Legal departments often get caught up in the regulatory compliance and disclosure drafting side of ESG. These elements are certainly important, but neither is going to create significant value on its own. To capitalize on opportunity and mitigate risks, companies must prioritize operationalizing ESG. A recent report from GlobalData discusses the importance of integrating ESG into daily operations:
“The report finds that ESG strategies must extend beyond compliance and disclosure. Companies face operational and financial exposure from the physical consequences of climate change, evolving regulations, investor expectations, labor market pressures, and reputational damage… The report also emphasizes the importance of supplier engagement. ESG risks can emerge across extended value chains, including through forced labor, deforestation, emissions, data protection failures, and weak governance practices.”
The report recommends tailoring your ESG program to the specific needs of your industry and provides a methodology for doing so. It also identifies the importance of engaging suppliers in today’s globalized economy. A company is only as resilient as the weakest link in its supply chain. Economic and reputational risks can manifest outside a company’s direct operations. Developing a working relationship with suppliers and encouraging resilience in your supply chain can help mitigate these risks. Additionally, tools like human rights audits and supplier due diligence can help preserve a company’s reputation and social license to operate.
Bringing sustainability off the page and integrating it into operational practices creates value from ESG programs. The most compliant company with the most robust and accurate sustainability report will not see a significant ROI without integrating ESG into business functions. Companies must prioritize operationalizing ESG to seek out competitive advantages or risk losing out on value.
Our members can learn more about ESG business value here.
