Tom Fox speaks on important issues to note in designing and implementing ESG programs. He shares an overview on the structure of ESG programs and explains why they should be led by compliance.
ESG Internal Controls
ESG programs must be tailored to fit your company’s risk profile, Tom explains. Companies must be able to identify, measure, and address all risks within ESG. “The ‘E’ is going to be more focused on climate and the environment, but this means understanding your company’s environmental footprint and your risks.” Rather than assigning this to the audit committee, Tom recommends ethics and compliance, as they have a similar responsibility and similar processes. “This tends to show how compliance lends itself to either leading or being a significant part of an overall ESG corporate response,” he adds. From an operational perspective, it makes more sense to then report directly to the board after these operations are put together.
Measuring ESG
ESG operations consist of a cross section of corporate operations, environmental concerns, and social issues. Companies must identify issues falling under the ESG umbrella, tailor an ESG program, and select key measures of performance. “ESG disclosures open up an entire new set of standards, controls, and requirements around setting proper disclosure of ESG relevant information and performance,” Tom tells listeners. DEI is just one; climate change and environmental issues will raise another set of requirements. Companies will have to determine what information shareholders, stakeholders, investors, and others will focus on for the ESG evaluation process.
ESG and Compliance
Both ESG and compliance programs involve risk assessments, policies and procedures, and controls to mitigate risk, to name a few similarities. Tom advocates that compliance is uniquely suited to lead a corporate ESG effort, as this new world “shares many operational principles with an overall ethics and compliance program.” Issue programs must be designed around five basic operational issues:
- Information collection,
- Accuracy and reliability of information,
- Data collection procedures,
- Coordination with the disclosure procedures, and
- Testing, auditing, and monitoring the process to ensure accuracy and effective operation.
Resources
Tom Fox’s email
Implementing ESG Programs: Structure and Responsibilities (Part I of III) – Corruption, Crime & Compliance
Building an ESG Structure and Program (Part II of III) – Corruption, Crime & Compliance
Basic Operational ESG Program Issues (Part III of III) – Corruption, Crime & Compliance
