June 3, 2008 - Companies see the need to more effectively manage environmental risk, but an uncertain regulatory future is keeping most from getting their act together, says a new report from the Economist Intelligence Unit.

Most of the 320 risk managers surveyed say they are dedicating more attention and resources to environmental risk management. However, the findings also indicate that many companies are still in the early stage of the process and rarely consider environmental risk management formally when formulating business strategy.

"Environmental risk management is rising on the corporate agenda," says Rob Mitchell, who edited the report. "[But] while there are some companies that take environmental risk very seriously and have developed robust processes to identify, assess and mitigate their exposure, others continue to manage environmental risks in an ad hoc way and do not consider them when planning major strategic activities."

Fewer than half of the respondents to the EIU survey say they undertake a formal assessment of environmental risk when developing new products and services, and fewer than one in five do so when planning mergers and acquisitions.

If companies recognize the need and are reallocating resources to address the problem, why are so many falling so short? For starters, it's hard to hammer out a risk-management plan when the environmental risks are hard to quantify and the regulatory risks are still uncertain, the report suggests. Adding to the confusion, few companies have assigned responsibility for environmental-risk management to a particular job function or role.

One thing is for certain, according to the report: [E]nvironmental risk will rise up the corporate agenda as concern about climate change and the impact of business on the environment increases. This presents challenges for companies, but it also offers opportunities. Depending on their industry, companies may be able to develop products or services that offer better environmental performance than those of their competitors, or that help to address some of the risks that companies are now facing.

Download the report here (PDF).