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ESG screening, or environmental, social and governance screening, is becoming an increasingly important part of due diligence for companies around the world. Legislation mandating ESG due diligence is being introduced in many countries, and even where it is not yet required, consumers, investors, and employees are demanding ethical practices from companies.
Improving ESG due diligence processes is essential for companies to avoid regulatory penalties, reputational damage and to meet the growing expectations of stakeholders for responsible business practices. This blog will explore the reasons why ESG screening matters, including examples of recent enforcement actions taken against companies that have failed to adequately screen their operations for human rights and environmental impacts--we'll also include our checklist for due diligence so you can make sure you take every necessary step to avoid risk. Let's dive in.
Among the most prominent trends in compliance today is the spread of legislation mandating companies to carry out due diligence on the human rights and environmental repercussions of their business and its third parties. And, as we saw with the pandemic, response to the Russian war on Ukraine and increase in global natural disasters, one country's response to global phenomena can have a massive impact on the entire world.
The same is true of ESG responses as very few companies operate in just one market--meaning that foreign legislation can alter the business decisions of many global actors.
Here are some recent examples of global legislation:
More countries are considering adopting similar legislation, and even where there is not legislation there are growing expectations from consumers, investors and employees that firms demonstrate an ethical approach. So all firms should be prepared, which starts with improving their due diligence process.
MORE: Supply chain transparency, ethics, and the use of technology for due diligence
Businesses that skirt ESG requirements do so at their own peril. With increasing legislation comes increasing risk of consequences if a business chooses to forgo ESG requirements.
Here are just some of the enforcement actions relating to alleged regulatory breaches in 2022:
Clearly, ignoring these laws can have major repercussions for businesses around the globe--let alone the impacts on the environment and human rights. Therefore, it is important that companies do their due diligence to avoid hefty fines or other consequences.
MORE: Stop the risk: Asking the right questions for complete due diligence
Given the extreme consequences of not complying with country ESG laws, it is imperative that all companies perform regular due diligence. But, robust due diligence research can take time that you don't have. That's where Nexis Diligence+™ comes in. With Diligence, you can do a thorough job with their due diligence tasks in a manner that leaves ample time for their your deliverables.
Nexis® Diligence makes it easier to quickly and thoroughly vet and monitor third parties, explore relations and associations, check for red flags and develop a risk profile at scale. You can research entities, explore associated entity interests, check for red flags and develop an entity profile with ease. Our enriched data empowers you to experience truly global data discovery, so you never miss important legislation that can impact your business dealings.
Interested in learning more? Our Due Diligence Checklist 2023 provides a comprehensive look at everything you need to consider as you operate your business. And, when you're ready to get started, sign up for a 7-day free trial to see how Nexis Diligence+ can help you mitigate risk easily.