Why the “social” of ESG should matter for compliance professionals

11 minute read

Environmental, social, and governance (ESG) factors and sustainability have been on the corporate agenda for a few years now. A whole industry has emerged around supporting companies creating and meeting their ESG objectives, often facilitated by dedicated ESG leads or teams within a business. But ESG has traditionally been skewed toward the E: environment. Under virtually any measurable metric, the environment receives the lion’s share of ESG attention. Whether budgets, resources, or key performance indicator measurements, discussions around environmental issues such as carbon and net zero are front and center. Virtually any company with an annual revenue of over $100 million will have a sustainability strategy, and the environment will usually contain the headline objectives.

Compliance professionals have historically had less need to get involved in the environmental aspects of ESG. Instead, it is the G, or governance—covering anti-bribery and corruption (ABC) sanctions or fraud, for example—that compliance departments are heavily focused on and long familiar with.

So, that leaves S: social. This is the most varied pillar of ESG, but also where we see the most regulation emerging and where compliance officers will be required to do some of the heavy lifting. At S-RM, we commissioned a survey of 550 corporations and 200 investors across eight different sectors to probe further into the social pillar of ESG: What risks does it pose for compliance professionals, how prepared are they, and what are their biggest headaches? Our headline findings identified that more than two-thirds of the corporate leaders we spoke with anticipate their ESG budgets will increase over the next five years, with the biggest rise coming in the social pillar. The social issues compliance professionals need to respond to will not only have a greater budget allocated to them, but they also pose some of the biggest risks in terms of reputation and market value and are commanding growing attention from corporate boards and senior decision-makers.

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