Production and processing businesses neglect key resource assessment

Businesses are failing to assess and mitigate the risks that could disrupt the availability of natural resources, leaving them vulnerable to significant financial losses.

Production and processing businesses that rely on natural resources, such as breweries, fisheries, and agriculture are at greater risks of natural capital losses (capital derived from natural resources) if they are cut off from or experience a scarcity in resources arising from supply chain disruptions or a natural catastrophe.

Recent analysis estimates that global primary production and processing sectors have unaccounted costs of €5.3trn per year – roughly 13% of global economic output in 2009 – through environmental impacts and unsustainable use of natural resources.

The warning comes after KPMG, Fauna & Flora International and the Association of Chartered Certified Accountants launched a guide to help businesses understand natural capital as a business risk.

Speaking to StrategicRISK, KPMG UK sustainability services manager and lead specialist Dr Stephanie Hime (pictured) said: “Natural capital and [natural resource] dependencies aren’t necessarily incorporated into risk management. Because of that, you don’t see it coming when resources that you take for granted in your supply chain are affected.

“For instance, if you are a brewery you need water, but then water scarcity starts to creep in, and you find that more people are reliant on the same source that you use. Suddenly your brewery can’t rely on that source any more, so you have to truck in water to remain operational.

“These are the sort of threats in the background that will hit you out of nowhere, and are exactly the type of risks that should be considered on your risk register.”