presenting comparable IC information in ISSB sustainability reports. In addition, studies are needed to help identify IC information, other IR capital and metrics, which could represent material information for investors to assess sustainability-related risks and opportunities.

Kajian Praktik Manajemen Risiko terkait Sustainability pada Divisi Produksi: Studi Kasus pada PT XYZ

Sustainability is one of the things that corporations pay attention. Many parties have deep concerns about future generations makes corporations obliged to take sustainability seriously. One of the things that can be considered by corporations is their production process. Production activities are processes that are carried out by a corporation to transform inputs into outputs. This production process is prone to risks, where the risks in production activities can threaten a corporation on long-term vision or sustainability. So, it is important to carry out risk management about sustainability-related risks in the corporation production process. In this study, the object of the research is PT XYZ, a company that produces educational aid, PT XYZ was founded in 1970 but until now PT XYZ does not know about sustainability-related risks, especially in their production. Therefore, this research will help PT XYZ in conducting risk assessment, and risk analysis, and providing recommendations for risk mitigation with FMEA and cause and effect analysis. The result of the study showed that a risk production budget exceeding was the highest risk with an RPN of 114.59.

Practices and strategies for sustainability-related risk management in multi-tier supply chains

This study investigates how sustainability-related risks are managed in multi-tier supply chains. It focuses on the strategies and practices that companies use to manage sustainability-related risks and how these differ between supply chains and supply chain tiers. We use a multiple-case study with 25 companies forming 5 multi-tier supply chains. As a result of this study, we present a conceptual framework for sustainability-related risk management practices in multi-tier supply chains and apply it empirically by defining sustainability-related risk management profiles for the case supply chains. We show that in multi-tier supply chains, companies need direct and indirect collaboration and direct and indirect monitoring practices for managing sustainability-related risks emanating from not only their first-tier suppliers but also lower-tier suppliers. Our framework helps purchasing and supply chain managers understand the dimensions of sustainability-related risk management in a multi-tier setting and develop strategies and practices for mitigating and managing those risks. We also empirically show the challenge of extending sustainability-related risk management practices beyond first-tier suppliers due to the different practices in different supply chain tiers.

Integrating ESG risks into value-at-risk

This study addresses the regulatory request for sustainability-related risk integration into traditional financial risk measures. We propose a new risk metric that combines a traditional market risk measure expressed in terms of Value-at-Risk (VaR) and environmental, social, and governance (ESG) factors. The new metric, VaRESG, considers the orthogonality of the ESG criteria with fundamental variables, applying a perturbative approach and an entropy function of ESG factors. The pilot empirical application relies on a financial portfolio comprising approximately 3000 equities. The results show the predictive power of VaRESG to reduce unexpected losses (i.e., out-of-VaR). The results were confirmed especially under stress conditions, when the values of losses were higher (in terms of magnitude). To the best of our knowledge, this is the first attempt in the financial literature to effectively integrate ESG risks into the VaR measure to predict the expected losses of an equity portfolio. The measure of VaRESG can be useful to asset managers and institutional investors to reduce unexpected losses, and to supervisors interested in increasing the level of accuracy of VaR estimations.

Facing new security threats in an era of global transformations: Turkey's challenges of energy security, climate change and sustainability

ABSTRACT Turkey's geopolitical position at the intersection of numerous conflict-laden regions has compelled Ankara to prioritize hard security concerns in defining its foreign and domestic policies. While these concerns will maintain their significance, new global threats and opportunities, particularly in energy security, climate change, and sustainability, necessitate a reconceptualization of security. This study posits that this new conceptualization must be more comprehensive by integrating these new challenges into conceptions security. After presenting pressing transformations in the energy security and climate change realm, the critical puzzle that the article will explore is Turkey's main challenges and opportunities in meeting its rapidly increasing energy needs on the one hand and facing mounting climate change and sustainability-related risks on the other. Moreover, the study will examine the domestic and foreign policy implications of these transformations in times of global changes and uncertainties.

