Research shows a substantial percentage of companies are not prepared for the environmental, social and governance (ESG) data assurance requirements. Only 25% of companies feel they have the ESG policies, skills and systems in place to be ready for independent ESG data assurance. This is despite the fact that two-thirds of companies must disclose such data or will soon be expected to do so on a mandatory basis.

One of the core challenges for companies planning for ESG assurance is a need for more internal skills and experience. Learn how these requirements will impact corporate and financial services companies. Plus, uncover the proactive steps your company can take to prepare for the legal implications of these requirements.

Impact on Corporate and Financial Services Companies

 

The ESG data assurance requirements create the following opportunities if handled correctly, in addition to challenges for corporate and financial services companies:

Opportunities

• Reduced risk and compliance costs: Proactive data quality management can help avert costly fines associated with regulatory non-compliance.
• Competitive advantage: Companies prioritizing data assurance can distinguish themselves in the marketplace as trustworthy and reliable partners.
• Improved decision-making: Trusted data results in better-informed decisions at all organizational levels—from product development and customer service—to risk management and compliance.
• Enhanced trust and credibility: Strong data assurance processes can build trust with your customers and investors by committing to transparency and data integrity.

 

Challenges

• Evolving regulatory landscape: Keeping up with the ever-changing regulatory landscape, especially in areas like ESG reporting, can be exhaustive for your internal resources.
• Increased costs and complexity: Implementing and maintaining effective data assurance programs requires an investment in technology, personnel and processes, which can be a financial and administrative burden on your company.
• Lack of talent and expertise: This can have significant consequences for your company, resulting in operational challenges, inaccurate data, and increased costs and inefficiencies. Moreover, finding and retaining skilled professionals with data governance and assurance expertise can take time and effort.

 

You can gain a competitive edge by preparing and leveraging the potential benefits. Conversely, the implications of non-compliance can be significant and multifaceted, from regulatory fines and penalties to negative brand perception.

Key Steps to Prepare

Here are some proactive steps you can take to prepare for the ESG data assurance requirements:

 

1. Stay informed:Monitor emerging standards for ESG data assurance, including the proposed International Standard on Sustainability Assurance (ISSA) 5000 and legislative developments. Acquaint yourself with relevant regulations in your jurisdiction and industry.

 

2. Conduct a risk assessment:Find areas where your ESG data collection, management and reporting practices might be vulnerable to legal risks because of possible inaccuracies.

 

3. Develop robust internal controls:Establish strong data governance policies and internal controls to confirm data accuracy and consistency within your company.

 

4. Invest in data management systems:Upgrade your technology and data infrastructure to assist in effective and trustworthy data collection, retrieval and storage.

 

5. Examine disclosure obligations:Recognize your legal responsibilities for ESG data disclosure, both mandatory and voluntary, under stock exchange listing requirements and relevant regulations.

 

6. Establish ESG reporting policies:Create thorough policies for ESG data collection, verification, aggregating and reporting. Ensure they support recognized standards and best practices.

 

7. Provide training:Offer training for employees engaged in ESG data collection, management and reporting to guarantee compliance with internal policies and legal requirements.

 

8. Consider independent assurance:Evaluate the need for independent third-party assurance of your ESG data to enhance stakeholder confidence and mitigate legal risks. Select reputable assurance providers who adhere to relevant standards and ethical codes.

 

9. Conduct due diligence with suppliers and partners:Assess the ESG practices of your suppliers and partners to ensure alignment with your commitments and avoid reputational risks.

 

10. Partner with legal experts: Consult with legal professionals specializing in ESG and sustainability to guarantee compliance with relevant laws and regulations and navigate potential legal risks associated with your ESG data disclosures. For legal inquiries, please contact us at Pastore LLC.

 

By taking these proactive steps, you can begin to prepare for the evolving ESG data assurance requirements. The legal landscape is dynamic, so staying updated and adapting your strategies is crucial.

 

This article is intended for informational purposes and does not constitute legal advice.

 

(Julie D. Blake, JD, LLM, CIPP, CIPM, is an experienced commercial litigator and data privacy expert with expertise in cybersecurity, data privacy breaches, risk assessment and data privacy policy review.)

Tags: ESG, Julie Blake, Legal Implications