Hijacking ESG: What risk professionals and their boards need to know

December 1, 2021 · READ

While the term “hijacking” is a somewhat provocative way to describe what’s happening to corporate ESG initiatives, the reaction from attendees at the RIMS ESG/ERM conference confirmed the growing urgency of this issue. Fueled by actors and groups online, social media has turned companies’ ESG agendas into a matter of public discourse that can alter the speed and direction of these initiatives.

Most stakeholders demand higher standards from companies and use social media to hold them accountable. Their intentions on the whole are good as they’re committed to inspiring positive change.

However, in other cases, bad actors take advantage of this well-intended dialogue to forward their own agendas. Their motivations are often inconsistent with, or detract from, what the company is trying to achieve. They prey on companies, overpowering corporate messaging with their digital chatter and hijacking companies’ ESG agendas to inflict considerable damage.

During our session at the RIMS conference, my colleague Dr. Andrea Bonime-Blanc, CEO of GEC Risk Advisory, explained why this is happening and what risk professionals can do to gain an early-warning advantage over the digital chatter of actors and groups who originate or amplify risks to corporate ESG initiatives.

Our session focused on three key assertions:

  1. ESG risks are amplified on the surface, deep and dark web.
  2. Risk intelligence is an essential defense for boards and leadership teams.
  3. You can gain a competitive advantage over ESG risks.

Attendees acknowledged that horizon scanning of ESG risks in real-time is an emerging need, and understanding who is behind the digital chatter in question can provide vital risk intelligence. Through better cross-functional integration internally, and with the help of new risk intelligence technologies, this new type of risk can be quickly identified and mitigated early. What follows is a summary of our presentation for those who may have missed it.

Assertion #1: ESG risks are amplified on the surface, deep and dark web

ESG meet T (technology). This new part of the equation is the accelerant to ESG risk, which Dr. Bonime-Blanc outlines in her latest book, Gloom to Boom: How Leaders Transform Risk into Resilience and Value. While consumers, employees and activists use social media to organize and make change, bad actors and groups can leverage the same technology to fuel destruction.

In fact, a recent Forrester Consulting Total Economic Impact™ study, commissioned on behalf of Resolver, found two-thirds (67%) of companies named social media in their annual 10K reports as a top risk. In addition, they agreed that social media commentary, whether true or false, can negatively affect brand value, reputation and financial performance. Nearly all (99%) stressed the importance of protecting their corporate assets from social media-driven risks: reputation, image, loyalty and equity.

Adverse social media events like these carry a significant value impact on reputation. As Aon illustrated in its report on Reputation Risk in the Cyber Age, that impact has doubled “since the advent of social media.” Speed is certainly a determining factor as is the sheer reach of social media to engage millions of people with information, whether true or false, about a company. While some leadership teams can turn lemons into lemonade and increase market value (20%) from these crises, others record a 30% decrease in market value. The bottom line is the risks are real and measurable.

Adverse social media events like these carry a significant value impact on reputation

Assertion #2: Risk intelligence is an essential defense for boards and leadership teams

Risk intelligence provides an essential defense leadership teams need organizationally and personally as social issues gain mainstream attention. In fact, a recent Wall Street Journal article titled “CEOs ignore social issues at their own peril” illustrated the very real impact ignoring social issues can have, not only to the business, but also to a CEO. The study cited in the article suggests that leaders are more likely to be fired for riling shareholders about social, rather than financial, concerns.

It’s no wonder the previously mentioned Forrester study of annual 10-K reports showed 100% of them acknowledged the rising importance of ESG to investors, customers, employees and regulators. This matches the expectations raised in a report by USC Annenberg’s Center for Public Relations, which showed activist, employee and consumer demands are not only rising for businesses to play a greater role in society, their expectations are also rising for CEOs to take public stand on social issues.

Considering that not every actor or group will agree with the stand CEOs take, company leaders find themselves in a delicate situation where rising expectations have now converged with two other trends to create three key drivers of today’s accelerated risk landscape:

  1. The perpetual state of crisis management: Companies and their leaders are encountering a higher frequency of known and also unknown risks originated or amplified by actors and groups via social media.
  2. The growing demands of stakeholder audiences: As previously noted, an expanding horizon of stakeholders, interwoven with bad actors and agenda-driven groups, are publicly pressuring companies to act faster than ever before.
  3. The scale and velocity of digital chatter: When you consider that 4.48 billion people now have access to social media globally, which amounts to an average of 8.8 social media accounts per person, the ability for companies and their leaders to keep pace with the speed at which digital chatter moves is nearly impossible.

Company leaders are getting wise to this not-so-perfect storm of risk factors. Resolver recently surveyed more than 100 corporate leaders, the majority CEOs from companies with annual revenues in excess of $1 billion, on this topic. The most staggering finding from the Corporate Leaders Risk Survey was that more than three-fourths (77%) of CEOs said they believe more companies will be targeted by organized groups online or internet savvy actors intent on damaging their brand within the next year.

Unfortunately, organizations are struggling to put up a strong defense.

Ceos are struggling to put up a strong defense against risky actors and groups

Assertion #3: You can gain a competitive advantage over ESG risks

Boards are becoming increasingly educated on the accelerated risks and expanding risk oversight needed to combat this challenge. In response, the same study referenced above found that 72% of corporate leaders agree investments in new risk intelligence solutions will increase within the next 12 months.

Risk intelligence remains a critical component for organizations looking to build better organizational resilience models. The virtuous resilience lifecycle, presented by Dr. Bonime-Blanc, provides a framework for addressing the modern-day challenges facing corporate ESG initiatives. Conversely, failing to put in place the right components for identifying and mitigating these risks can have very real consequences.

Building better organizational resilience models that prioritize risk intelligence

Questions every risk committee should ask themselves

Risk readiness begins with deep reflection and candid conversations across the organization. Below are a few critical questions to jumpstart these conversations with your leadership team:

  1. Is your organization scanning the horizon for these new types of ESG risks? (Or, only searching for what’s historically been captured in your risk register?)
  2. Has your ESG agenda been seized or manipulated by actors or groups? (And, would you know if it was?)
  3. Has an effective risk intelligence solution been adopted to address digital chatter? (And, is it an interdisciplinary approach?)
  4. If so, does your risk intelligence solution scale effectively, detect what matters and exclude what doesn’t? (Both AI and human intelligence are needed.)
  5. How is ESG risk intelligence currently escalated, shared and incorporated? (In other words, are you always first to know and first to act?)

Companies and brands who’ve succeeded in today’s highly polarized marketplace have embraced new resilience models that prioritize an actor-centric approach to risk intelligence, which delivers a new competitive “early warning” advantage over individuals and groups who threaten their ability to successfully advance ESG agendas.

Resolver’s actor-centric approach has redefined the way companies identify and mitigate risks. Our Risk Intelligence Graph analyzes millions of digital conversations in real-time, revealing the hidden relationships between individuals and groups in order to predict customer impacts as early as possible. This is an essential best practice for contemporary executives and the organizations they lead.

In addition to living their ESG values effectively, the Forrester Consulting TEI study found that Resolver customers reduced the impact of a crisis by 40 percent, prevented one per year, and achieved a 572% ROI.

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