Regulatory, Stakeholder Demands Driving Corporate ESG Efforts

Corporate ESG

(Credit: Pixabay)

by | Dec 23, 2022

Corporate ESG

(Credit: Pixabay)

Reporting obligations, both because of regulations and stakeholder demands, are driving ESG corporate initiatives, according to a report from Thompson Hine.

Data and obtaining the appropriate information to make ESG decisions is also a significant concern of private and public companies, according to the report. Reporting obligations are greater as well and include topics such as greenhouse gas emissions, environmental impacts, and supply chain issues.

This is the second year Thompson Hine has put together the report, which surveyed both private and public companies. Private companies say data collection is their biggest concern (20%), while public companies say green initiatives (23%) were the greatest ESG challenge.

Reporting has become a bigger issue across industries over the past year. That’s because investors and other stakeholders are increasingly viewing how a company is handling ESG initiatives as imperative to business success. Regulatory pressures are also growing, such as the Securities and Exchange Commission’s proposed emissions and climate disclosure rules.

Making ESG commitments is seen by many businesses as important to financial outcomes. A report by Planetly says even voluntarily making ESG disclosures can benefit companies, and a wealth of data resources has recently become available to help businesses manage their ESG targets.

SEC rules gain attention

Prepping for the potential SEC mandates varied widely between public and private companies. Nearly eight in 10 public companies say they are preparing for the potential disclosure rules, while 30% of private companies say they are.

One of the big topics in the SEC disclosures is Scope 3 emissions, which are indirect emissions. According to the survey, 77% of the companies say they are not planning to report their Scope 3 emissions in 2022, although public companies are more likely to do so with 36% saying they will make that information available.

Manufacturing (39%) led industries in saying they have or will report Scope 3 emissions. Just 14% of professional services companies say they will report the emissions.

Of international regulatory significance, 66% of companies say they are preparing for the European Union’s corporate sustainability reporting directive. Additionally, 34% say they are looking to meet International Sustainability Standards Board requirements, and 34% also say they are preparing for other regulations such as the EU taxonomy, and supply chain requirements from countries such as Brazil and Germany.

Customers and suppliers play an ESG role

Many respondents, 46% collectively, say they are using third parties to help them support some aspects of their ESG efforts. Among the areas those using outside sources to help with their sustainability initiatives are developing ESG frameworks, material assessments, and Scope 1 and 2 emissions calculations.

Around a third of public companies and a quarter of private companies say they are adding ESG obligations to contractual agreements. Of companies that are looking to make such commitments, topics such as supplier ESG efforts and Scope 3 emissions data are among the priorities.

About half of companies aren’t seeing customer demand for ESG initiatives. Of the sustainability topics companies are being pressed on, 34% say greenhouse gas emissions are the most pressing.

In terms of ESG and sustainability programs such as Science-based targets initiatives, 42% of public companies say they are committed to those efforts while 14% of private companies answered that way.

The survey was conducted with 128 in-house counsel members and senior business executives. Industries covered include manufacturing, financial services, professional services, technology, retail, and transportation. About three-quarters of the respondents’ businesses are in the United States with the rest having international operations.

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