Sustainability, risk management and governance: towards an integrative approach

The purpose of this paper is to present a granulated governance perspective to face sustainability risks and challenges that our planet is facing. The authors argue that sustainability challenges should be addressed simultaneously at the individual, organizational, sectorial, national and supranational level. Financial institutions have a systemic impact on the economy, and on the functioning of our societies. Therefore, a culture of profit maximization and unbridled risk-taking, notwithstanding the external costs and impacts, contaminates not only the financial system and the economy, but also individual norms of responsibility. In this line of reasoning, the global financial crisis revealed the destabilizing effects on the economy, society and corporations and forms a serious impediment for sustainable business. This is a huge challenge for sustainability business and corporate governance; however, it is an illusion to think that managers can prevent scandals and moral norm deterioration without support from other social players.

This paper offers a conceptual analysis on the past financial crisis (2008-2012). It questions the focus on sustainability at the corporate level, and suggests a more comprehensive method for governance. The authors argue in favour of sustainability implementation, combining different governance levels.

The double-dip financial crisis 2008-2012 showed the failure of an unsustainable global system. It becomes clear that corporate responsibility and corporate governance are limited in their contribution to sustainable business in a sustainable economy. Hence, it is important to have a more integrated approach to address sustainability risks, with a solution at individual, sectorial, national and supranational governance levels.

This contribution advances five different levels of governance to mitigate risks for sustainable business, arguing in favour of integrated governance for sustainability risks. However, an empirical validation of these ideas still needs to be developed. Future empirical research is needed to validate the five levels of governance. Future research is also needed to better grasp the mechanisms in support of governance.

Corporate responsibility and corporate governance are necessary but not sufficient conditions to address the sustainability risks one faces. All actors in the economy recognize that governance for sustainable business in a sustainable economy is a collaborative effort for which neither legislative nor institutional or behavioural norms are developed in an integrated way. They should also recognize that integrated governance is not only imperative for the common good, but also in the direct interest of shareholders and other stakeholders.

This paper contributes to the literature on corporate responsibility and corporate governance with the identification of specific roles for regulators, sector representatives and individuals, which are complementary to the role of the companies in creating the conditions for sustainable business in a sustainable economy.