Ensuring governance in the ESG environment

The relevance of sustainability has risen sharply in recent years and has become a decisive factor for corporate success. In order to meet the demands of society and advancing regulation, companies must have a holistic governance concept in place.

The reporting requirements of the CSRD lead to unprecedented transparency regarding consumption data as well as the actual social and environmental conditions in the supply chain. In addition to the CSRD, the EU Green Deal has created further regulations aimed at meeting the 1.5 degree target, reducing or offsetting CO2 consumption and reducing the consumption of natural resources in the manufacture of products.

The topic of sustainability is thus moving further into the focus of investors, competitors, consumers, customers and employees. Companies cannot avoid aligning their goals, structures and processes with the new requirements of the ESG triad "Environment, Social, Governance" in order to ensure long-term economic success. Financing instruments, tendering conditions and market preferences all use information on social and environmental factors when making decisions. Given the wide range of initiatives and opportunities, companies will need to make the planning, control and targeted management of all ESG measures a top priority.

Companies, authorities and organizations are operating in a political environment in which regulations are generally becoming increasingly strict. The Supply Chain Due Diligence Act, the EU Taxonomy, the Act to Strengthen Financial Market Integrity, the EU General Data Protection Regulation, the ongoing efforts in the area of money laundering prevention at EU level and the Whistleblower Protection Act confirm this development.

However, ESG goes further and starts in the DNA of the company. It is about successful value management in order to successfully and credibly establish sustainable and ethical corporate management and culture ("G" for governance), the "E" for a company's environmental awareness and the "S" for social factors. Only if rules and processes that are relevant for compliance with responsibilities and standards in the context of sustainability are clearly and effectively formulated and implemented can sustainable management be guaranteed.

The risks of embezzlement, corruption and fraud increase under the pressure to act in compliance with the new regulations. The requirements relating to social factors and sustainability are leading to new facets of white-collar crime. Overall, we are observing a whole new dimension of white-collar crime and risk factors. For example, companies are facing challenges such as green or carbon washing, falsification of environmental certificates, unjustified climate and environmental protection claims on products, misappropriation of funds, corruption in connection with environmental approval procedures or requirements, but also violations of human rights as well as rainbow and purple washing, which must be countered preventively and proactively.

It is time to think and act holistically, because the consequences of white-collar crime, such as sanctions, reputational damage or fines, result in high and long-term consequential damage.

Almost every company is regularly affected by white-collar crime and misconduct; internationally active companies much more frequently.

The prevention of offences in the ESG environment, the detection of misconduct and the correct response to identified problems as well as the minimization of the resulting damage are the focus.

KPMG offers you a multi-dimensional approach and has interdisciplinary forensic and ESG specialists who carry out special investigations, gap analyses, risk assessments and prevention projects in the ESG environment. Please do not hesitate to contact us.