ESG: Exploring Frameworks, Responsibilities, and Upcoming Software Solutions

August 31st, 2022
Hannah Tichansky
ESG supply chain

To celebrate and kick-off the launch of Aravo’s new ESG Solution, Aravo’s Colin Campbell sat down for a fireside chat with industry experts and ESG thought leaders to discuss the current regulatory landscape, determine how to prioritize initiatives, and tips for getting ESG programs off the ground.

With the upcoming Aravo for ESG you can build a supply chain that reflects your values, comply with complex regulatory requirements, and mitigate third-party risks.  Our solution enables organizations to quickly onboard and screen third parties; use pre-configured assessments aligned with global ESG frameworks, standards and regulations; integrate with risk intelligence provides for deeper analysis of third parties and suppliers; identify and mitigate risks with continuous monitoring, action plans and issue management; and review ESG metrics and centralize reporting of risk and compliance dashboards with executive dashboards.

A Conversation on ESG With:

Examining ESG as a Framework

Colin Campbell: I’d like to explore frameworks and give a perspective on what those mean for ESG, and an organization.

Lisa-Beth Lentini Walker: I think for many years there were very many different approaches to speaking about ESG, how to measure and report on it. We’re at this critical time right now, where there is more cohesion and coalescing around standards. One of the things that came out of the recent Copenhagen meetings was that there is a more serious push towards international standards for reporting from a financial disclosure perspective. And we’re seeing more and more developments in that space.

But, as we continue to grow and develop in this space, what’s becoming abundantly clear is that it isn’t just the first responding companies, the larger corporates that are expected to disclose that are in the mix here, because we are in a very connected world. ESG is not just limited to what happens within four walls. We’re seeing these impacts within supply chains and the expectations around behaviors being extended to third and fourth parties.

Jim Massey: ESG is a framework through which we, as people and companies, disclose to those who are counting on us how we’re tackling big challenges. And I think when we started, we were talking about corporate social responsibility. Sustainability was very European and this ESG framework tends to, for me at least, be much more global, more comprehensive, and explains the totality of why a business exists. And I think what we’re seeing to Lisa-Beth’s point, regulators are trying to come together, but they’re coming together during one of the most polarized times in our world.

And so, I get very concerned that it’s going to get difficult for us to have regulations come together when we, as a society, are so polarized. And that’s why I believe it’s going to be more important for companies to focus on ESG as a framework through which they can disclose. And the new trend I believe is going to be uber transparency. If you, as a company, don’t want to share the information, a key stakeholder or employee will share it for you on social media. And there are numerous examples from the Meta papers to the Uber papers, where employees were saying enough, people need to know what you’re doing. And so, I believe ESG is the framework through which we, as a global society, will be able to communicate and evaluate one another to see if we’re really doing what we promised we would.

Ken Wolckenhauer: When facts don’t matter anymore and political narratives rule the day, that is the biggest risk to addressing ESG. If people are anti-regulatory, I tell them, you can’t walk away from this. ESG is coming at you, whether you want it or not. It doesn’t matter what you think, it doesn’t matter what your values are. It’s coming at you anyway; it’s a risk management framework and you’ve got to accept it.

And that is the major educational responsibility we have right now, is to talk about the real situations going on in the world today with our environment, that you cannot deny that social injustice is happening. Everybody needs to be educated on ESG, no matter what narrative they follow.

Colin: Ken, when you think about managing vendor risks for a bank, how have you tackled educating vendors and suppliers around risk and ESG, and how they should operate while supporting your operations?

Ken: One of our principles that we look for is that we have a supplier code of conduct that we try to run up and down the flag pole. And we realized, especially on the international side, that not everyone shares our specific goals, values, and culture, yet they all signed on to the UN Global Compact.

So, if we can point back to that framework and say if you want to be our supplier, we need to know that you’re on board with the Sustainable Development Goals of the UN Global. And so, being able to point to that framework puts us in a position to say, if you’re not where we want you to be as a supplier, how can we work together to get you there. For the most part, if we have the opportunity to work with our suppliers to educate them and bring them along and to have them make commitments that meet the values that most of the world has agreed on, then we’re there to do it.

Colin: Lisa-Beth, what you are seeing in the market when it comes to employee training and education, and how that relates to an ESG standpoint in existing programs?

Lisa-Beth: When we’re talking about ESG and we’re talking about employee populations, I think it’s very important to ground any type of training awareness, et cetera, in the values of that organization and how that organization chooses to navigate the world. Now, certain industries are going to have more interest and more impact in different areas.

For example, I used to work for a very large travel management company. One of the things we spent a lot of time training employees on was human trafficking because travel is one of the key components of that human trafficking cycle. And therefore, travel becomes a means by which you can limit the impact of attempts at human trafficking. If not tended to, you can be part of the problem. So, when you’re in a space that has a particularly strong impact in one of those ESG areas, I think it’s really important that you connect the “why” you are doing what you’re doing.

Colin: Jim, in terms of your role and responsibilities as Chief Sustainability Officer at Zai, how is your program working across different stakeholders inside your organization as you approach ESG?

Jim: People always try to divide up and conquer, and that’s the best way to do this. ESG is a framework for any risk the organization can face. I spend my days working with HR on recruitment and retention of employees, I’m working with compliance and legal and our enterprise risk management… where do we have modern-day slavery, and human trafficking risks within our supply chain?

Those are big concerns; every business faces it predominantly in their supply chain. And I think that ESG is everyone’s job for an organization to fulfill its commitments…  And so, I work across all sectors helping to crystallize how this shows up as a risk for the organization, and often how it can be a major leverage opportunity for us to differentiate and do the right thing, which often saves us significant amounts of money.

