Every year, the World Economic Forum (WEF) publishes its Global Risks Report, widely recognised as the most comprehensive and authoritative guide to the biggest challenges facing society and the planet. In the report, risks are allocated into one of five categories—economic, environmental, geopolitical, societal, or technological—and then assessed by the WEF’s global community of experts. And this year marked something of a watershed moment: For the first time since the report’s inception, all of the top five global risks, when ranked by likelihood, were environmental in nature.
There’s a good chance, however, that your clients haven’t yet received that particular memo. In a recent report, we surveyed 150 senior buyers of consulting services in the US, and asked them to plot the WEF’s five categories onto a risk matrix, thinking specifically about the context of their organisation. Environmental risks ranked relatively poorly both on scale of impact and likelihood; clients, on average, felt that their organisations were more exposed to cyberattacks and financial shocks than to resource shortages and extreme weather events.
It is hardly surprising, of course, that there would be a lag between the perceptions of risk specialists and those of the wider business community. But this does present something of a challenge for consulting firms—particularly those that are placing big bets on sustainability services. While we should be careful not to make the mistake of seeing sustainability as a purely risk-driven agenda, it is undeniably true that clients who have a better appreciation of the environmental—and societal—risks on the horizon will be more willing to spend money on insulating themselves from them.
Clearly, consulting firms have an education challenge ahead of them. For much of the last decade, leading firms have been impressing upon their customers the need to take cybersecurity seriously—likely a major reason why technological risks now figure so highly in client thinking. Now they need to do the same for sustainability-related risks. And we believe there are two things that firms can do to help accelerate that process.
Firstly, consulting firms have a key role to play in contextualising these issues squarely in the here and now. One reason why so many clients underestimate the relevance of environmental risks to their organisations is that these risks tend to be presented as slow-burning, multi-decade problems; discussions about climate change, for example, are often framed in relation to how much global temperatures will rise by 2050. But most client organisations—outside of a few specific sectors—simply aren’t used to thinking on those timescales. And so the job of the consultant is to reframe the conversation, and to highlight the more immediate ways in which these risks might manifest themselves. Clients might be unlikely to measurably feel the impact of climate change in 2021, for example, but they could easily be caught unprepared by a sudden shift in their government’s climate policy.
The second way that firms can start to shift client perceptions involves chiselling away at the very idea of discrete risk categories itself. While categorisation models like that used by the WEF can help us to organise our thinking about specific issues, they necessarily smooth over some of the complexities of those issues. Indeed, COVID-19 provides the perfect example of how these different categories of risk can intersect with one another: A societal crisis—the pandemic—very quickly led to an economic one. More people working from home has opened up new cybersecurity vulnerabilities, and in many countries, political instability has increased as a direct result of the pandemic.
Similarly, clients will be more likely to invest in environmental consulting if they understand how environmental challenges intersect with other sources of risk. If climate change causes a new migrant crisis, that will inevitably lead to geopolitical conflict; if new environmental regulations make the mining of rare earth metals more expensive, that will have significant knock-on effects on the costs of new technology. If you can help your clients understand how these risks intersect, that will open the door for a richer, more meaningful conversation about what they should be doing today to make their businesses more resilient to them.