The Environmental, Social and Governance (ESG) movement has been around for a long time, but over the last year it has hit a tipping point. In fact, according to Roy Snell, former SCCE & HCCA CEO and now advisor to Osprey ESG Software, it has hit several tipping points.
In this podcast he and Alison Taylor, Executive Director of Ethical Systems, outline how strong the ESG movement has become and how important it is for compliance professionals to embrace it. They will also be addressing this topic at the SCCE ESG and Compliance Conference on June 17, 2021.
As they share here, recently the EU announced it was looking to create regulations monitoring the truthfulness of ESG claims, particularly for investment firms. The US Securities & Exchange Commission (SEC) has set up an enforcement working group of its own. Standards bodies are emerging and setting some very high bars, and many organizations have committed to various ESG goals.
One of the difficulties of ESG is that there is a mix, Alison notes, of hard and soft obligations. In the area of modern slavery, for example, many countries already have requirements in place for, at a minimum, reporting what the company is doing to managing the risk. And in environmental arena there are already a host of laws and regulations. But, in many other areas that fall under ESG there are not yet laws. Nevertheless, a corporate commitment should be taken just as seriously and with great rigor.
In sum, ESG has come of age, and with it has come the risk that organizations will start fudging the numbers to meet their proclaimed and required ESG goals. That leads to an opportunity and need for compliance teams to get involved. As in other areas, compliance should not necessarily be directly involved in the initiatives since it can create a conflict of interest. Instead, they advise, compliance should, as it traditionally has, ensure the integrity of the organization’s work by creating control processes and procedures and investigating claims of potential wrongdoing.
For the compliance team to be effective they recommend working with related units in the organization: ESG, corporate social responsibility, sustainability and investor relations. Increasingly investors are demanding that organizations report on their ESG efforts, and that has caught the attention of leadership and the board.
Listen in to learn more, and then join us at the SCCE ESG and Compliance Conference.