Updated: Jul 22
Those that have been following us will know that compliance needs to be more than just checking boxes and passing audits. This is true for all compliance domains including environmental obligations.
In recent years I have written about how the compliance landscape has changed and that it needs to more like operations than simply a function that inspects and conducts audits. Compliance as a category of programs is more akin to quality which has control and assurance functions but also strives to build quality into the design of products, services and all functions of the organization.
One does not need to see very far ahead to realize that this is exactly what is happening now in earnest for Environmental Compliance. Environmental compliance is moving beyond simply monitoring and reporting towards establishing programs and systems to reduce carbon footprint, emissions, waste, and other objectives all in increasing measure. Sustainability is now the top priority and net zero across every dimension is the driver for operational objectives. Instead of quality as job one or safety first programs, organizations now need to lead their risk & compliance programs with an Environment-First strategy.
The Environment and ESG
There are many reasons why we are now seeing a greater elevation of environmental initiatives within organizations. Some of these will include the heighten attention on climate change along with existing environmental protection regulations and initiatives. However, what seems to be the source of urgency and immediacy is the increase of ESG integration in the investment world.
ESG is all over the news, financial reports and increasingly in shareholder reports. However, it does not have a consistent definition. In broad terms it is concerned with Environmental, Social, and Governance objectives applied to sustainability.
Specifically, ESG investing is focused on scoring organizations on how well they are doing at being a good steward of the environment. In broad terms this is called value investing. However, investors are also interested in the impact organizations are making at improving the environment or reducing climate change and its effects. This is called impact investing.
Currently ESG scoring is done by investors and ESG reporting is done by organizations with some regulation of common categories on which to report. However, for the most part, the categories and measurements used in scoring and how it is reported are far from being the same. Greater alignment is expected but there will always be gaps driven by differences in priorities across investors, organizations, and governments.
Whether or not ESG helps to create greater returns for shareholders is debatable. In some cases, ESG investments may be more expensive and come with lower returns. However, what is starting to become clear is that the integration of ESG may have a greater impact on promoting environmental initiatives than what government regulations might enforce. In essence, the marketplace is engaging in a more significant way to drive environmental change which for many is a more effective and desirable approach.
What we can say with certainty is that we are moving towards an Environment-First world which will affect investments, stakeholder expectations, and compliance obligations among many other things. Environmental programs will no longer be characterized by only monitoring and reporting. Instead, environmental programs will be defined by sustainability and the effective implementation of systems to progressively reach zero emissions, net zero carbon footprint, zero waste, zero environmental harm, and other environmental objectives.
Are you ready for an Environment-First future? You can be.
Lean Compliance has helped organizations establish an Environment-First program and can help you do the same.
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