Ernst & Young: ‘Radical greening’ less risky to business, but CSR demands attention

For each of the past three years, global tax and business compliance adviser Ernst & Young has published something called its Global Business Risk report.

Its latest edition is now available, and while the report indicates that so-called “radical greening” should be less of a concern to businesses, the firm has identified social acceptance risk and corporate social responsibility as a new area that deserves top executives’ attention.

Here are the top 10 risks for 2010. The number in parentheses is the ranking from 2009:

1. Regulation and compliance (2)
2. Access to credit 1)
3. Slow recovery or double-dip recession (unchanged)
4. Managing talent (7)
5. Emerging markets (12)
6. Cost cutting (unchanged)
7. Non-traditional entrants (5)
8. Radical greening (4)
9. Social acceptance risk and corporate social responsibility (new)
10. Executing alliances and transactions (8)

Ernst & Young compiled this report after interviews with more than 70 top executives from 14 different industrial sectors.

The firm’s decision to add social acceptance risk and corporate social responsibility reflects the rise of reputation management as an important concern for companies with global brands and reputations to protect. Here’s an excerpt:

“Some interviewees argued there is now an ethical standard created by pubic pressure that cannot be ignored regardless of legal outcomes. Whether because of ethics or politics, or a combination of both, the risk of unwittingly triggering a backlash has risen in recent years. … Companies need to take account of public viewpoints and rather than dismiss them, work to better inform the public through transparent activities and careful PR management.”

We are witnessing an ongoing high-profile example of this argument in the unfolding BP response to the Gulf oil spill.

In downplaying the potential risk of radical green policies, Ernst & Young notes that this remains a very important long-term concern for businesses. But it actually is just as much of an opportunity as a risk.

“For example, the real-estate sector requires a new generation of buildings with significantly lower carbon and energy footprints, which could imply functional obsolescence of all but the most recent, or recently upgraded, commercial buildings. Likewise, in the telecomms sector, participation in smart grids, lower-consumption handsets, and more energy-efficient outsourcing could create opportunities for companies to gain market share.”