BrazilThe compass of RiskSphere: From sustainability risks to opportunities
With the effects of climate change becoming more pronounced, customers becoming more purpose-driven, and the introduction of strict ESG laws, the business risks around sustainability have never been clearer. New consultancy firm RiskSphere aims to helps organisations manage these risks, as well as guide them through the opportunities that sustainability offers.
As heat records are set worldwide and then broken again, alarming warming events occur at the poles, and fires sweep swathes of land in Europe and North America, it is clear the impacts of climate change are no longer an abstract discussion.
This development has changed the view on sustainability from the boardroom. Organisations can no longer afford to just do ‘a little on the side'; it is now commonly regarded as the greatest long-term risk most businesses face.
But the risks are not just in the future anymore. According to Marsh McLennan’s latest ‘Global Risks Report’, five of the top ten short-term risks are environmental. Among the most frequently mentioned risks were natural disasters and extreme weather – while in the longer term, businesses feared the loss of biodiversity and the collapse of nature ecosystems.
Henk-Jelle Reitsma has been involved with sustainability risk for years. He has seen with his own eyes how the subject has increasingly come to the fore.
“Of course, companies have been working on sustainability in its many incarnations since the 1980s – think of CSR – but ESG and sustainability risk in its current form was still a theme in the background a few years ago,” Reitsma says.
Last year, Reitsma decided to devote himself entirely to the subject – RiskSphere was born. Starting the consulting firm under the umbrella of The Hup, a group of companies that also includes finance consultancy Solid Professionals, Reitsma devised a new firm with one clear “design principle”.
“’Do relevant things, with positive people, with great clients’,” he explains. “The great things we do center around sustainability. This is a theme that appeals to me for two reasons: I find it intrinsically important to contribute to the necessary transition and I find it intellectually challenging to work on a subject that is still in such a state of flux.”
Over 2023, he has built up a RiskSphere team to serve clients across the entire sustainability risk cycle. From insight into the risks and opportunities, via dashboarding and reporting, to improvement and change programmes.
“We have experience and knowledge across the entire cycle,” says Reitsma, adding that the firm can leverage the network of The Hup. “As RiskSphere, we have in-house knowledge and expertise, but where needed we can scale up with the help of Solid Professionals or the large interim community.”
Sustainability has risks and rewards
Much of the client work that RiskSphere does comes from a “regulatory-driven agenda”. This includes helping clients to comply with laws and regulations regarding ESG and sustainability, via stress tests, reporting and data management.
Data management is crucial to the success of sustainability drives. However, even while a growing number of companies tout “science-based” net-zero targets for the coming decades, as many as half of companies estimate an error rate of close to 40%. Such statistics are leading governments to intervene in the development of the sustainability risk field, with Brussels at the forefront.
He notes, “The movement from, among others, the EU and the ECB to place sustainability risk as a core theme for businesses has had an impact which cannot be overestimated. Many major transitions are difficult to create bottom-up alone, especially if they have to be done quickly and consistently. Then public policy is a calibrated tool for initiating, enforcing and driving change.”
“Looking at Europe, the European Commission has clearly made the climate transition a central theme, taking a broader view of ESG.”
This is leading to important changes which will hopefully improve the continent’s drive to greener modes of business. Notably, the EC is using the ECB as a lever to force change via the financial sector, primarily through banks, but secondarily via credit policy.
But Reitsma does argue financial institutions and non-financial companies should not only see sustainability as a compliance theme. There is much more to be gained from it than that. “We think it should also be considered intrinsically important,” he suggests. “Complying with the rules should not become an end in itself, if only because it is really important for companies to reinvent themselves in terms of their business model.”
Sharpen the axe
In any case, for now he is happy that legislation is accelerating the transition towards a sustainable economy. Pointing to the Corporate Sustainability Reporting Directive (CSRD) – the EU’s aim to standardise corporate sustainability disclosure and ensure that investors and stakeholders have access to consistent, reliable, and transparent information on corporate ESG practices – he suggests there is a flourishing awareness among companies that “real action is needed now.”
Reitsma goes on, “RiskSphere is based in financial services, but we are currently actively seeking connections with larger SMEs and smaller corporates in other sectors to offer our knowledge and expertise in the steps that must now be taken there.”
This kind of expertise has proven very welcome, as many of RiskSphere’s early clients have tried to “just start without really thinking about the long-term plan”, or “even more fundamentally – the ‘why’.” According to Reitsma, many businesses are not really sure whether they have commenced sustainability drives just because they want to comply with the rules; because they want to make their organisation future-proof; because they hope it will make them more attractive to talent; or all of the above.
Walking through RiskSphere’s usual process, he notes, “We always enter into a dialogue with the customer in order to identify those motives and to make a plan based on that. Rather think a little longer and then achieve success than immediately get started without a real plan. As Abraham Lincoln said, ‘If I'm given five minutes to cut down a tree, I'll spend the first three minutes sharpening the axe’.”
At RiskSphere, Reitsma assures clients that the proverbial axe is already well-sharpened. Stating the firm is very happy with how things are progressing, he points to how the firm’s website and marketing are quickly gaining momentum, helping to establish an external reputation, and reinforce internal culture.
Looking ahead, he expects this to help the firm make a big difference for years to come – whatever its size.
Reitsma concludes, “Our consultants have a positive impact on clients every day, and we are growing. The ambition is to have eight to nine consultants before the end of the year. Our ambition is not growth in itself, but if it helps to have an impact, then there is room for it. Ultimately, the ambition is in line with my mantra when I started RiskSphere: ‘doing relevant things, with positive people, with great clients’.”
