Guest Post: As Climate and Biodiversity become Business Critical ESG Issues, an Integrated Platform can go Beyond Compliance and Deliver Business Value
By: Peter Walsh, Director, ESG Market Strategy & Partnerships, Benchmark | Gensuite ®
No matter where you turn for market news these days, you’re bound to see a headline about ESG, EHS or sustainability. Markets are maturing, investors and institutions are demanding more environmental data and intel from companies, and new acronyms abound.
While some markets wrestle with the politicization of ESG and others march ahead, companies need to be prepared more than ever as voluntary sustainability reporting is increasingly becoming mandatory disclosure. Companies need to be nimble, survey the landscape, develop a sustainability and ESG disclosure strategy, and proactively move their company-wide integrated capability forward.
While most of the focus has previously been on operational emissions and other climate-related financial risks, new standards on biodiversity and resilience are emerging. Even as expectations rise, by utilizing an integrated platform to source, track, and provide real time reporting on performance metrics, companies will have a greater ability to keep pace.
The ESG space is not getting any simpler. The ISSB’s upcoming inclusion of biodiversity and just transition in reporting standards, the EU’s recently-strengthened disclosure requirements for structured finance products – and the advent of the Task Force on nature-related financial disclosures (TNFD) – are just a few of the blockbuster moves to crowd an already-burgeoning landscape. To navigate the complexity, business leaders will need to do more than take a tick-the-box approach for sustainability disclosures. They’ll need the data management, analytics and reporting capabilities to make ESG, EHS and sustainability-guided capital investment and management decisions.
Even if the depth of the U.S. SEC’s Scope 3 emissions reporting requirement is undetermined, and politicking muddies the water in some markets, companies need to act now or risk falling behind regulatory requirements in the near future. Firms are also realizing that those risks don’t only include ‘traditional’ ESG benchmarks anymore. Consumers, regulators and businesses must address biodiversity as a business-critical issue. While currently only 5% of businesses assess their impact on nature, the recent COP15 and monumental launch of the Global Biodiversity Framework (GBF) means that number will need to rise rapidly. Organizations with the ability to adapt their sustainability approach in real time to emerging issues are the ones that will ultimately find the most success with both regulators and investors.
Even already-existing disclosures are getting a refresh. The ISSB is moving ahead with the creation of IFRS Standard 1 & 2, to be released by Q2 2023. The standards, designed to be interoperable with the GRI, TNFD and proposed SEC standards, will become mandatory in less than a year. The quick turnaround of these and other regulations, including the EU’s CSRD, is creating a rapidly changing business environment. It’s even more reason to ensure your enterprise sustainability and ESG platform is adaptive, efficient, and effective.
Aside from regulatory obligation to meet current and emerging disclosure obligations, what benefit is there for businesses to optimize their sustainability platform?
Whichever sustainability or ESG aspect is being addressed, risk management ultimately underpins many of these disclosures. And with more risks being made more explicit, there are more market opportunities for companies that disclose and account for these risks. In addition, governments are cracking down on greenwashing which makes the need to report and communicate effectively even more important. By ensuring internal systems are forward looking and integrated across the organization, companies can break down silos, and ensure outcomes that support their objective: embedding sustainability throughout their organization and delivering higher ROI.
Evidence continues to emerge that companies who address sustainability and ESG objectives, including aligning their approach with international standards such as GRI, SASB and TCFD, are among the most profitable in their respective sectors. Companies with a streamlined approach to managing this data internally can focus their efforts on leveraging lessons learned to improve business operations. Ultimately, that is what executives – and investors – want to see.
The bottom line is that, as the acronyms accrue and the debates roll on, ESG, EHS and Sustainability are precisely what every business should be pursuing – identifying long-term risk and value opportunities. The difference now is the rapid increase in regulations that require unprecedented accuracy and reliability in tracking and reporting performance.
An integrated enterprise-wide platform can underpin a company’s ongoing efforts to both meet regulatory obligations and deliver value to all stakeholders.