Sustainable financial services: reflection and future perspectives

Sustainability transformations in global financial services aimed at addressing sustainability-related risks have been long overdue and are critical for the future development of financial services. The call for sustainability transformations in financial services arose out of the Paris Agreement and the UN Sustainable Development Goal agenda. The financial services sector plays an important role in providing sustainable financial services to nudge sustainability practices among firms and consumers around the world. However, efforts for sustainability transformations among financial service providers are still slow, and little research has been documented in this area. So far, no bibliometric analysis has been conducted in this area as well. Therefore, this research undertakes a comprehensive snooping review of extant sustainable financial services research in order to establish a trend of existing financial services sustainability activities to enhance future research possibilities. Our comprehensive review of the Scopus database was guided by the PRISMA protocols, including PRISMA-P and SPAR-4-SLR. Bibliometric and content analysis approaches were also employed as analytical tools within an analytical framework. This study has also employed Microsoft Excel and the VOSviewer tool in conducting performance and science mapping analyses. After article filtering for “sustainability” was conducted, a total of 103 research documents published between 1991 and 2022 were identified as usable samples, which were critically reviewed and analyzed in this study by means of content analysis. Three major themes were investigated, including—sustainable financial products, sustainable financial services delivery, and sustainable financial services marketing strategies. Our findings show a recent growth in academic publications in the area, but also indicate relatively low financial sustainability activities around the world. This research therefore aims to provide present and future innovative insights on sustainable financial services aimed at stimulating more financial institutions, financial service managers, policy makers, and academic researchers to take more action toward greater sustainability development activities in the financial services sector.

Stochastic framework for carbon price risk estimation of real estate: a Markov switching GARCH simulation approach

PurposeThe risk management of transitory risk for real assets has gained large interest especially in the past 10 years among researchers as well as market participants. In addition, the recent regulatory tightening in the EU urges financial market participants to disclose sustainability-related financial risk, without providing any methodological guidance. The purpose of the study is the identification and explanation of the methodological limitations in the field of transitory risk modeling and the logic step to advance toward a stochastic approach.Design/methodology/approachThe study reviews the literature on deterministic risk modeling of transitory risk exposure for real estate highlighting the heavy methodological limitations. Based on this, the necessity to model transitory risk stochastically is described. In order to illustrate the stochastic risk modeling of transitory risk, the empirical study uses a Markov Switching Generalized Autoregressive Conditional Heteroskedasticity model to quantify the carbon price risk exposure of real assets.FindingsThe authors find academic as well as regulatory urgency to model sustainability risk stochastically from a conceptual point of view. The own empirical results show the superior goodness of fit of the multiregime Markov Switching Generalized Autoregressive Conditional Heteroskedasticity in comparison to their single regime peer. Lastly, carbon price risk simulations show the increasing exposure across time.Practical implicationsThe practical implication is the motivation of the stochastic modeling of sustainability-related risk factors for real assets to improve the quality of applied risk management for institutional investment managers.Originality/valueThe present study extends the existing literature on sustainability risk for real estate essentially by connecting the transitory risk management of real estate and stochastic risk modeling.

Analysis and prioritization of risk factors in the management of Halal supply chain management

In the competitive globalized market, risk management is an important aspect of the supply chain, but it becomes crucial to the management of a faith-based supply chain. The halal supply chain is an emerging research era at an early stage. To retain the halalness from procurement to end customer, this research was aimed to identify and prioritize the important risk elements for managing the HSC. For this purpose, a literature review was studied, 42 risk factors, classified into seven dimensions, were categorized with the expert’s opinion. A fuzzy best–worst method was proposed to analyze and prioritize the risk elements. The results indicated production-related risks are highly significant and sustainability-related risks are the least important among risk elements in the Halal supply chain. This research makes a major contribution by compiling a detailed list of risks associated with Halal supply chain management. It may also assist the manager in mitigations of risks for the Halal supply chain on a priority basis.

Modeling Supply Chain Sustainability-Related Risks and Vulnerability: Insights from the Textile Sector of Pakistan

Abstract Sustainability-related risk and vulnerability management have attained significant attention from academia and industry. Manufacturing industries in developing countries such as Pakistan are under severe economic pressure and striving to boost sustainable supply chain practices for achieving business excellence. In this context, the objectives of the present research are to examine the critical supply chain risks associated with sustainable development goals, namely social, economic, and environmental factors. The failure mode and effect analysis (FMEA) technique is employed for categorizing the risk factors and Pareto analysis for highlighting the more crucial and risky factors. For this purpose, a large-scale survey was carried out in the textile industries of Pakistan to develop a risk mitigation model for sustainability-related risks and vulnerability in a textile supply chain (TSC). It captures the input expressions of experts for risk factors, namely severity (s), occurrence (o), and detection (d) for calculating the risk priority numbers (RPNs) of identified alternatives. The results depict that endogenous environmental risks categorize as the most significant for the textile manufacturing industries, and the interfaces between the various risks associated with sustainability-related are also found very high. This study would be a toolkit for the industrial managers and policy-makers for creating sustainable manufacturing culture on organizational premises.

