Ticking the box but missing the point
While the future of human rights and environmental due diligence and reporting regulation remains uncertain, it offers real promise to better protect people and planet and enable businesses to thrive in an increasingly complex environment.
At our recent event, held in partnership with Forster Communications, we explored how to stay focused on delivering meaningful change as we navigate the new wave of EU sustainability regulations.
We recognise there is a risk that ‘regulation sucks oxygen out of sustainability teams’ and need to ensure that a narrow, compliance-driven approach does not prevent creative, strategic solutions from emerging.
How you drive change in your organisation and achieve these benefits in practice is undoubtedly challenging.
Our conversation highlighted key recommendations and principles to achieve impact.
Focus on value, not virtue
It’s important to keep the benefits of investing in sustainability front and centre of the business strategy, addressing commercial tensions and trade-offs, and highlighting both organisational resilience and the economic value created – especially in the current economic and political climate. These need to be actively communicated and championed internally on an on-going basis.
“Terms like ESG and diversity are being torn up by many, while regulatory requirements continue. Unless we rapidly update the way we communicate about sustainability and ESG actions and make it relevant to everyone, we’re going to find it harder than ever to drive action.” – Amanda Powell-Smith, CEO, Forster Communications
Be pragmatic
Over complicated approaches can discourage action. Companies are expected to show progress, not perfection. The regulations are based on long-standing global standards of responsible business conduct and so much of this should be familiar to practitioners already. It is risk-based and proportionate, helping to understand where the greatest impacts are so you can direct resources to addressing them. Be wary of consultants that seek to over-complicate or risk shift.
“A focus on strategy, simplicity and a heavy dose of pragmatism are crucial to harness the value that emerging regulations can bring to businesses. Let’s not forget that the overall aim of these regulations is to encourage a more integrated view of company strategy that factors in the real risks and externalities that are impossible to ignore and to seize opportunities in the near and longer term. Conversations within the business and a company strategy that fully integrates sustainability is what we are aiming for – and the disclosure is the output of this (not the other way around).” – Kate Gibson, Senior Advisor focused on Strategy, Transformation and Sustainability and former Global ESG Director, Diageo
Be creative
Regulations and the standards that they are based upon are not overly proscriptive so long as you can demonstrate you are working toward achieving them. Now is the time for creativity and experimentation. Collect data in different ways to see what works best – some businesses are partnering with competitors to agree common approaches to collecting data which in turn reduce risks to the individual companies.
“Without clear guidelines on enhanced due diligence, clients like Unilever are experimenting to gather better data on material risks. Before rolling out large-scale data collection methods, Unilever is challenging various service providers to deliver more cost-efficient data on human rights issues. It’s a great way to spark some competition and get ahead of the curve in preparing for CSDDD compliance, all while enhancing decision-making.” – Tom Adam, Co-Founder and Chief Strategy Office, 60 Decibels
Engage with empathy
The conversations required by legislation of this type will present unexpected and uncomfortable truths and these need to be anticipated and communicated from the outset. Recognise the different perspectives, needs and priorities of your stakeholders – from the board through to delivery teams and suppliers – and meet them with empathy and understanding of their current views. The ‘alphabet soup’ of sustainability in which we are swimming makes it that much more challenging for practitioners to stay focused. We need to cut through sustainability jargon to demystify, build trust and ensure information is not lost in translation.
“Effective implementation is dependent on winning over others across the business, and with suppliers. This requires trust building, which can only come through empathy and teamwork among all stakeholders, and a commitment to the wider purpose that due diligence serves – beyond superficial box-ticking.” – Judy Kuszewski, CEO, Sancroft
Involve the right people
Engaging rightsholders early on to understand the human rights impacts that a business causes or contributes to is crucial to developing meaningful solutions. This includes employees, but also external communities, supply chain workers, and end-users who are often directly impacted by corporate activities. Using engagement to inform decision making and working with rightsholders to discover what works is a powerful tool to drive meaningful action.
The World Benchmarking Alliance’s Social Benchmark, which assesses the world’s 2000 most influential companies, reports that engaging with affected stakeholders improves companies’ human rights and decent work practices yet only 9% of companies currently do so.
Celebrate progress to maintain momentum
Transitions are long and hard. We need to celebrate milestones along the way to maintain momentum and keep people motivated and energised. Bring in personal voices wherever possible, using peer-to-peer communications and highlighting real-world experiences to both reassure and motivate people about change. The good news is that both investors and employees want to deepen their knowledge of and ability to engage with this subject, a fact made apparent by ever more complex questions coming from both.
We hope that you find these reflections and recommendations helpful to drive change in your organisation. If you would like to discuss how your organisation can use regulation as a springboard for positive impact, contact Rachel.Weller@sancroft.com or for any communications challenges you’re facing get in touch with amanda@forster.co.uk.
If you would like to stay in the loop for future events let us know at events@sancroft.com.