On 9 June 2022, NAVEX hosted the 2022 European Risk and Compliance Virtual Conference, in which industry leaders and experts came together to discuss all the latest news, trends, updates and challenges surrounding company compliance, whistleblowing and ESG.

Environmental, Social and Governance (ESG) touches every part of an organisation and has become the latest areas of legal framework that companies, society and investors use to measure the success of an organisation in a non-financial way. Often, investors and customers will now look to understand how a company, and it’s supply chain, legally, ethically, and socially functions before deciding whether to invest or buy its services and products.

Below is a summary of some of the main points that were discussed throughout the two ESG and compliance talk tracks of the virtual conference.

Ethics, Compliance and ESG

Speakers: Roisin Rivers, Corporate Marketing Manager at NAVEX and Tabish Wani, COO, Castolin Eutectic

About Castolin Eutectic:

Castolin Eutectic is a worldwide maintenance and repair application leader, established in 1906. The organisation works across more than 50 industries to bring innovative products and sustainable solutions in maintenance, surface protection, and special joining to reduce maintenance costs and increase industrial productivity through welding, brazing and coating technologies.​

How do the recent compliance endeavors Castolin Eutectic have taken improve the organisation and install company trust?

Compliance is important, both from the perspectives of the market and customers, but more so internally. As an organisation, Castolin Eutectic prides themselves on their people – believing that people make up the value of a business and transform organisations.

It is important for a company to bring in compliance standards to unleash its potential, to make a company a better place to work and so people have the rights to express their views and share their experiences. Doing this translates into a better business, both for the employees and eventually the customers.

Castolin Eutectic has internal governance systems and standard operating procedures on local and global levels, with the NAVEX One platform as a tool to ensure everyone throughout the company has the correct level of information and access. Having one platform makes it easier to manage and maintain compliance – with NAVEX One information is continuous and the company can work collectively as one.

What are Castolin Eutectic doing surrounding ESG?

Castolin Eutectic ensures that customer processes are more sustainable and cost effective. However, this is not just for customers, but internally as well. The company constantly works with the operations team to achieve more sustainable product transportation, check the sustainability of the supply network design, and redesign the supply chains to align with ESG goals.

The company is also working on consolidating their manufacturing footprints, global sourcing impact, energy consumption, and the environmental impact of the business. On the product side, the company is evaluating and changing plastic packaging to more sustainable materials.

A global organisation must understand the collective impact of all its employees around the world surrounding ESG. The NAVEX One platform is helping Castolin Eutectic to understand their impact – to collectively measure it and to bring information across to employees, customers, and stakeholders. When the collective information of an organisation is aggregated on one platform, it helps people to realise, especially with larger companies, there is an opportunity to make a huge environmental impact.

How do current company compliance and ESG initiatives affect growth and potential employees?

ESG is a topic that society, in particular the younger generations, are becoming increasingly aware of. Castolin Eutectic’s purpose and actions repeatedly demonstrate this awareness, with customers and stakeholders giving positive feedback on the sustainability work being undertaken. Castolin Eutectic has taken many measures to ensure employees work in a cleaner, more sustainable environment and lifestyle, for instance by providing business bikes and electric cars.

From a footprint perspective, Castolin Eutectic manufactures across many countries; in each location they ensure the company ecosystem, and its suppliers, continue to be as sustainable as possible. As a result of that reflecting well within society, the company will be expanding its ESG operations and hiring new employees.

Will companies who do not take ESG seriously suffer?

ESG creates company value – people want to work for organisations they feel good about. Especially now, companies who do not put a proportionate focus on sustainability and a commitment to customers and employees, will suffer in the long-term.

This is especially true in Europe where the workforce is very competitive. ESG and sustainability are topics that can make one organisation stand out more than another, giving them a competitive advantage for recruitment and attracting new talent.

Purpose and Value of ESG Programmes

Speakers: Robert Smith, Director, Business Compliance and Ethics. Serco Group PLC. and Giles Newman, Managing Director, International at NAVEX.

ESG is Here to Stay

The ESG continues to grow in importance amongst investors and entities, with currently 81% of employees, according to the NAVEX 2021 The Definitive Risk and Compliance Benchmark Report (US, UK, France and Germany), having a formal ESG compliance program in place at their company.

In addition, the volume of ESG regulatory laws, regimes and requirements have dramatically increased and broadened over recent years. In late 2022, the first standards are expected to be presented from the ISSB and The European Commission’s CRSO standards are due from the EFRAG. As for 2023, TCFD aligned disclosures will now be required across most of the UK and the German Supply Chain Act will be actioned.

ESG as Value Creation

Implementing an ESG program can be a great business driver and shouldn’t just be viewed as a framework that entities must follow to stay legally compliant. More people are increasingly aware of social, ethical, and environmental issues, and want the companies they are involved with to act upon them and create a positive impact. Therefore, successful ESG programs drive positive values across corporations, investors, and society in several ways other than simply for regulatory compliance:

Corporate:

• Companies perform better overall if they have robust ESG program in place
• An entity following ESG regulations shows commitment and care, leading to higher employee retention and customer loyalty.
• ESG programs gain stakeholder’s trust in that companies are determined to do the right thing

Investors:

• Positive ESG measurement ratings drive higher asset valuation
• ESG risk assessments can be used as tools to mitigate climate and biodiversity risks
• Bloomberg estimates that global ESG assets may represent $53 trillion USD by 2025

Society:

• ESG policies help people understand and improve the impact businesses have on society
• Contributing to UN SDGs
• Provides capital allocation to address social and environmental challenges

How Do ESG, Ethics and Compliance sit alongside each other?

ESG and E&C are a complementary fit – but depending on the company, different topics take the lead in importance. However, there is a natural fit between the three areas, as the skills developed within an ethics and compliance programme, merge well with skills needed to successfully run an ESG program. Ethics and compliance teams have complex issues to manage, ranging from whistleblowing, creating policies, and rolling out new projects across an entire organisation, so they must be very well connected within their company. A range of issues, large project roll outs and good connections are also needed skills to run ESG programs efficiently.

In addition, ESG isn’t just about data and reporting – that is the final result, and what investors are looking for. It is also about how the findings and data are delivered. Ethics is around business values, behavior, and the decisions that the company makes. If the integrity and honesty around how ethics, compliance and ESG decisions are thought through and delivered fails, then the whole programme fails. Many of the data points and actions needed within ESG originate from ethics and compliance and cement the integrity of an organisation.

What is Next for ESG?

ESG is not going away. Governance regulations are historically consistent, and there continues to be increased public and media attention around environmental issues and climate change awareness. Diversity, equity, and inclusion (DEI) are also major topics for companies and investors that need to be measured alongside the need for key demonstrations of social value, community impact and community investment.

There are countries looking to standardize ESG requirements and reporting framework. In Europe, the EU Corporate Sustainable Reporting Directive was introduced, setting new standards for how European companies should report on elements of ESG. In the UK, the ISSB is pulling together their first standards around the general requirements for disclosure of sustainability and information, which takes a completely different approach on materiality.

To learn more about how NAVEX can help your company stay ESG compliant, discover the NAVEX One platform here.