ESG. Now that I’ve got your attention…
ESG is big right now. Very big. So much so that it is frequently cited in the top three preoccupations of businesses.
It may shock you to learn that this isn’t happening purely because companies are free finally to put their deeply held love of nature and the planet into practice. The biggest driver for ESG is pressure from customers, investors and the governments they elect to implement more environmentally and socially-aware policies. True, those governments are often tardy in putting the required policies and targets in place, but they usually have to do something. Or at least be seen to do something.
In the EU’s case, something is now being done. On 5 January this year, the EU’s Corporate Sustainability Reporting Directive took effect. This requires “all large companies and all listed companies (except listed micro-enterprises) to disclose information on their risks and opportunities arising from social and environmental issues, and on the impacts of their activities on people and the environment”.
Draft standards being developed “will be tailored to EU policies, while building on and contributing to international standardisation initiatives. The Commission should adopt the first set of standards by mid-2023”. It is predicted they will cover around 50,000 companies that are incorporated, listed or doing businesses in the EU.
Things are moving quite quickly with the first companies set to apply the new rules in financial year 2024 for reports published in 2025.
The need for clear and legally enforceable accountability for ESG is likely to be dismissed as needless and burdensome regulation by those who are preternaturally disposed to view any kind of government intervention in an unfavourable light. But without agreed, defined ESG reporting, the potential for abuse is high and the integrity of voluntary reporting requirements can be too easily undermined and diminished by rogue businesses.
This is not a concern held and expressed solely by do-gooders and tree-huggers but by businesses themselves, even if their fears are based mainly on distrust and cynicism over the integrity of their peers’ reporting. That concern was clearly expressed in a new study by Inmarsat of more than 1,000 senior technology and ESG decision-makers across agriculture, mining, transport, utilities, and oil & gas firms.
The study found that 76% of those surveyed doubted the accuracy of the ESG reporting of their peers. Cynicism and scepticism over ESG reporting were highlighted by the 80% who believed competitors were “more focused on perception rather than achieving tangible sustainability outcomes”.
Luckily, despite the widespread scepticism about ESG reporting, Inmarsat was fortunate enough to only interview virtuous organisations with unimpeachable sustainability credentials. That’s surely the sole conclusion that can be drawn from the fact that 81% were certain that their company was “more sustainable than their competitors”.
The only way to be certain of the accuracy and credibility of any organisation’s ESG reporting is, of course, to standardise the process so that it is detailed, audited, public and comparable.
ESG reporting is important but only if it’s accurate, measurable and comparable. Any business can make claims about its ESG policies but they don’t really mean anything without a set of standards and regulations to buttress them. The fact that businesses can see this shortcoming so clearly in their rivals merely illustrates the point. The fact that they can’t see it in themselves reinforces it.
To paraphrase the popular parable, without a clear view of what ESG entails, businesses can see the motes but not the beams.
Subscribers 0
Fans 0
Followers 0
Followers