- ESG Compliance, a Drop in Ransomware Attacks, and a Chad’s on a Spa Day 🤖[
- ESG Compliance, a Drop in Ransomware Attacks, and a Chad’s on a Spa Day 🤖
ESG Compliance, a Drop in Ransomware Attacks, and a Chad’s on a Spa Day 🤖
Good morning.
There were a few interesting pieces of news on ESG compliance and regulations that are worth keeping an eye on. Many of these rules are yet to come into force, but companies should start thinking about how they will meet these requirements (and who will take the lead). Also, there’s some positive news on the ransomware front.
Unfortunately, the metrics didn’t update properly today. I’ve sent Chad (the robot who manages the data) off for a spa day while I fix things, and I apologize that there aren’t any numbers today.
Coverage and Analysis
ESG Round Up
Two ESG-related items caught my eye over the last week.
EU Anti-Greenwashing Legislation
The EU is introducing legislation to counter greenwashing – misleading environmental claims – in response to concerns that companies are being dishonest about their environmental credentials. One analysis by the European Commission found that over 50% of claims contained “vague, misleading or unfounded information” (or as we used to call them, ‘lies’), illustrating how widespread the problem is.
EU countries would have to ensure environmental claims are proven against a science-based methodology, such as a “product environmental footprint” framework that tracks environmental impacts across 16 categories including the air and climate change.
“By fighting greenwashing, the proposal will ensure a level playing field for businesses when marketing their greenness,” said the draft, which could still change before it is published.
Reuters
It would be up to EU countries to put in place appropriate systems (and fines) to bring the eventual rules into force but this would clarify decision-making for consumers who would be more assured of the veracity of any green claims made by a company. Companies will have an additional compliance burden for any claims they make but should be able to reap a ‘green dividend’ from consumers who want to favor firms taking steps to address climate change. See Reuters for more.
Companies Aren’t Ready for ESG Reporting Regulations
An FT piece this weekend (from the print edition, so no link, I’m afraid) notes that although companies are facing climate reporting requirements around the world, many seem far from ready. A move from voluntary to mandatory reporting raises the reporting requirements and level of detail required. This is outside the expertise of many of the heads of ESG who will be subject matter experts in that domain, not compliance and audit. The Big Four accounting firms are pushing companies to bring ESG reporting into their existing audit and reporting frameworks which does offer some advantages: all major firms have an experienced team who can ensure that reports are compiled and submitted in line with the appropriate guidelines.
However, being a crack financial auditor doesn’t necessarily lend itself to evaluating the efficacy of a DEI policy or qualitative returns to the community of a social-impact program. Therefore there still needs to be a mix of expertise to ensure that the regulatory and practical aspects of these programs are met. Otherwise, the ‘tick box’ aspect of ESG may be in great shape while the initiatives themselves are ostensibly worthless.
Eventually, a new class of specialist ESG auditors who bring a mix of technical and regulatory expertise to bear will emerge.
[ https://www.thelykeion.com/101-in-sustainable-finance/ ](https://www.thelykeion.com/101-in-sustainable-finance/
Carpe tomorrow!