Key trends in ESG and corporate sustainability to look out for in 2024 

The continued prominence of ESG (Environmental, Social and Governance factors) is starting to drive material change inside many corporates. This is being influenced by a number of issues the most important of which are increasing investor pressure and increased regulatory demands on corporates to meet society’s environmental and social concerns. 

While we expect many developments to occur in the wider business ethics landscape, when looking at trends in ESG and sustainability specifically, there are five key areas that should be the focus of business attention in the coming year. 

1. A significant increase in ESG related reporting.

The Corporate Sustainability Reporting Directive (CSRD) is already forcing many corporates to set up more formalised systems to capture and manage ESG related data. The requirement to report against the CSRD criteria will also force corporates to improve and consolidate reporting across all ESG topics. However, this will also bring more scrutiny and more concerns about potential greenwashing. The disconnect between ESG metrics and indices compared to the ESG hype and storyline could present significant problems if unaddressed. Ethics and compliance professionals will therefore need to ensure that the temptation to exaggerate ESG performance is avoided.

2. The passing into law of the Corporate Sustainability Due Diligence Directive (CS3D) will generate significant new activity in many corporates.

It will require many organisations to re-think traditional due diligence and to move towards a much more thoughtful review of risks in a company’s operations and value-chains. In particular, it will force companies to combine environmental and social reviews of suppliers. It will also challenge many organisations who, have naturally focused on the traditional risks to the business, rather than risks to people and planet. The management of ESG related risks in a company’s own operations will also cause stress, as corporates will need to consider their own behaviours and performance, not just the activities of remote suppliers.

3. The new ESG related reporting and risk assessment laws will require a considerable increase in risk assessment activities.

The rise of AI and digital tools will be a central part of the response for many corporates. This is because the ESG risk assessment requirements are far reaching and complex. For organisations with thousands of suppliers, the task to gather and sift data is huge. New tools will be needed to help organisations make judgements about suppliers, partners, customers and other intermediaries in relation to their risks to the planet and the people they employ and work with, as well as their specific corruption and governance risks.

4. These changes will require organisational rethinks.

The traditional split between these five corporate functions of ethics/compliance and legal; procurement and the supply-chain; environment and sustainability management; operational management of projects, and human resources will need to evolve. These five areas all touch on key aspects of ESG reporting and operational management. It does not work to sit an ESG team on top of the organisation and hope they can pull these strands through to the ESG report. The management of material ESG risks will need to be built into the operations of the business. In particular,  organisations will need to rethink risk assessment and due diligence, to make sure that all of these functions are able to contribute the right insights and expertise to identify, evaluate and manage ESG related risks properly.

5. New people are needed!

The new challenges go way beyond the normal corporate skill sets and require cross-functional thinking. They also require people trained to think about impacts on society, not just the  risks and opportunities for the business. These people are emerging from a wide range of universities, but this is clearly a landscape where old timers in corporates will need to be open to new thinking and new ways of working.

Many of our clients are already on this journey and we look forward to supporting them in the coming year. Others will be watching and waiting to see what emerges. Increasingly we see that companies can develop a competitive advantage by identifying and managing their ESG and sustainability issues, particularly when it comes to attracting and retaining talent, building relationships with customers and regulators, while also responding to investor demands.