While many ESG trends continued in 2021, the past 12 months also saw landmark events, accelerating regulatory attention and a heightened public awareness not present in previous years. CCI editors provide their rundown of the top ESG articles of 2021 below.
In 2021, it sometimes felt as if ESG had transformed from a cause to a sort of corporate lifestyle trend. Executives took careful steps to make themselves seen at COP 26, the UN’s climate summit in Scotland. Businesses highlighted their features with a carefully chosen reporting framework. ESG shareholder communications were on vibrant display throughout proxy season.
In some cases, these ESG poses were indeed only skin-deep. CCI editors came across one corporate sustainability report from a business that will not be named. It eagerly promoted the fact that it had achieved carbon neutrality by purchasing carbon credits from a tree-planting business sufficient to offset the several dozen metric tons of C02 its offices produce. A quick scan of the carbon credit provider’s website reveals that this was supposedly accomplished for the price of about $1,000 — an impossibly low sum for such a critical task.
Of course, this was a rare exception. Anyone who followed ESG in 2021 knows that the movement is much, much deeper than simply representing the latest trend. A cohort of activist investors led by Engine No. 1 landed three directors seats on Exxon Mobil’s board. Hertz announced it would spend $4.2 billion to add 100,000 Teslas to its fleet. Sportswear and fashion brands, solar panel manufacturers and many others faced supply chain disruptions due to a U.S. Customs and Border Patrol withhold release order on products originating from forced labor in Xinjiang, China. The European Union legislated a standardized reporting framework that will go into effect as soon as 2022. In the U.S., the Securities and Exchange Commission signaled it would follow similar steps. Oh, and global ESG assets under management reached $35 trillion in 2020 and are projected to hit $50 trillion by 2025.
On the other hand, perhaps less has changed than one might think. CCI published its first article on ESG on June 5, 2019. “While the tenets of ESG are generally understood,” wrote Brian Alster at the time, “what remains to be clearly defined for organizations is how to monitor for, assess and comply with ESG standards within third-party risk management programs.” For many business leaders, these words still resonate.
Then again, some among us argue that we should understand the basic tenets of ESG differently. Over and over, thought leaders admonish us not to forget the “G” in ESG, while others encourage us to rethink the “S” and still others go a step further and encourage us to add an “H” to the acronym.
Explore these insights and more in our top ESG articles of 2021.
We Asked the SEC and Others About the Impact of Standardized ESG Reporting. The Answers Were Complicated.
SEC commissioners debated policy relating to ESG standards all year: “If investors are buying a product that claims to use an ESG strategy or be sustainable, they should have a clear understanding of what that product actually does,” SEC Commissioner Elad Roisman told CCI. “Asset managers selling the product should provide enough disclosure so that people can come to that understanding.”
By Henry Kronk. Read the full story.
Should CCOs Take Responsibility for the “New” ESG Function?
Michael Volkov argues chief compliance officers have to refuse leadership of ESG but dovetail oversight with their roles in the broader governance framework. The “G” can be leveraged to build an even better corporate culture and improve governance operations.
By Michael Volkov. Read the full story.
US Customs Clampdown on Xinjiang Forced-Labor Exports Multiplies Supply Chain Compliance Challenges Across Industries
New forced-labor requirements related to Xinjiang and a three-fold increase in enforcement by U.S. Customs have raised the risk of supply chain disruptions and penalties for U.S. importers. How should companies go about proving the negative: that their supply chains are forced-labor free?
By Doreen M. Edelman and Andrew Bisbas. Read the full story.
Today, CBP announced 5 Withhold Release Orders on goods from China produced with state-sponsored forced labor in Xinjiang where the Chinese gov't is engaged in systemic human rights abuses against the Uyghur people & other ethnic & religious minorities: https://t.co/dxk3cSdXIS pic.twitter.com/M3P7jBEn07
— CBP (@CBP) September 14, 2020
Why We Need to Add Health to ESG
As environmental, social and governance (ESG) penetrate corporate boardrooms, one key factor within this mindset barely registered until the onset of the COVID-19 pandemic: public health. Governments on both sides of the Atlantic have done their best with regard to public health. It’s time for businesses to step up and get behind public health, and by adding an “H” to ESG. Doing so provides a new measure by which we can evaluate performance.
By John Godfrey. Read the full story here.
Biden’s Inauguration Heralds a New Era in Financial Regulation
President Biden will focus on environmental, social and governance (ESG) policy, as there is currently a lack of consistency, standardization and regulation in this area. The SEC is likely to implement mandatory ESG disclosure standards and more aggressively enforce environmental regulations for all companies. It will look at ESG disclosures such as climate and risk disclosures, corporate governance, worker pay, worker treatment, diversity and health care policies.
By Bijaya Das and Nishanth Neeli. Read the full article.
The Messy Business of ESG: Why Short-Term Thinking Can’t Fix Fundamental Flaws
Implementing an ESG program at your business calls for far-sighted and informed decision-making. But that impulse often appears at cross-purposes with short-term fixations on quarterly performance. This and myriad other quagmires lie in store for those who are tasked with ESG compliance.
By Michael Volkov. Read the full story.