Understanding Uncertainty in an Organizational Sustainability Program
Uncertainty originates in the internal and external context within which the organization operates. Here are some examples:
Uncertainty is a consequence of underlying sociological, psychological, and cultural factors associated with human behavior
Uncertainty is produced by natural processes that are characterized by inherent variability (e.g. the weather)
Uncertainty changes over time (e.g. due to competition, trends, new information, or changes in underlying factors)
Uncertainty is produced by the perception of uncertainty, which may vary between different parts of the organization and with its stakeholders.
Uncertainty represents a deficiency of information that leads to an incomplete understanding of what can happen that would threaten the organization’s ability to meet its objectives. You can think of this as an economic recession, a severe storm, a devastating legal situation, or any number of things that could happen that would distract the organization from meeting its objectives. Uncertainty exists whenever the knowledge or understanding of an event, consequence or likelihood is inadequate or incomplete. Incomplete knowledge may involve information that, alone or in combination with other information:
Is not available
Is available, but is not accessible
Is of unknown accuracy
Is invalid or unreliable
Involves factors whose relationship or interaction is not known
It may be possible to do something about some of these uncertainty elements, thus lowering the uncertainty. The level of risk is expressed as the likelihood that particular consequences will be experienced. Consequences relate directly to the strategic or operational objectives. Consequences arise when something does or does not happen. Therefore, the likelihood being referred to here is not just that of the event occurring, but also the overall likelihood of experiencing the consequences that come from an event and each will have its own likelihood.
When uncertainty is present, it creates effects. These effects can lead to a negative or positive deviation from the objectives that the organization seeks to achieve. Negative effects are often referred to as threats. Positive effects are referred to as opportunities. Uncertainty risk (as opposed to traditional risk) consists of both positive and negative effects.
The practice of organizational sustainability seeks to have the organization establish responsible objectives to help it maintain its social license to operate. Organizational sustainability has been adept at seeking to find and create opportunities. Risk management is the larger influence as it seeks to balance the threats and opportunities. Sustainability is often operated in a manner that is not embedded in the organization (i.e. stand-alone sustainability). The practice of organizational sustainability can identify or create many opportunities to help promote the organization’s reputation. By working within the risk management program, sustainability can help the organization overcome the effect of uncertainty, thereby enhancing its chance of attaining its objectives.
Dr. Bob Pojasek
Sustainability Legend | ESG Reporting & Disclosures | Uncertainty Risk | Pollution Prevention Expert | Process Improvement | Organizational Sustainability Reporting | Sustainable Procurement Professor
Chairman, Education and Research Executive Board (EREB)
VCARE Academy Inc.
Center for Corporate Performance & Sustainability
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