CCO Insight: Effective Compliance for Sustainability/ESG

How are Chief Ethics and Compliance Officers (CCOs) integrating the role of Compliance in building and sustaining an effective compliance program for Sustainability/ESG (Environmental, Social, and Governance)? 

KPMG client CCOs share many key insights, including:

The CCO Role in Sustainability/ESG

• Position Compliance as a coordinator/collaborator with senior leadership and the Board
• Work with internal stakeholders to determine if new Sustainability/ESG controls need to be designed and integrated into an existing framework
• Validate all content messaging, reporting elements, and stakeholder responses prior to issuance
• Use Sustainability/ESG as a value driver for ethical business practices and ‘good corporate citizenship’

Sustainability/ESG Compliance Program

• Determine if a separate Sustainability/ESG policy is appropriate and what it should entail
• Expand third-party and supplier risk management including due diligence and monitoring & testing
• Assess current regulatory change management processes and ensure that they fully capture diverging global, federal, and state Sustainability/ESG

KPMG Perspective

Compliance must drive an effective compliance program for Sustainability/ESG in line with an overall sound framework. This means identifying and building controls to mitigate a new series of potential Sustainability/ESG-related legal, reputational, and compliance risks.

Some key sample questions to ask of your Compliance program include:

Regulatory and Commitment Change Management: Does our regulatory change management process fully capture relevant proposed and new Sustainability/ESG-related requirements at the global, federal, and state levels and identify divergent requirements posing compliance risks?

Risk Assessment: Have we assessed the inherent and residual risks to the ESG-related regulatory requirements/expectations and our company’s Sustainability/ESG-related commitments?

Policies and Procedures: Have we mapped our existing policies and procedures to the Sustainability/ESG-related risks?

Monitoring and Testing: Have we updated our monitoring and testing to the new Sustainability/ESG-related risks (e.g., advertising/marketing/disclosures, social audits, monitoring of third parties/suppliers)?

Issues Management and Investigations: Do our current legacy data access/processes need to be revamped/retooled for active and varied stakeholder Sustainability/ESG-related requests?