IWA 48:2024 4.2.2: Build a risk and opportunity framework on value creation principles with leadership, integration, design, implementation, evaluation and improvement

What does 4.2.2 require?

The organisation's way of handling ESG risk and opportunity has the marks of an effective approach: it is holistic, relating the organisation's activities to the world around it; systematic and complete, so results are consistent and comparable; tailored and proportionate to the organisation's ESG objectives; inclusive, bringing interested parties in at the right time and listening to them; and dynamic, spotting and answering change as it happens and reporting promptly when a material impact changes in scale. It rests on the best information to hand, credible and scientific where possible, with assumptions, limits and uncertainties stated; it respects how behaviour and culture shape risk judgements at every level and stage; and it keeps learning. The framework asks the organisation to find, assess, manage and report the risks and opportunities it creates for the environment and for society, its nearby and more distant communities included, to draw on the perspectives of every relevant party, and to be resourced by senior management under an ESG roadmap. Because the view is outward-facing it needs tools such as environmental risk assessment and social impact assessment, benefits from joint work within the sector on credible evidence and shared data, and keeps scanning the horizon and the market for emerging exposure; topics including the climate, nature, human rights, forced labour and equality, diversity and inclusion are examined upstream and downstream as well as in-house. Setting the framework up is a governance task: leadership and commitment from the top with resources at every stage, integration into every part of the organisation in the light of its structure, risk culture and context, design that names accountable people and teams, implementation through resourced and authorised plans, policies and procedures within the ESG risk appetite and informed by interested parties, periodic evaluation of whether the framework works with the power to step in, and improvement from lessons learned. The governing body builds the culture for handling risk and opportunity, weighs, treats, monitors and communicates the risks and opportunities in its own decisions, and oversees the whole activity.