ESG Compliance: Opportunities for CCOs

  • August 3, 2021
  • Quantivate

Compliance professionals are tasked with managing and mitigating risk along many vectors in an organizationā€™s operations. As businesses and their customers increase their attention to social issues such as inclusion, diversity, and sustainability, CCOs face both significant challenges and unique opportunities.

Compliance officers occupy a position that allows them to impact their organizationā€™s efforts to promote environmental, social, and governance (ESG) responsibility. There is a growing sense among leaders that ESG initiatives are not just a reflection of good corporate citizenship, but also of good compliance management.

Many regulatory authorities are looking for policies and practices that promote these priorities, putting compliance teams at the forefront. Additionally, investors are taking ESG issues into consideration when making decisions with their portfolios.

Read more: ESG Disclosures in the Regulatory Spotlight

The drive for better inclusion and diversity is not just a product of the momentum these issues gained in 2020. Regulators like the Securities and Exchange Commission (SEC) are considering new frameworks for ESG compliance and reporting. The hope is that by making these concerns integral with other ESG disclosures, companies will begin to develop effective and innovative solutions. Additionally, the SEC intends to create transparency and allow for potential investors to easily understand where a particular organization may stand with their efforts to address and support ESG topics.

The difficulty in the SECā€™s framework is how to appropriately define what a successful and compliant report will look like. Lack of expectations and measurement principles will likely limit the effectiveness of the legislationā€™s goals. The SEC will need to create reasonable and achievable reporting standards that satisfy the interests of investors and the general public and foster the development of effective organizational policy.

Compliance teams will face a considerable challenge in understanding and analyzing these complex issues when implementing policy and navigating new regulatory requirements. But CCOs may be able to make an impact by applying their skills to designing effective and thoughtful ESG compliance and reporting procedures that lead to better outcomes.

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