Evaluating the risk exposure of sustainable freight transportation: a two-phase solution approach

A combination of sustainability-related regulations and increased demand from stakeholders has pressed firms to adequately address sustainability-related risks. This issue is particularly important, and challenging, for the freight transportation sector due to its exposure to a large number of inherent sustainability risks. Despite the growing significance of sustainability risks, there is a lack of research related to sustainability risk management, which may be due to the difficulties in identifying and evaluating sustainability risks. We aim to fill this research gap by identifying, measuring and modelling sustainability risks in the context of freight transportation. Our research makes three primary contributions. First, we introduce the concept of a sustainability risk index (SRI) to understand the risk exposure of freight transportation systems (FTSs) in the context of India, an emerging market. The SRI is a mathematical tool used to measure sustainability risks and to quantify a firm’s exposure to sustainability-related risks. Second, we propose an integrated two-phase model based on an interval 2-tuple linguistic model and a digraph matrix approach to calculate the SRI. In contrast to other existing techniques, the proposed approach can effectively deal with uncertain and incomplete linguistic assessments without suffering a loss of information. Third, we propose a framework for calculating both the disruption scores and influencing power of sustainability risks to evaluate the associated criticality and triggering power. For a robustness check, we also conduct a sensitivity analysis of the impact of risk variations on the SRI. Unlike conventional perceptions, our results show that organisational and governmental risks, which are mostly behavioural and skills-induced, are more significant for sustainable FTSs compared to financial risks. Our research helps the managerial community in the freight transportation sector in emerging markets to engage in more informed decision-making to proactively mitigate sustainability risks, which have potentially devastating financial, environmental and societal impacts.

Policymakers, BigFintechs and the United Nations Sustainable Development Goals

This paper - part of a series from the UN Taskforce on Global Digital Finance Governance - examines existing regulatory frameworks relating to digital finance platforms - BigFintechs (BFTs) - and their positive and negative impacts on the United Nations Sustainable Development Goals (the SDGs), with a particular focus on regulatory initiatives in relation to or originating from developing countries. The paper begins by highlighting the significant potential of BFTs in contributing to the SDGs through financial inclusion and provision of financial services. However, BFTs also create unique risks to the financial system as a result of platform economics and tendencies toward market concentration and dominance, misuse of data and gaps in existing regulatory standards. In response to these risks and opportunities, domestic and international policymakers have developed a range of regulatory approaches to digital technology, finance and sustainable development. Most of these regulatory processes and approaches are not specifically focused on BFTs or the SDGs; they also do not specifically address issues from a developing country perspective. Further, while regulators and policymakers are now focusing on digitization and sustainability-related risks, so far there appears to be little synergy between the governance of BFTs and the pursuit of the SDGs. To better understand the scope and limitations of existing regulatory approaches, this paper considers two aspects. First, the paper examines regulations relating to economic activities, structures and impact of BFTs, with a focus on financial, data, competition and Internet/telecoms regulations. The existing regulatory processes address some of the challenges brought by BFTs, including risks to financial stability (i.e. systemic risk considerations), market dominance and concentration, data protection and Internet/telecommunications licensing. At the same time, existing regulatory responses to BFTs are not consistent across jurisdictions, leading to problems with extraterritoriality of domestic laws and regulatory fragmentation. Further, regulators often have limited technical expertise and experience in dealing with BFTs and are grappling with providing effective answers to risks generated by BFTs. Second, the paper examines regulatory initiatives relating to the SDGs. To date, most sustainability-related initiatives have been developed in the context of environmental, social and governance frameworks (ESG) rather than the SDGs. Our review concludes that an array of domestic and international policies has emerged to address sustainability-related risks, rather than to support sustainable development in a holistic manner. The proliferation of such different standards, however, creates regulatory uncertainty and a lack of clear standards for ESG/SDG governance. While several jurisdictions such as the EU have attempted to standardize ESG/SDG governance, there is still no coherent approach to ESG/SDG reporting and supervision. In addition, the majority of existing ESG/SDG governance standards are voluntary or insensitive to the impact of technology. Based on the analysis of the BFT and SDG processes and regulatory approaches, we highlight the gaps that need to be addressed by relevant stakeholders. First, regulators should promote greater consistency among international and national regulatory standards. This point is particularly relevant in the context of developing countries that may struggle to comply with varying international standards and approaches. Second, considering the broad scope of BFT business models, regulatory bodies should promote greater synergy and cooperation in their work. Third, regulators in developed countries should pay greater attention to the interests and needs of developing countries to support their pursuit of sustainable development. Fourth, regulators should adopt balanced and proportional regulatory approaches for fintech companies and services to address new risks created by BFTs. Specific ways to address such gaps are discussed in Technical Papers 3.2 and 3.3.

