Stuart Pardau on ESG and Compliance [Podcast]

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By Adam Turteltaub

Perhaps the biggest non-Covid change in the corporate landscape over the last few years has been the growth of the Environmental Social and Governance (ESG) movement and its call to measure business on more than P&L statements. While some consider it a passing phase, Stuart Pardau, Associate Professor of Business Law, Professional Practice at Miami Herbert Business School at the University of Miami, thinks it is here to stay.

As proof he points out that BlackRock, Vanguard and State Street, with a combined $20 trillion in assets, have stated their commitment to making investment decisions informed by ESG considerations. He also notes that the SEC has proposed new rules to standardize climate-related disclosures.

On the corporate side, bonuses are increasingly tied to ESG metrics, and annual reports are featuring ever more language on the topic. Organizations are also more willing to take a stand on social issues.

With this revolution, though, has come new risks, he notes. Greenwashing – making marginal or fraudulent environmental claims – has grown to be a serious issue with the potential for reputational damage.

With this and other risks have come new challenges for compliance programs. Compliance teams need to help in the assessment of which ESG risks are greatest for their organization. In addition, they must keep in mind that not all of these risks come from aspiring to be a better organization. Some, whether around environmental, forced labor, or other issues, already have laws behind them.

There is also an internal risk around corporate culture. If there is a gap between the professed values and the everyday actions, the chances of a public and embarrassing failure are great.

Listen in to learn more about where ESG is going and the role of compliance along the way.