With growing compliance burden, companies are rushing to embrace ESG – but overcommitment is a significant risk. Companies must hold themselves accountable for their own commitments. A failure to meet your own obligations opens the door to enforcement actions by regulators.
Introduction
Regulators are extending their reach beyond regulations into the realm of corporate statements. Scott Nadler recently posted that the Securities and Exchange Commission (SEC) is looking at corporate ESG statements and pursuing mis-representation. The SEC went after BNY Mellon for 1.5 Million for their statements that certain investment funds were geared towards ESG, when that was not actually the case. The SEC also went after Vale mining for misleading statements in their ESG reports about the tailings dams at their mines (two of which breached and killed over 289 people). More and more, what companies claim they are doing will be held against them – especially if the claims turn out to be false.
While this trend is not new, it is growing in prominence. As far back as the early 2000’s, the famous Dupont Chemical Company was held accountable for releasing C-8 (Teflon) chemicals into the local water supply at a level that was greater than their own safe-level recommendation. This led to lawsuits, penalties and settlements in the hundreds of millions – not to mention the negative publicity and the lives that were lost and damaged forever. The case was well documented in the film Dark Waters. The point is that regulators and governments can and will use a corporation’s own statements about their activities in enforcement actions. If you say something, you now have to do it.
Companies around the world are rushing to sign up for various international standards such as the Business Social Compliance Initiative or for industry specific standards such as the World Responsible Apparel Products, the Responsible Jewelry Initiative or Green Marine. Regardless of what your organization commits to, the key challenge is not the initial commitment, but rather the maintenance of the program and the ongoing assurance that you are executing on the related obligations. In many organizations, a commitment is made by a division or a business unit with good intentions and the corporate team may include such a commitment in their annual report or ESG report. However, it is absolutely critical that the organization assures that these commitments are being met. Since each commitment is a potential liability for the company, centralizing and organizing your obligations is more important than ever.
Most commitments can be verified internally, but to do so in an effective and efficient manner you must create clarity and processes. Nimonik can help organizations centralize and organize their commitments, linking them to the internal controls such as audit schedules, policies and procedures. There is however, no magic bullet. An organization that wants to embrace industry best practices must invest in its systems and people. Nimonik strives to work with companies that have three key elements: management commitment to compliance, a team lead who has the time and resources to implement a project and a set of people who can execute on tasks, review findings and close out actions. With a robust company-wide commitment, a regulatory and standards compliance program can be implemented in as little as 6 months. To learn more about how you can wrangle your commitments and obligations, please contact us.
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If you need help implementing a Comprehensive Compliance program for your organization and your stakeholders, please contact us at info@nimonik.com of at +1-888-608-7511
