How to meet international ESG requirements

The term ‘ESG’ is shorthand for a number of environmental, social and governance topics considered to be important to stakeholders. While there is no single standard for what it covers, topics commonly include:

Taking action is not only the right thing to do, it also makes business sense:

• consumers are actively looking for more ethical products and brands,  
• employees want to work for businesses that align with their values, 
• procurement departments are committing to reduce impacts in their supply chains and apply specific requirements for suppliers,  
• banks, investors and insurers want to see that you are responsibly managing risks and may have specific investment policies, 
• regulators around the world are adopting new laws to govern products, materials, sourcing, business practices and disclosure,  
• large organisations increasingly must request data from their suppliers, clients and other business partners in order to comply with these regulations. 

So what does all this mean for your business and how should you respond? 

These considerations are not limited to your own operations, but to your full value chain, from harvesting of raw materials and supplier practices upstream, to the final disposal and recovery of your products.  

The practices applied by businesses to manage the above areas are what are often referred to as sustainable business practices. 

And when done well, these practices can help grow your business and make it more profitable and resilient, including :

• improving its reputation,  
• attracting new customers and maintaining existing ones,  
• gaining access to global markets and value chains,  
• attracting and retaining top employees,  
• and reducing operational costs and cost of capital. 

Some of these regulations target products or services themselves, including product design, materials sourcing, performance and disposal, while others target the practices of the business supplying them.  

Standards targeting products and services may include: 

• Prohibitions and restrictions of certain chemical substances, conflict minerals, illegally logged timber and products made with forced labour. 
• Product-specific requirements including performance specifications, health and safety standards, manufacturing process, energy efficiency, waste recovery and labelling. 

These standards require your business to have transparency over what substances are used in your products, their origins, and whether the products themselves have been designed and tested to meet performance requirements. 

Standards vary by country and region and are constantly evolving. You can find them for a few key markets below: 

• Europe – Access2Markets database  
• US – Federal Trade Commission Compliance Advice 
• UK – Standards and regulatory import requirements guidance  

Regulations targeting business practices generally include: 

• Disclosure of internal practices to manage risk, including risk of modern slavery, climate-related risk, and environmental and social impacts in investments. 
• Disclosure of specific ESG performance metrics, including greenhouse gas (GHG) emissions, pay equality and other material ESG impacts. 
• Requirement to conduct due diligence, including human rights and environmental due diligence of their operations and supply chains. 

Much of the data required will come from two main sources: 

Other information may be drawn from: 

• Policies, procedures and other internal documents – e.g. whether a policy exists on specific topics like equal employment opportunity, or what management approaches are in place such as for health and safety hazards; 
• Supplier requests – e.g. records specific to services and goods provided such as waste collection volumes, energy sources, types and quantities of goods provided, as well as information on suppliers’ own sustainability commitments and performance; 
• Sensors, submeters and building management systems – e.g. for tracking chemical concentrations in emissions or usage of water or energy. 

There are many tools and platforms available to support companies to collect, compile and calculate the required data, depending on your needs and budget. These range from simple calculators that can estimate your GHG emissions (also referred to as carbon footprint), to more robust climate data collection and reporting, to comprehensive ESG performance management and reporting systems. 

Even if you aren’t currently required by law or being asked by your stakeholders, it will be beneficial to start collecting this information. First, it may take a while to gather and ensure it is accurate, so start now to make sure it will be ready. Second, once you establish your baseline, or starting point, you can start seeing how much you’ve improved your performance! 

Local bank loans: Banks offer both traditional commercial loans and sustainability-linked loans (SLLs), which offer better terms for businesses progressing toward specific sustainability targets. 

Green and social bonds: Businesses can issue bonds to finance projects with positive environmental and social impact, attracting impact-driven investors. 

Development banks: For businesses in emerging markets, these financial institutions support economic development and sustainable projects which could not otherwise get funding.  

Grants: Local, state or federal governments often offer non-repayable funds to support the implementation of sustainable practices or innovation of new sustainable technologies. 

Rebates and tax credits: Some governments also offer financial incentives to businesses for adopting sustainable technologies and practices, such as solar panels or reducing their GHG footprint.

Learn more about the ‘virtuous circle’ of reporting, finance and action in ICC’s recent report, Unlocking sustainable finance for SMEs: The $789 billion green growth opportunity. 

As with any change initiative, you will also want to consider how to drive your sustainability goals within the business. Some approaches that can help ensure your success: 

• Articulate a formal commitment: This can be a policy or simply a vision statement that provides direction for sustainability efforts and communicates this commitment to stakeholders. Communications that reflect specific environmental commitments or expressions of climate (or sustainability) goals that are aspirational in nature and not likely to be met until many years in the future (e.g., net-zero, carbon negative, climate positive, etc) requires that you are able to demonstrate, in concrete terms, that your company has a reasonable capacity and methodological approach to meet the claimed commitment or goal. See the ICC Framework for Environmental Marketing Communications for guidance.  

• Establish a cross-functional committee: This applies specially to medium-sized businesses and involves representatives from relevant parts of the business, e.g. operations, finance, HR, marketing, procurement to agree plans, share updates, review progress, collaborate and address challenges.  

• Develop an action plan: Set out clear initiatives, steps, timelines and responsibilities, ensuring a clear roadmap and priorities. 

• Allocate resources: Ensure your sustainability plans do not get neglected by allocating sufficient time and attention to implement and drive them, e.g. through an ESG or sustainability manager and champions in relevant parts of the business. 

• Define KPIs: Identify measurable indicators to track progress in both implementation and sustainability outcomes. 

• Monitor and review progress: Regularly assess progress against goals to celebrate successes, address challenges, and refine your approach where needed. 

• Learn through peer networks: Join relevant initiatives to connect with industry peers, stay informed about emerging best practices, and collaborate on shared challenges. 

For further information, your local chamber of commerce is a good source to reach out to for guidance, resources and to join peer networks.