Staying Abreast of ESG Risks

Colin: Is it hard to stay on top of major ESG-related changes and how to respond?

Ken: I am encouraged by the fact that some of the standards and industries are starting to consolidate and mature, which is going to clear up some of the confusion in the months to come. Because there’s just so much out there right now and it makes it even harder to educate people on ESG when there are so many multiple standards.

Colin: Are there any particular studies, background info, or courses that people can take to really start to skill themselves up around ESG?

Jim: I think one of the important things I want everyone to be aware of is Martech’s law. It’s a theory that technology is changing so rapidly that we, as individuals, can respond faster than our businesses can, and businesses respond faster than government and regulations can. The reason I bring this up is as individuals, we can learn a lot. And I still do believe in crowdsourcing effects and social media, finding reliable information, finding reliable content.

Throughout Europe, the US, and I’m even seeing it in Asia, many of the leading academic institutions have created certificate programs, master’s and undergraduate’s degrees on ESG. But, it’s very hard to keep up to date. As individuals, we need to keep finding this information, leveraging each other, and crowdsourcing, even if it’s as simple as posing a question on LinkedIn.

And then, inevitably just pure benchmarking- going and looking at other organizations that you respect, reading their sustainability reports, seeing how they’re doing it. Those are all avenues through which we, as leaders, can up our game to help our organizations within our own capacities.

Building Trust

Lisa-Beth: I’m going to take a different approach here. There is a lot of misinformation and disinformation about what ESG is, where it’s going, and how you need to stay abreast of everything that’s happening. I think part of that is because we’re in such an uncertain environment. But the bottom line is we need to be pragmatic about what is actually happening today, not what might happen.

One of the things I think is really important is there is no one who knows everything about ESG and every jurisdiction all the time- that would be an impossible task. But what you want is to have the most important elements, have awareness around that, and then be able to build a body of knowledge. Yes, there are lots of resources, but the important thing is to start with small, reliable building blocks.

Colin: How can organizations manage expectations and gain the trust of stakeholders related to these events?

Lisa Beth: I think ESG is one of those things that is a north star and helps an organization determine how it moves through the world and what its impact is. I think that’s closely aligned with values. And as we continue to go through these very interesting times, there will be whole new ways of looking at the world, our role in it, and what that means for life as a human being on this planet we all share.

Ken: Part of the problem is that not everybody is facing the same crises, and some of theirs are much more desperate. It’s so important that Europe, the US, and countries like China take the lead because we’re going to have to develop technologies. We’re going to have to develop economic models that don’t leave out the rest of the world.

Jim: For the UN Sustainable Development Goals, there are 17 goals with 169 targets of which none are on track to be met by 2030. And, we had more than enough time to make progress and we simply aren’t. We’ve been hearing about this for a while. We’ve been expecting to see change, and it’s clear that we’re not. I always talk about the system being full of white noise. So, how do we bring that white noise and find the nuggets? How do we break through to start incremental steps? And that’s why I’m trying to work throughout the enterprise to say, in your role, this is what I need you to focus on. Start small.

Lisa-Beth: There are a lot of promises with no path to keeping the promises. So, I think that one of the things to focus on is to be real, be transparent, and don’t promise things that you have no plan to ever get to, because then we’re going to have a big trust and credibility issue. And in order for ESG to be able to have the respect and credibility and trust, it has to be genuine. The biggest challenge to relationships, whether they be between human beings or between organizations and their stakeholders, is the challenge of unmet expectations. And those unmet expectations need to be addressed proactively.

Ken: This trust isn’t always happening. My hope is that what Jim said about the ground swell is what makes the difference, it only takes a spark to get a fire going. The people have to have to start demanding change, but of course, they have to do that with facts. And to me, this education initiative that we’re all embarking on now is really everything.

This interview has been edited for length and clarity.

Aravo’s Upcoming ESG Solution

Aravo for ESG is a SaaS solution that helps organizations shine a light on their third-party ecosystems and help ensure that they meet ethical standards and adhere to the values of your organization. Throughout the entire third-party relationship lifecycle, Aravo supports assessment, monitoring, and mitigation of third-party risks.

Benefits

  1. Hold third parties accountable and weed out those that don’t demonstrate integrity by integrating ESG standards into third-party due diligence
  2. Create a consistent, controlled, transparent process with a robust and accessible audit trail to meet the demands of global ESG regulations
  3. Cost effectively automate assessment, management, continuous monitoring, and mitigation to confidently run your program with fewer resources

Features:

  • Enforces controls to ensure third parties are held compliant with anti-slavery, conflict minerals, EHS, diversity, and other ESG regulations
  • Automates the due diligence, assessment, risk scoring, renewal, and continuous monitoring of your third parties
  • Extend risk assessment to additional areas, including anti-corruption, data privacy, and information security
  • Executive dashboards and reporting of your ESG metrics and risk and compliance performance
  • Screen third parties and suppliers with risk intelligence data providers, including EcoVadis
  • Review potential risk exposure of business-critical suppliers and third parties
  • Trigger incident reports and remediation or termination plans based on breaches or non-compliance.
  • Built on flexible, configurable platform that manages and mitigates risk across virtually any risk domain as well as offering ready-to-use applications for anti-bribery/corruption, InfoSec, data privacy, and financial services risk assessments
Aravo ESG Solution
Aravo’s new ESG Solution

To learn more about Aravo’s upcoming ESG solution, reach out to one of our experts.

Share with Your Friends:

Subscribe to Blog Updates

Tags
Our Expertise
Expertise
Who We Help
Customers

Ready to get started?

Get in touch for a better approach to third-party risk management