Companies are not just about the bottomline

By Dinah A.Koehler (China Daily) Updated: 2015-09-01 07:40

Worst-case scenarios

Negative environmental and social issues can cut projected cash flows and threaten the survival of a business. The tragic consequences of the collapse of a clothing factory in Bangladesh in 2013 had a negative effect that spread quickly across the international clothing and textile industry.

According to the World Economic Forum's annual global risk rankings, the top-five dangers companies face when they do business are:

・ Water crises.

・ Failure to adapt to climate change.

・ Extreme weather events.

・ Social instability and inequality.

The disclosure of serious problems can lead to fines, sanctions or the loss of brand equity. Company CEOs have no alternative but to be mindful of how they work out "intangible assets" on their balance sheets. They have the potential to cause long-lasting financial and reputational damage.

Sustainability threats

Scientists have now reached a consensus that a large number of health risks are concentrated in a small number of industries. While coal-fired power stations remain the biggest source of global carbon emissions and a major driver of climate change, in the US some of the most toxic and carcinogenic chemicals are emitted from aluminum and cement industries.

Increasingly, environmental and health issues in certain sectors pose real economic threats to corporations. This in turn damages shareholder value. While a company can attempt to reduce this problem by altering production methods or product design, it can often be hard to achieve in a global supply chain.

Rewards on offer

Safe and efficient factories reduce insurance costs, create superior working environments, and produce higher-quality products that are bought by consumers.