Ghanaian businesses must align vision with strategy to mitigate ESG Risks – KPMG

Bernard Owusu-Ansah

Bernard Owusu-Ansah, a Manager with KPMG Ghana’s Governance, Risk and Compliance Services (GRCS) unit, has urged Ghanaian businesses to first align their organisational vision with their strategy to effectively mitigate Environment, Social, Governance (ESG) risks in their businesses.

 

Mr. Owusu-Ansah made this call while speaking during a UK-Ghana Chamber of Commerce (UKGCC) webinar with KPMG Ghana on “Mitigating and Managing ESG Risks: Building Resilience for a Sustainable Future”.

 

According to Mr. Owusu-Ansah, recent studies indicate that over 70% of companies globally are now exposed to moderate to high ESG risks. This exposure makes businesses more vulnerable to ESG-related impacts that may weaken their ability to withstand and adapt to operational and financial shocks.

 

Environmental risks involve potential adverse impacts from the natural environment, such as extreme weather conditions, pollutions and emissions and resource scarcity. These risks can affect a business’s reputation, financial performance, and long-term sustainability. Social risks, on the other hand, are challenges related to a business’s impact on its workforce and communities. These include non-compliance with labour standards, inadequate compensation, or insufficient health protection for employees. Governance risks refer to issues around governance structures, ethical practices, and overall corporate conduct.

 

To effectively manage these risks and strengthen business resilience, Mr. Owusu-Ansah remarked that, “It all starts with your strategy.

 

“Everything starts with strategy, and cascading your vision and ambition through the organisation, because if you are implementing a corporate strategy that runs parallel to your risk approach, you’re going to have a lot of issues”.

 

He advised that businesses first establish a vision which that incorporates ESG principles, then consider available opportunities in the strategy.

 

Following this, business leaders must define the ESG ownership from the board level. Here, Mr. Owusu-Ansah cautioned that whoever is appointed to own ESG in the business must be able to quantify how the business is benefiting from the ESG strategies that have been implemented to counter a potential perception that the business is ‘wasting money’.

 

He stressed, however, that “Risks are not always counter-productive to the business; they can also create opportunities.

 

“You can thrive by using risk as a competitive advantage or by developing new products that exploit these risks”, he explained.

 

 

 

 

How to align vision with strategy

 

To align your business’s vision with its strategy, Mr. Owusu-Ansah suggested that companies may assess their risk landscape and identify who matters to their objectives (i.e. key stakeholders) such as investors, regulators, community members, employees, customer and the supply chain.

 

“It is important to consider the community in which you operate because it is not only about the financial impact on your business. For instance, there are powerful people, leaders and social influencers in communities who can change public opinion about your business. It is essential to understand and consider what matters to these people”.

 

He further advised businesses to focus on material issues that matter to their business, clarifying what they seek to achieve with ESG as a function, i.e. if they want to be simply compliant with regulations, strategic, or transformative with their entire operating model; and consider both the local and international regulatory landscape.

 

“There are a lot of issues. You cannot tackle everything simultaneously, but prioritising those most material to your business, and leads to what your ambition is”, he said.

 

ESG: Opportunities and Challenges

 

ESG also presents opportunities such as enabling businesses to grow and innovate with new products and services, making it attractive to businesses leaders.

 

However, challenges such as integrating ESG with corporate strategy, a complex regulatory environment, and difficulty in defining what is sustainable, in addition to responsibility for reporting and measurement amongst others, can make its adoption arduous to several companies.

 

Despite these challenges, Mr. Owusu-Ansah emphasised that adopting ESG principles and managing its related risks is worthwhile.

 

“ESG is ultimately about doing the right thing. If you set out to do the right thing in every aspect of your business, you will realise that you are complying with most of the regulations, regardless of where your business extends to”.

 

The webinar, moderated by Emma A. Opoku-Pare, an Assistant Manager with KPMG Ghana’s Financial Risk Management Unit, also covered topics such as ESG risk drivers, Enterprise Risk Management Frameworks, creating value from ESG, risk identification and materiality assessment, and prioritisation and mitigation strategies, among others.