Leveraging the ESG power trio: How finance, sustainability, and legal collaboration can navigate climate regulations

Post Date
10 April 2024
Author
Emma Lawrence
Read Time
5 minutes
  • ESG advisory

Gone are the days where sustainability is a “nice to have” corporate exercise. Roles and expectations of sustainability professionals have changed; it’s no longer about volunteering information. It's increasingly about ensuring the information we are obligated to disclose is available and consistent for consumers, investors, supply chain partners, and regulators.

At the Reuter's Responsible Sourcing conference on March 27th with leading sustainability practitioners, there was a significant emphasis on the new era of business we now find ourselves in, moving from voluntary disclosures to a regulatory environment. Whether you call it sustainability or ESG, an expanding body of regulations imposes disclosure requirements on companies, encompassing key environmental and social metrics.

One of the recurring themes that kept coming up in conversations, working groups, and panel discussions is how to bring teams and leaders onboard whose priorities are not aligned with the company’s sustainability goals or regulatory requirements.

Key takeaways from executives and sustainability leaders for fellow practitioners include:

Embrace the shared responsibility of sustainability across finance and legal

Sustainability has become interwoven into the real business imperative. The responsibility for reporting no longer falls to one group as sustainability reporting for the organization is not the same as financial reporting for the organization.

Change your framing on this; how you approach this conversation can have impacts over the next reporting year. In many corporate settings, there can be a knowledge gap between finance and legal departments and sustainability initiatives. Typically, these areas operate independently with limited overlap or engagement. Without guidance or collaboration, finance and legal departments often take a narrow, compliance-focused approach, overlooking the broader impact and significance of sustainability efforts within the company. This underscores the importance of fostering cross-functional collaboration to ensure a comprehensive and impactful approach to sustainability across all aspects of the business. The first step to including finance and legal is having this conversation. This can mean walking the CFO/CLO through the company's ESG journey to date or sharing a recap on the sustainability goals that have been announced externally a year (or five) ago and the implications.

As the sustainability expert, your role is to anchor the connection between finance, legal, and sustainability in a shared understanding of value creation. That shared value will drive the organization.

Create functional ownership of the ESG reporting process

Accountability for ESG reporting needs to be spread throughout the organization for success. Many companies are collecting a huge amount of data from their value chains for the first time.

A starting point would be to review your organization’s governance structures and take this as an opportunity to really reflect on if they are working. This is particularly important as collaboration is essential, recognizing the strengths of each department (sustainability teams will not be finance experts and vice versa).

To prepare for compliance, some companies have reorganized finance and sustainability teams. Some have created a governance structure that provides visibility enterprise-wide, so everyone knows who is doing what and who to go to for what. Others have mandatory reporting responsibilities sitting with finance, voluntary reporting sitting with sustainability, and legal advising sustainability and finance and the impacts it has on the organization. Ultimately, as an organization you need to design the most effective structure for your teams to report in the way that you need, based on your particular situation.

Seize this opportunity to unite

It’s going to take more employees than before to report successfully. Engaging and working with people who have expertise in different areas will strengthen collaboration across the organization, avoiding alienating people, and bringing them together instead.

This opportunity can also create harmony on the data being collected from your value chain; there is huge commonality across stakeholders where there are opportunities to streamline communication to do this effectively without fatiguing cross-functional partners. For instance, companies such as Google are incentivizing suppliers to participate in surveys via the CDP supply chain platform. This initiative aims to enhance the scrutiny and verifiability of reported data, while also alleviating the reporting burden for suppliers who can submit their data once and share it with multiple customers.

Reap what you sow

Reporting does have its pain points (as any company-wide effort would); however, creating alignment internally by creating shared value for your stakeholders is the key to success. Communicating authentically to stakeholders is the real challenge, and demonstrating leadership, humility, and impact is the true mark of success in navigating these hurdles effectively, fostering trust, and driving meaningful change in the journey towards sustainability.

The time and effort spent on compliance efforts now lays the foundation for long-term resilience and adaptability in an ever-evolving regulatory landscape.

How SLR’s ESG & Sustainability Advisory Team can help

The latest regulation such as the SEC Climate Disclosure Rule, California Climate Bills (SB253 and SB 261) and Europe’s CSRD could lead to significant adjustments in your approach to your strategy and disclosures. At SLR, we have been helping companies develop ESG and climate strategies for 25 years and are ready to assist with implementing this new rule in alignment with your needs and requirements as the regulatory landscape continues to evolve.

Contact Emma for more information.

Recent posts

  • Insight

    21 May 2024

    5 minutes read

    What is air dispersion modelling and why is it needed?


    View post
  • Insight

    20 May 2024

    4 minutes read

    The risk of greenwashing: A global perspective

    by Daniel Silberhorn


    View post
  • Insight

    17 May 2024

    4 minutes read

    The end of greenwashing? How companies can track their transition to transparency

    by Regan Leary


    View post
See all posts