ESG 2022: Top 6 ESG Issues Companies Need to Address | NAVEX
[author: Giles Newman]
ESG (Environment, Social and Governance) are increasingly important factors for companies to measure within their supply and value chains.
A strong ESG framework now greatly reflects an organization’s brand – and how it is perceived by investors and wider stakeholder groups such as customers, suppliers and the community. With the way today’s world is changing, due to climate change, COVID and social awareness, ESG tracking and progress is more essential than ever.
However, implementing an ESG program is not always a cakewalk. Organizations that adopt and measure ESG, within their supply and value chains, may face new challenges. Here we will discuss six key ESG challenges:
1. ESG governance issues
For Karin Reiter, Global Head ESG and Sustainability at Adecco Group, governance is the foundation of ESG: “It’s the ‘G’ of ESG that really underpins a company’s ability to achieve its goals. environmental and social. The ‘G’ allows us to thrive from an ‘E’ and ‘S’ perspective.
Governance is therefore essential to being correct and has been the cause of some of the biggest corporate media scandals when neglected. As the world evolves, the law and the media are bringing ESG and the importance of human rights across the value chain into the limelight more than ever. This now raises the stakes for companies to effectively monitor ESG factors.
Otherwise, reputational damage, compliance costs, potential loss of business, as well as a company’s lack of ability to attract top talent can come into play. If a company does not properly comply with policies , ESG laws and regulations, it may lack secure funding and the ability to attract potential investors.
2. Scope 3 Shows
There are many challenges to consider when implementing ESG within a supply chain, but Scope 3 emissions may just take the crown as the most complex to manage.
Greenhouse gas (GHG) emissions are broken down into three categories or “scopes”. Scope 1 refers to direct emissions. Scope 2 refers to indirect emissions from, for example, the generation of purchased energy. Scope 3 covers all other indirect emissions in the company’s value chain.
Why is this so difficult to manage? Well, for Emir Sassi, Global Head of Procurement Sustainability at Novartis, “the size of scope three as part of our total GHG emissions is over 90%.” This is a huge area for many companies to manage and many of the factors that affect the percentage are not direct. Employee vehicle travel, factory and office emissions are often easier to track, as they represent less than 10% of total GHGs. The rest is generated from the supply chain.
3. “Follow the conversation”
“Sustainability is a hot topic – great in theory, but challenging in practice,” says Richard Howells, vice president, solution management for digital supply chain, SAP. Organizations often talk about monitoring ESG factors, but don’t follow the process. Publishing marketing and public relations statements about goal achievement and net zero targeting is simply not enough.
In order to successfully monitor ESG, companies need to have a strong corporate culture, clear policies and software systems already in place. The systems must fully integrate with each other, or better yet, be located on a software management platform. It is about getting a clear overall picture of the value chains of the company and the whole organization. Only then can a company base future decisions on sustainability.
4. Cultural change
When it comes to implementing ESG factors in an organization and value chain, it’s not just about the tools used to measure effectiveness – the mindset and values of employees are also important. Patrick Fetzer, President and CEO of Castolin Eutectic says, “Employees make decisions every day. There are many policies you can put in place, but you can’t make every one of those decisions yourself, and you can’t constantly check them. This is where culture comes in. »
Senior members at the top should lead by example, maintaining a high value company culture by being transparent about the company’s ESG goals, needs, policies and mission. Employees, customers and stakeholders need to understand what the company stands for and why sustainability plays a vital role in the company’s efforts. The more employees understand the benefits and importance of ESG, the more they can contribute to achieving the company’s mission and sustainability goals.
5. Form partnerships
ESG is a huge area to monitor, especially for large organizations, and many companies cannot manage or measure it on their own. “Where are we at with ESG, whether you’re looking at the E’, the ‘S’ or the ‘G’, the point is that you can’t sort it all out on your own.” says Nancy Hobhouse, ESG manager at Hermes. This is where partnerships become essential. Unless companies are in constant contact with suppliers and customers within their supply and value chain, companies will never know their exact metrics or achieve their ESG goals.
In order to gain better visibility and understanding of ESG factors, companies, agencies, employees, stakeholders and investors need to collaborate, have increased communication and have open and honest conversations with others about climate factors. and ESG. By joining forces, more can be accomplished and longer-term sustainability goals can be achieved within organizations.
6. Ethics: compliance rules
Supply chains are not lifeless and sometimes it can be easy to forget that there are real people working there. State laws are much-needed areas of protection for these invisible employees to eradicate any form of social inequality or unsafe practices in the workplace.
The UK’s Modern Slavery Act and California’s Transparency in Supply Chain Act, for example, have been in place for more than five years. Germany has already enacted its supply chain due diligence law, and it was only last month that the EU adopted a proposal for a directive on sustainability due diligence. businesses.
As compliance increases, technological advancements will be required to track, measure, and maintain rising ethical standards under compliance laws. “The human element is essential, but I’m also a technologist. Technology has a big role to play in this; bringing together ESG solutions that can help companies and their suppliers address some of these ethical challenges throughout the supply chain. says Karen Alonardo, Vice President of ESG Solutions, Navex Global.
Thanks to modern technology, issues such as child labor, conflict minerals and human rights standards can be monitored more easily than ever.
Overall, from broad areas such as corporate culture to specific issues such as Scope 3 emissions, there are many challenges that need to be addressed when companies implement ESG goals, strategies and controls across their chains. supply and value. By creating and maintaining a strong corporate culture – ensuring ESG objectives are transparent, keeping abreast of legal regulations, building strong relationships with other organizations and implementing modern surveillance – the above problems are much easier to overcome.
At NAVEX, we provide technology solutions that will help you overcome these challenges and achieve your company’s ESG objectives. To learn more about managing your company’s ESG objectives in one platform, find out how NAVEX ESG can help.
For more information on how to get started with ESG, download the ESG Definitive Guide.