Why ESG Will Be Difficult
Updated: Jul 30
The topic of Environmental, Social, and Governance (ESG) programs continues to be in the forefront of many conversations in recent months. Most of these discussions have focused on the investment and reporting side of ESG. However, few conversations have focused on how to advance ESG objectives and operationalize them within organizations.
In recent studies we conducted, we explored how external and internal obligations were managed across an organization. In this context, external obligations were those associated with mandatory requirements (mostly regulatory) while internal obligations covered environmental, social, sustainability, and other voluntary commitments.
What we learned was that for external obligations:
most of the compliance resources are dedicated to these
these are managed primarily by audits and inspections
a fraction of the processes were controlled using a QMS or EMS
roughly 50% of the obligations were identified and managed
the level of certainty that internal obligations would be met was MODERATE
For internal obligations we learned that:
few resources were addressing these obligations
these were not being managed
most of the processes were uncontrolled or ad-hoc
most of the obligations were not documented and did not have clear goals and objectives
the level of certainty that internal obligations would be advanced was LOW
Given that ESG goals and targets fell mostly under internal obligations and represent as much (and perhaps more) as external obligations, it was difficult for organizations to meet their obligations using traditional compliance functions that prioritized regulatory requirements. Advancing ESG objectives using current approaches, resources, and organizational structures was not enough.
In some cases, ESG objectives sat along side of the value chain and was added to it. However, with others, ESG outcomes became part of the value created by an organization. In all cases, a greater degree of alignment and coordination (i.e. governance and operational integration) was needed for organizations to make progress and realize the benefits from ESG along with other compliance efforts.
To learn more on how you can improve the probability of success of your ESG and other compliance efforts join us for our upcoming webinar on August 17.
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