The Impact of ESG Regulations on your Compliance

Environmental, Social, and Governance regulations (ESG regulations) were once thought of as a way for companies to try their best to give back and be inclusive. However, now they're becoming more of a regulator requirement for many companies.

This is also happening across the globe and not just focused on any one country. It has forced companies to develop a more focused approach to try to reach their obligations. In the process, they report their requirements in the most standard and unified way possible. You can already see this with the SEC in the U.S. and the EU pushing its own regulations.

What are some of the major pitfalls for businesses?

Previously, many managers were pushing to have human resources or procurement handle this topic. Some have expanded into including a sustainability department. However, it hasn't done its task of having these businesses take accountability for their actions and have them fulfill their requirements.

Another area that has been severely lacking is data collection and standardization. This data availability and quality hit another roadblock in the lack of technology dedicated to these requirements. Typically it was a checklist and handled on any type of spreadsheet. However, the reporting requirements that these government regulators require are becoming more and more complex.

Keep in mind that some of these ESG requirements are simple. It's just that companies need to prepare themselves to give more and have a better understanding at the same time. Conditions are typically broken down into disclosure, consideration, laws circling around ESG, and audit requirements. This helps with managing operations and supply chains.

How to approach ESG regulations properly

It makes perfect sense that as good corporate and global citizens, these companies, while focused on making a profit, also take the time to do it more carefully. That means taking a holistic approach to ensure you meet ESG goals and they are compliant. That means everyone within the organization should be aware of the ESG goals and requirements of the business. Partially dedicating their roles and responsibilities to achieving this.

No area or department's too high or low-level, and the strategy should come from the top. Then it needs to have governance controllers to be able to ensure that every department is handling their respective requirements for being compliant and go all the way down to the product or service that the company is offering.

While numerous regulatory frameworks are being developed and already established, these are starting to congeal together to work on a uniform framework. This will especially help those companies working in different countries.

In the end

Avoiding penalties is something that companies want to avoid due to not complying with these strict regulations, but many regulators are pushing these companies hard because, in the end, it will help them to operate in a much smoother and more efficient manner, especially a more mindful manner. This can, in effect, be better for the overall bottom line.

For those that are looking for guidance or implementation of the right ESG strategies, feel free to reach out to us here. We offer comprehensive compliance and regulatory services and work within your existing organizational structures to ensure a smooth integration.