Top 5 Things Companies Are Doing to Navigate Sustainability in Uncertain Times
As sustainability regulations evolve, political winds blow and stakeholder expectations rise, companies are adapting their sustainability strategies to remain resilient and compliant. Based on recent conversations with clients and market trends here are the top five actions companies are taking to lead through uncertainty:
1. Identifying and Addressing Climate Risks and Opportunities
The impact of our changing climate is real and immediate. And despite delays in certain global climate disclosure regulations, stakeholders are demanding information on how companies are addressing these risks and opportunities. In response, companies are:
- Assessing physical and transition risks associated with climate change;
- Identifying adaptation and mitigation strategies to minimize impact;
- Developing transition plans to align with regulatory requirements and stakeholder expectations;
- Developing long-term budgets to mitigate these risks and take advantage of opportunities; and
- Drafting disclosures on their transition plans that meet the requirements of the CSRD, ISSB, California and other jurisdictional regulatory demands.
2. Optimizing Reporting Processes
In the preparation for CSRD reporting prior to the Omnibus proposals, many companies gained insight into the challenges of collecting and reporting non-financial information. After year 1 of CSRD reporting for Wave 1 companies and during the reprieve for Waves 2 and 3, we are seeing management use the extra time by focusing on building repeatable, reliable reporting processes, using technology. Some specific actions they are taking include:
- Automating data collection beginning with source data fed directly into a data lake and output into a reporting template to meet external reporting needs using platforms like Workiva, Microsoft, and SAP.
- Enhancing governance and controls over existing environmental data systems like Enablon and Watershed.
- Continuing to clarify accountabilities and responsibilities for sustainability data and reporting.
It is clear that the amount of time and effort to collect and report sustainability information is cumbersome and there is value in automating the process to save time, resources, and ensure quality.
3. Ensuring Supply Chain Traceability
Similar to the COVID-era, all eyes are on supply chains, whether companies are evaluating the impact of tariffs, looking to ensure resiliency due to severe weather events, or to comply with regulations. As companies contemplate supply chain challenges, they are also considering:
- The need to comply with regulations like the EU Deforestation-free Regulation (EUDR) and the Corporate Sustainability Due Diligence Directive (CSDDD).
- Enhancing traceability at the product level to ensure compliance, transparency and strategic priorities.
- Evaluating tariffs and other supply chain resilience challenges as opportunities to address sustainability regulations.
4. Tracking and Adapting to ESG Regulations while Balancing Voluntary and Regulatory Disclosures
Although companies have a bit more time to comply with regulatory ESG reporting, governance still remains a challenge. Companies are focused on assigning accountability and responsibility for ESG regulatory compliance by:
- Designing their compliance strategies to mirror their approach to cybersecurity and data privacy laws.
- Establishing clear governance structures both locally and centrally to monitor and respond to regulatory changes, ensuring companies remain agile and compliant.
- Reconsidering whether they need separate teams for voluntary and mandatory ESG reporting.
- Exploring externally managed services to support their evolving reporting needs.
5. Preparing for Assurance
Companies are laying the groundwork for credible and assureable sustainability reporting. This includes:
- Creating internal disclosure checklists to distinguish between required and contextual information.
- Establishing Risk Assessment Control Matrices (RACMs) for ESG, mirroring financial reporting practices.
- Strengthening governance with detailed documentation, ownership of disclosures, and certification processes.
- Integrating sustainability into internal audit plans to identify gaps and enhance data reliability.
There is still a lot of work yet to be done. Delaying will result in onerous manual efforts, data quality risks, and the potential for noncompliance. Despite the continuously shifting sands in the sustainability landscape, NOW is the time to take action.
We have started this blog to provide timely information in the lead up to New York Climate week and COP 30. Please check back weekly as we dig into each of the top 5 as well as what we have planned for the upcoming climate events!
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