The European Union is often ahead of the game when it comes to environment, social, and governance (ESG) regulation. However, despite more widespread approval for ESG and climate regulations in the EU, there are still bumps in the road. Financial institutions and lobbyists are gearing up to fight the passage of a bill which would open up companies in all industries who operate in the EU to liability if there are human rights abuses or environmental issues identified in their supply chains. This bill goes far beyond the mandatory disclosure-related regulations that have become law in the past. Financial institutions argue that this law would create huge amounts of work as examining the value chains of all of their clients and customers is no easy task. While this bill has not yet been passed into law, it will have wide-reaching implications for any company operating in the EU.

With new regulations emerging it can be difficult to stay up to date. Competent Boards’ best-in-class ESG and Climate & Biodiversity programs help you keep your finger on the pulse and gain critical insights, so you can have improved foresight and oversight. 

1. ESG translates to better performance. According to research by Bain & Company in collaboration with EcoVadis, companies with strong ESG strategies who prioritise addressing issues in their supply chain have margins that are 4% higher than those who do not. ESG-focused companies also score higher on employee retention and satisfaction. Additionally, companies whose boards have more women see greater growth and profitability. This report can potentially have significant impacts on board member recruitment and procurement, and shows that ESG is a strong driver of value creation for companies. 

2. The importance of inclusive shareholder engagement. According to research conducted by The Engagement Appeal, a social venture of shareholders and investors, over a million shareholders are being overlooked in corporate shareholder engagement strategies. Companies typically focus their engagement efforts on their largest shareholders, leaving individuals and small shareholders without a voice. Individual shareholders in particular are the most overlooked as they often are unable to participate in any meaningful way when it comes to company policy. Despite growing commitments to diversity and inclusion, this is an overlooked aspect of inclusivity among shareholders, and demand for greater engagement is on the rise. The Engagement Appeal is working to encourage companies to change the way they handle shareholder and stakeholder engagement, and suggests taking advantage of technology to give more shareholders a voice.

3. Patagonia, the poster child of ESG strategyThe drastic step of transferring ownership to a non-profit and a trust which will ensure all company profits are directed towards environmental conservation and climate change mitigation has cemented Patagonia as the poster child of ESG corporate strategy. When questioned about balancing the growth and success of Patagonia with sustainability and ethical capitalism, CEO Yvon Chouinard pointed out that chasing endless growth is impossible. He believes that every company has an ideal size, and if a company grows beyond that they tend to fail. He states that Patagonia is “focused on longevity, not expansion”. When discussing working with suppliers to ensure Patagonia’s values are supported throughout the supply chain, Chouinard believes it is less about working with suppliers to change, but taking the time to find organisations whose values already align. No business can be truly sustainable, but they must focus on limiting the environmental damage being done.

4. Singapore to fund Asia’s zero emission transition. The Monetary Authority of Singapore has announced a new action plan to help finance Asia’s net-zero transition. One of the largest obstacles to carbon neutrality in developing nations is a lack of financing for sustainable development, and this fund seeks to address that by supporting climate risk disclosure and management. Singapore’s Deputy Prime Minister and Minister for Finance, Lawrence Wong, shared that the key targets for this new fund were to improve “data, definitions, and disclosures” by bringing climate and nature related risk and disclosure up to the same level of awareness as ESG risk assessment. 

5. The employee and employer relationship. The relationship between employee and employer is a complicated one, and the COVID-19 pandemic has only exacerbated this. According to research conducted by EY, employees increasingly want to work for companies that share their values and that have transparent and fair remuneration policies. EY found that the #1 reason that employees look to change jobs is salary, however only 1 out of 3 employers are being proactive in responding to evolving employee needs such as working from home. Here are three key ways to better manage the relationship between employer and employees:

  1. Take the time to listen to what your employees are asking, especially those of younger generations. Engage with them in an open and ongoing conversation regarding their expectations and requests of the company.
  2. Focus on long-term success and retention of employees by tracking trends and how they impact hiring prospects.
  3. Ensure that management is focusing on teaching employees new skills (upskilling) and supporting their professional development. This can also help address the growing demand for new hires with technology skills.

Ira Srivastava is Competent Boards Program Coordinator. Follow Competent Boards on LinkedIn.

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