Environmental, social, and governance (ESG) compliance is an emerging topic across industries. But with new standards that often vary between regions, it can be challenging to prioritize your company’s initiatives and ensure that you’re complying with regulations.
Fortunately, the Sustainable Enterprise Tech Council brought in the experts to share insights on all things ESG compliance, from rules and regulations to best practices for companies of any size.
Most companies — especially smaller ones — don’t have the capacity or funds to shape their own sustainability group. On top of that, ESG is a broad area that encompasses many different aspects of its three pillars. So, how can you prioritize ESG initiatives when you have limited resources?
According to Marcia Narine Weldon, “It really is a matter of risk. Dealing with trade groups, industry groups, [and] others can keep you educated because you have to have pretty much a spreadsheet to figure out what's going to apply to you. But you have to take a risk-based approach.”
Because your ESG prioritizations will be specific to your company, you have to dig into the details of your operations. Look at your supply chain and devote time to your tier two and tier three suppliers. Additionally, you should look at where you’re operating. Are you operating in the EU? Are you a US company operating in the EU? Different regions have distinct regulations, and it’s crucial that you are aware of those specific to your company. Most importantly, you must figure out where your data is and how you get it. Almost all regulations are focused on disclosure, and if you can’t reach your data, you won’t be able to report it accurately.
As the climate change crisis heightens and people become more aware of environmental sustainability impacts, many companies are working to reach net zero emissions. Along with this, new standards of compliance are being set in place.
A decade ago, companies had to submit data on different areas like packaging and waste electronics, but today, much more information is required. The shift came around 2015 with the introduction of the EU Circular Economy package, which then spread globally. But the real shift was around 2018 when there was a major focus on plastics, plastic waste, and how we recycle. Today, companies have to report more data and become more transparent regarding their recycling, emissions, and waste operations.
“When we are audited,” Emma Mundy explains, “the sheer volume of information and data that is required of us is — all these new requirements are coming in, and they're only getting more onerous.” As a sustainability professional who has seen the changes over the last decade, Emma goes on to say, “We have to set KPIs in some countries on reducing our consumption and showing how much we're recycling certain products and packaging. And we have to track the data on those things.”
As ESG regulations and standards progress, companies often wonder: how strict is the enforcement?
Regulation and enforcement vary by country, but typically, the enforcement isn’t used as a scare tactic — it’s put in place to help you comply. Authorities see the bigger picture and want companies and the rest of the world to progress toward a more sustainable future.
Typically, enforcement comes in the form of fines for non-compliance or reporting inaccurate data. Brendan Walsh says that “in Europe, [the fines] can be quite significant for their own privacy-related breaches. In certain instances, you can be looking at fines up to 10% of global revenue. So for Google, Microsoft, [and] Apple, that is enormous. They take them very seriously. The other aspect, clearly, is the reputational risk that goes along with it.”
The consequences of ESG non-compliance often depend on your region and the size of your company, but overall, it’s essential to abide by the regulations. That way, your company not only upholds its reputation and avoids fines but also works toward a better future.