A review of how good a job companies are doing in adhering to their promises in the areas of environmental, social and governance (ESG), with two attorneys from Crowell & Moring LLP: John Brew, covering international trade and product risk management, and Thomas Lorenzen, specializing in environment, natural resources and government affairs.
Crowell & Moring surveyed more than 200 individuals, including in-house counsel, ESG professionals and other corporate leaders, for its new report, “ESG Survey: Environmental Performance and the Stakes for Your Business.” It found that most organizations have set goals for improving their environmental performance, but only around 30% are actually measuring the sustainability of their supply chains.
Lorenzen says the gap between promise and performance is due in part to the still-developing nature of ESG, a broad term that covers multiple aspects of corporate social responsibility. Businesses are grappling with multiplying criteria and trying to decide which benchmarking systems to adopt. “It’s not a one-size-fits-all scenario,” he says, adding that companies are wary of the risks that might arise from disclosing compliance problems in their supply chains.
Brew says the issue for many companies divides into two categories: setting aspirational goals for reducing the carbon footprint, and complying with legal requirements for how products are sourced, including the presence of forced labor. And the further up the supply chain they go, the less visibility they have of any violations. Direct emissions (Scope 1) are more easily monitored and curbed than Scope 2 (energy expenditures) or Scope 3 (arising from the activities of independent suppliers and vendors).
In-house counsel generally lacks visibility into a company’s ESG efforts until the emergence of problems that trigger investigations and audits. Lorenzen advises businesses to create a single internal source of information-gathering related to ESG issues, to ensure total compliance and avoid the risk of “greenwashing.”
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