I have a five-minute presentation for accountants and lawyers whose responsibility is to flag business risks for their clients. It takes three questions, and these advisors quickly see threats yet to be included in their client discussions and reports.
Are you raising Environmental, Social, and Governance (ESG) risk mitigation with your private sector clients?
The answer is usually no. ESG is most widely tied to public markets, with the impact investment community taking the lead. The advisors explain that their private company clients tend not to have investors, and many businesses are not public-facing.
Did you know that the supply chain is the business function most exposed to ESG risk?
We talk about how difficult it is to have visibility beyond a company's direct suppliers. And we agree that: as long as there is a connection between businesses and their supply chain, there is a responsibility, and therefore, risk.
At this point, the information is interesting, but the advisors are not sensing any imminent concern or required action. Then comes question three.
What would be the impact of your client losing its biggest customer because they were not sufficiently socially minded?
The light bulb goes off. This risk is material.