GRIP Forecast 2024 – ESG

The GRIP team looks into the crystal ball and does some plain speaking about what the future might bring – this time looking at ESG.

Carmen Cracknell, Senior Reporter

I’ve noticed an opinion consensus among compliance industry experts that the acronym should be broken down and redefined because it’s currently not working and there’s no measurable index for how companies should conform to ESG as a broad concept.

There is also broad agreement on the need to clamp down on greenwashing and this should be a major focus for ESG and compliance professionals.

Jean Hurley, Commissioning Editor

Supply chain management will be a hot topic as mandatory ESG reporting on social criteria comes into force – child labour and forced labour.

European Sustainability Reporting Standard and Corporate Sustainability Reporting Directive will come into force for large businesses in January 2024.

Carbon offsets and carbon markets have come under scrutiny after scandals of prioritising money over doing the right thing. Role of registries will help with transparency. In Europe – Carbon Removal Certification Framework and Net Zero Industry Act are under consultation.

DEI/D&I and conduct should be high on the Board’s agenda with regulators saying there will be fines for non-financial misconduct.

Climate litigation – ClientEarth (as a shareholder) is continuing to drag Shell through the UK courts. They claim that Shell’s strategy to manage its climate change risk is insufficient, including in relation to the company’s emissions reduction targets.

Though they have been completely unsuccessful so far, the threat of legal action is likely to remain elevated for many firms.

Martin Cloake, Managing Editor

Is it possible that the term ESG will become as redundant as using the word wireless to describe a radio by the end of the year?

Maybe not, but the conversation about why bundling E, S and G doesn’t work has been going on for long enough to suggest there will be some fundamental changes in approach.

A central question will be whether it is possible, let alone desirable, for a business to exist in isolation from its impact on its environment.

Martina Lindberg, Production Manager

This is more than a trend, it is important and it looks like it remains on everyone’s agenda, though perhaps not always at the top of it.

I think there will be a big focus on greenwashing, and that we will see a lot of enforcement action in that area because bending the rules is so prevalent – partially because there is no clarity around what those rules actually are.

Thomas Hyrkiel, Head of Content Services

ESG as a concept and acronym will face a backlash both in terms of investment as well as global commitment to this cause.

Part of the problem is the attempted bundling of a progressive political agenda to a more elemental challenge of global climate change.

The hosting of COP28 by the UAE is a sign of things to come as realpolitik reasserts itself even in jurisdictions such as the UK that initially positioned themselves as ideological leaders.

Authoritarian regimes are sceptical of ESG and only pay it lip service anyway.

The electorate in democratic countries, which understandably is not keen to be impoverished whilst making a very limited impact on reducing global warming (given the disproportionate contribution to global emissions by heavy polluters such as the US and China), will force limits on these countries as well.