Attitude and Cultural Changes that May Impact Environmental Focus

Since the last recession, society has been a lot more focused on being ESG (Environmental Social Governance)-focused and reducing the carbon footprint. Additionally, governments around the world have increased regulation and monitoring to help reduce greenhouse gasses and other negative environmental effects. Overall, many businesses and individuals are finding that, while being ESG-focused sometimes costs more upfront, it can save money in the long-run.

As companies move forward with their ESG initiatives, they often end up improving their business in other areas as well. For example, looking at supply chain alone, ESG improvements can also improve sourcing, reduce human rights abuses and regulate compliance and reporting. These efforts then reduce costs, improving top-line growth, reduce regulatory interventions, increase productivity and optimize assets.

Government Support

As an effort to support net zero, the US Federal Government is bringing opportunities to both businesses and citizens. Grants, rebates and other opportunities all encourage climate-friendly business practices, and a lot of organizations are taking advantage of these options. The Inflation Reduction Act also allowed for more tax credits for carbon capture and storage projects, lowering the required amount of carbon captured needed to use the credits. These credits help small firms reach ESG goals by improving access to these resources.

ESG Government Regulations

Governments around the world are also creating regulations that support ESG efforts. In the United States, the SEC created Climate Disclosure Rules. These rules went into effect in 2022 and impact regulation at all levels of government while providing climate-risk disclosure guidance for publicly held companies.¹ The disclosure rules also encourage companies to look at climate change and its potential financial impacts and then share the details with investors.

The German Supply Chain Due Diligence Act in Germany, which went into effect at the start of 2023, requires organizations to evaluate their supply chains for human rights abuses.² While a lot of regulations focus on the environmental concerns, this is the first law of its kind that focuses on the social governance piece of ESG.

The Global Reporting Initiative (GRI) Standards cover environmental impacts, labor practices, human rights and societal contributions. While these guidelines are voluntary, many organizations and companies use them as a benchmark for reporting on sustainability since they include specific language for sustainability reporting.³

In Australia, the Sustainability Accounting Standards Board (SASB) is a non-profit organization that has developed sustainability accounting standards for public companies in Australia. These standards aim to improve sustainability reporting in Australia to help investors make more-informed decisions.⁴

Sustainability within The Supply Chain

The supply chain is one of the biggest sources of business carbon emissions, so another valuable resource when moving towards net zero is to streamline the supply chain. CEOs and other business leaders are taking a serious look at how they can reduce both costs and emissions by solving the supply chain trouble spots. Avetta helps companies evaluate their supply chain, providing insight into business risks such as ESG & Sustainability, GHG & Carbon Reporting, and Diversity, Equity & Inclusion. Avetta supports both clients and suppliers to navigate new processes for ESG maturity, tracks progress and provides guided actions to improve sustainability impact. Avetta helps you stay organized in the planning stage, then provides easy steps for executing and analyzing. Avetta also has tools to help you measure , track and report on your GHG Scope 3 emissions.

¹SEC Proposes Rules to Enhance and Standardize Climate-Related Disclosures for Investors, U.S. Securities and Exchange Commission-https://www.sec.gov/news/press-release/2022-46

²German Supply Chain Due Diligence Act SCDDA Explained https://www.ibm.com/blog/german-supply-chain-due-diligence-act-scdda-explained/

³A Short Introduction to the GRI Standards, GRI Standards- https://www.globalreporting.org/media/wtaf14tw/a-short-introduction-to-the-gri-standards.pdf

⁴SASB Standards are now a part of the IFRS Foundation-https://www.sasb.org/#:~:text=SASB%20Standards%20identify%20the%20subset,in%20each%20of%2077%20industries.&text=SASB%20Standards%20are%20developed%20based,transparent%2C%20publicly%2Ddocumented%20process.

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