Global corporates struggle to get a grip on ESG risk, Hogan Lovells survey finds
Companies failing to recognise link between bribery and corruption and ESG abuses
Global multinational companies are struggling to integrate environmental, social and governance (ESG) risk into their compliance programmes, according to a survey by Hogan Lovells.
The ‘Navigating Deep Waters’ survey found that 82% of compliance officers are concerned that ESG is not embedded in existing risk practices, while 78% reported a lack of ESG knowledge and skills. A further 57% are concerned about a lack of company-wide engagement with ESG issues. Only 42% said they have a mature ESG compliance programme in place.
Stephanie Yonekura, global head of Hogan Lovells’ investigations, white collar and fraud practice, said: “Businesses are looking across their organisations to address their impact on both the environment and society. As they face the challenge of navigating increasingly heightened ESG expectations, companies can use existing AB&C (anti-bribery and corruption) compliance measures to assist ESG risk management.”
Yonekura adds that companies shouldn’t be prioritising one to the detriment of the other, given that corruption is one of the biggest challenges of ESG compliance. Almost three-quarters of respondents (74%) said the associated corruption risk of countries in which they operate is a major concern for ESG compliance, while 62% said there is a failure to appreciate the links between bribery and corruption violations and ESG abuses.
Crispin Rapinet, a partner in London, said: “Effective ESG compliance implementation requires full alignment with an effective anti-bribery and corruption strategy. Collaboration between the relevant compliance experts is the best way to ensure both programmes are effective and ESG training can help inform employees where risks lie and how to mitigate them to avoid liability."
Responsible Legal Department of the Year is a category in the Women and Diversity in Law Awards, which are hosted by The Global Legal Post. Click here to nominate an in-house legal team
Supply chain challenges are also forcing companies to reassess supplier relationships, yet fewer than a third (29%) of companies report concerns about ESG risks posed by third parties, such as greenwashing or human rights violations. Only 1% of respondents said that third-party relationships currently pose a significant ESG compliance risk to their business, though more than a fifth (22%) believe it will increase in the next 12 months and 34% in the next 18 months.
Shelita Stewart, a partner in Washington DC, said: “With ESG regulatory investigations on the rise and increased public pressure from internal and external corporate stakeholders, it is important that organisations evaluate business decisions through an ESG lens to reinforce the company’s standards for conducting business and proactively mitigate ESG risks.”
A report by Lex Mundi in April found that general counsel face a growing challenge around balancing sustainability issues with the broader financial and operational health of their businesses. It maintained that amid heightened focus on environmental, social and governance (ESG) concerns, corporate governance is being less dictated by the boardroom and more by a wider variety of stakeholders who all have competing goals and interests.
Email your news and story ideas to: email@example.com