Prioritizing risks in sustainable construction projects using a risk matrix-based Monte Carlo Simulation approach

Sustainability-related risks and risk management frameworks have been introduced in the literature to help project managers identify and manage critical risks influencing project sustainability. Theoretically grounded in the framework of Monte Carlo Simulation, this paper introduces and operationalizes a new process for prioritizing sustainability-related project risks using risk matrix data. Sustainability-related construction project risks have never been assessed relative to different confidence levels across the risk matrix-based exposure zones. The application of the proposed process on construction projects completed in the United Arab Emirates reveals that the conventional risk prioritization scheme undermines the importance of tail risks (unexpected events), whereas such risks are captured in the proposed process. In contrast to the most critical risks identified using the conventional scheme such as shortage of client’s funding, insufficient or incorrect sustainable design operation, and design changes, the proposed process prioritizes risks such as poor productivity of labor and equipment in sustainable construction, unreasonable tight schedule for sustainable construction, and poor scope definition of sustainable construction. The proposed process is generalizable to prioritizing risks influencing sustainability in international construction projects and beneficial for enhancing project sustainability as there is a huge uncertainty associated with sustainability-related risks.

Assessment of risk in the management of Halal supply chain using fuzzy BWM method

ABSTRACT In the volatile globalised market, risk management of the supply chain is essential, but it becomes vital to the management of faith-based supply chains. Therefore, this study aims to identify and prioritise risk dimensions and their associated risk elements as required for managing a Halal supply chain. Initially, 42 risk elements of the Halal supply chain are identified through literature review and categorised into seven dimensions with the opinion of an expert team. Further, fuzzy BWM is applied to prioritise these risk dimensions and associated risk elements. The finding suggests that the production-related risks are highly significant, while sustainability-related risks are least significant among the identified risk dimensions in the Halal supply chain management. The mitigation of the production- and planning-related risks is to be addressed on priority. This study’s significant contribution is to provide a comprehensive list of risks related to the Halal supply chain management and their prioritisation towards effective management of the same.

Compliance and Risk Management Committee

Compliance with laws and regulations applicable to the company’s business activities and identifying and managing the risks associated with those activities are two of the fundamental duties and obligations of the board of directors. The emergence of sustainability as a new factor for consideration in boardrooms has expanded the compliance duties to include adherence to voluntary standards that the board has committed to with respect to governance and environmental and social responsibility and broadened the definition of risks to include environmental and social issues and challenges. While creating a separate board committee to focus on compliance and risk management is not a new phenomenon, such committees have grown in importance and this chapter covers the role of the board and such committees in developing and overseeing compliance programs, elements of effective compliance programs, risk assessments and enterprise risk management systems and sustainability-related risks.

The governmentality of corporate (un)sustainability: the case of the ILVA steel plant in Taranto (Italy)

The present research aims to investigate the role of states in governing the sustainability trajectories and decisions of companies and their local communities. Drawing on Dean’s (Governmentality: power and rule in modern society, SAGE, London, 2009) “analytics of government” as the theoretical framework, the paper focuses on detecting how the Italian Government “problematised” the sustainability-related risks associated with the ILVA steel plant in Taranto, whose levels of pollution have worried both the Italian authorities and the European Union Commission. The analysis also considers the “regimes of governance” under which the risks have been addressed and then explains the “utopian ideal” that the Italian Government tried to achieve by allowing the company to continue its activity, contrary to the Italian Judiciary’s provision to halt the hot working area of the steel plant in July 2012. Patterns related to Dean’s framework were identified through an iterative process of manual elaborative coding of the official documents ascribable to the main actors involved in governing the sustainability-related risks at ILVA. The findings show that the Italian Government took its decisions on ILVA in the name of relevant risks of unemployment, economic development and territorial competitiveness. The Italian Government adopted several practices of governance to make these risks more “visible” and to silence the environmental and health risks that, otherwise, would have emphasised the unsustainability of the business activities. The paper extends the growing body of research that investigates corporate (un)sustainability practices by showing how states may directly influence sustainability-related corporate risks in the name of a higher public interest.

