The relative fear of being accused as an attention-seeker is often considered an obstacle to lifting the CSR benchmarks to a higher level.
Aligning Governance, Risk, and Compliance (GRC) components with ESG/CSR sustainability compliance is crucial for modern businesses to effectively address their social and environmental responsibilities. Overcoming the reluctance rooted in the fear of being seen as attention-seeking poses a significant challenge to raising CSR benchmarks. Traditionally, companies have been reserved in communicating their ESG/CSR sustainability activities. However, due to global compliance demands, they are increasingly required to disclose these in annual reports or to stakeholders and the public.
Previously, many companies have sidestepped social accountability or governance responsibilities, engaging in greenwashing or applying moral controls in developing countries where they conduct business. However, from 2024, ESG disclosures should demonstrate a company’s action (or inaction) toward adapting to a net-zero economy. These disclosures hold management teams accountable for ESG issues and the impacts generated through business operations.
The global debate surrounding ESG/CSR sustainability has significantly heightened corporate, directorial, and management focus. ESG/CSR sustainability must become integral to corporate strategy, with measurable voluntary actions and fostering a positive corporate culture.
Several steps can be taken to effectively address ESG/CSR sustainability and develop a sustainability platform. This involves creating a sustainability platform within the organisation. Key issues to address while developing this platform include:
Standards and Frameworks: Companies must improve adherence to standards like the Global Compact, UN Principles for Social Responsibility, or the Global Reporting Initiative (GRI). Various international standards and frameworks containing relevant economic, environmental, and social performance indicators can fulfil new reporting obligations.
Transparency and Communication: Management must highlight the benefits of transparency, accountability, and sustainability when communicating ESG/CSR initiatives to stakeholders. Most respondents in a recent survey expressed the need for companies to communicate more about ESG/CSR in the future.
Materiality Assessment: Conduct a materiality assessment to identify ESG/CSR factors that significantly impact your business and stakeholders. This involves engaging with internal and external stakeholders to understand their concerns and expectations. Use tools like surveys, interviews, or workshops to gather insights.
Stakeholder Engagement: Engage with various stakeholders, including employees, customers, investors, suppliers, local communities, NGOs, and regulators, to understand their perspectives on sustainability issues. Feedback from stakeholders can reveal critical ESG concerns relevant to your organisation.
Industry Analysis: Analyse your industry and peer companies to understand prevalent ESG/CSR issues and emerging trends. Industry benchmarks and reports can provide insights into common challenges and best practices within your sector.
Global Standards and Frameworks: Refer to established ESG reporting frameworks such as the Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), Task Force on Climate-related Financial Disclosures (TCFD), UN Sustainable Development Goals (SDGs), and others. These frameworks guide various sustainability metrics and help identify relevant issues.
Regulatory Compliance: Keep abreast of local and international regulations related to ESG/CSR. Understand legal requirements and expectations for reporting and compliance in environmental impact, labour practices, human rights, diversity, anti-corruption, and more.
Risk Assessment: Evaluate risks associated with environmental, social, and governance factors that could impact your business operations, reputation, or financial performance. Identify areas where improvements in sustainability practices could mitigate risks.
Impact on Value Chain: Assess the impact of your operations and supply chain on ESG factors. Evaluate how your business activities affect the environment, communities, labour conditions, product safety, and ethical sourcing.
Emerging Trends and Stakeholder Expectations: Keep track of emerging trends, technological advancements, and evolving stakeholder expectations in the ESG/CSR landscape. This includes issues related to climate change, carbon neutrality, social justice, diversity, data privacy, and ethical governance.
Internal Review and Expertise: Leverage internal expertise and review past sustainability reports, audits, or impact assessments to understand previously identified issues and progress made. Engage cross-functional teams to ensure a comprehensive perspective.
By synthesising information from these various sources, companies can identify the most relevant ESG/CSR issues pertinent to their operations, industry, and stakeholders. This comprehensive understanding is crucial for setting strategic priorities and establishing sustainability goals and action plans.
Managing and Addressing CSR Issues: Companies need to manage, analyse, control, and take action based on the plethora of CSR-related information available. This includes focusing on environmental concerns, energy usage, employee welfare, community engagement, etc., and delegating responsibilities to relevant departments and units.
Resolving Practical and Conflicting Issues: Addressing practical CSR issues, such as reducing CO2 emissions or handling diverse employee demographics across countries, requires resolving conflicting approaches and tailoring strategies according to regional or cultural nuances.
Integrating ESG/CSR sustainability into corporate strategies demands a holistic approach, leveraging appropriate frameworks, clear communication, technological tools, and a proactive attitude towards sustainability issues.
At The Corporate Governance Institute by Copenhagen Compliance, we are developing The Esguiera framework, toolkit and certification seminars.