Sustainability-related risk management in buying logistics services

PurposeSustainability-related risk management of logistics service providers (LSPs) is an essential part of sustainability performance of focal companies, as logistics services touch the entire supply chain (SC) – from raw material sources to end-customers. The purpose of this paper, draws on resource-based view and stakeholder theory in exploring how companies can manage environmental and social sustainability-related risks from logistics service suppliers. This kind of capability is essential in order to maintain reputation in the eyes of stakeholders, and to maintain long-term financial performance.Design/methodology/approachThe data of this multiple-case study were collected from semi-structured interviews in eight case-companies in Finland. Five of the cases are primary logistics buyers, and three represent LSP companies.FindingsThe cross-case analysis showed that primary buyers of logistics services use their sustainability criteria as a prerequisite for LSP candidates, and when the level is adequate and equal, other factors, e.g. price and capacity, are decisive. Based on the analysis, large LSPs are preparing for the future competition, and act in a more sustainable manner than their customers (buyers) expect at the moment, while small LSPs strictly comply with the regulation. However, buyers’ requirements for sustainable logistics services are increasing as the stakeholder expectations for comprehensively sustainable SCs are growing.Originality/valueOnly little research has been conducted on sustainable logistics from the buyer company’s risk management perspective. This paper adds the knowledge of sustainability-related risk management in purchasing of logistics services and in the logistics industry.

The Heterogeneity of Board-Level Sustainability Committees and Corporate Social Performance

This paper explores an increasingly prevalent element of board-level commitment to sustainability. We propose a theoretical framework under which the existence and associated actions of board-level sustainability committees are motivated by shared value creation, where the interests of a diverse group of stakeholders are satisfied and sufficient profit is achieved. Using hand-collected data, we find that sustainability committees are heterogeneous in focus and vary in their effectiveness. Specifically, we disaggregate the sustainability committee construct based on stakeholder group focus (i.e., community, employee, environment, and consumer/supplier) and find that associations between sustainability committees and performance outcomes are stronger when committees focused on a specific stakeholder group are paired with relevant performance outcomes. We generally find that sustainability committees are effective at impacting relevant strengths, but do not mitigate relevant concerns. These results are consistent with the shared value framework, where committees both generate value by pursuing sustainability-related opportunities and protect value by monitoring, but not necessarily mitigating sustainability-related risks. Univariate tests suggest that effective committees are also larger, more independent, and meet more frequently. Finally, we propose a new method to classify industries based on their sensitivity to certain stakeholder groups and find that the effectiveness of committees focused on specific stakeholders is more pronounced in industries that are sensitive to these stakeholders.

Supply chain sustainability: A risk management approach

This paper develops an operational perspective of supply chain sustainability, by considering it as a risk management process. It explores the nature of sustainability-related supply chain risks, distinguishes them from typical supply chain risks and develops an analytical process for their management. An empirical study is conducted to generate insights about how sustainability-related risks should be managed in an integrated way. A mixed method approach is adopted for data collection and analysis. Through an extensive literature review and personal interviews, 30 risks across the three main pillars of sustainability (environmental, social and economic) are identified first. A large survey across different industrial sectors and two exploratory empirical case studies in two textile manufacturing companies are subsequently conducted to assess and analyse several dimensions of sustainability-related risk. The failure mode and effect analysis (FMEA) technique is utilised to assess the relative importance of the selected risks, to identify their potential causes and effects and test potential correlations between the identified risks. Based on the findings of the study, risk treatment strategies are proposed for all the identified sustainability-related supply chain risks. The findings show that endogenous environmental risks are perceived to be the most important across different industries and the interconnectedness between several sustainability-related risks is very high. This points to the need for integrated sustainability risk management approaches to facilitate the development of effective sustainable strategies.