How can you connect your global project to the ESG requirements of a local jurisdiction?
A conversation with Tom Barry; HLB USA Chair-person, and Benedetta Audia; Global Legal Expert & Advisor
It can become increasingly complex to navigate environmental, social and governance (ESG] requirements across different jurisdictions. After all, some organisations strive to align with global sustainability goals but face a patchwork of local laws and standards that often differ quite significantly from each other.
To complicate the matter further, there's a lack of uniformity between regions like the European Union and the United States, and this, when coupled with varying expectations from funding bodies like the World Bank, can create a challenging landscape.
But why is it so tough for businesses and organisations to ensure compliance? In an attempt to shed light on these challenges, Tom Barry, who is the chair-person of HLB USA and an executive committee member of HLB International, recently sat down with Benedetta Audia.Benedetta is a global legal expert who has extensive experience at the United Nations and other international bodies.
Their discussion focused on how organisations can manage ESG requirements locally, while at the same time maintaining a global perspective. They chatted about how important it is to understand both global frameworks and local regulations - and how organisations like HLB can help to bridge any gaps in understanding.
ESG regulations and requirements on the global level
There's been a dramatic growth in the demand for compliance with ESG criteria in recent years. As global sustainable investment assets reached $35.3 trillion in 2020, so there was a surge in interest and regulatory pressure. Yet ESG regulations remain fragmented across different jurisdictions, making compliance very complicated for global businesses.
Audia highlighted this fragmentation and noted how the European Union has implemented comprehensive ESG requirements, like the Corporate Sustainability Reporting Directive. This directive requires detailed ESG reporting from companies that operate within the EU and sets a high standard for transparency and accountability. Meanwhile, the United States has a much less formalised approach, as ESG often remains a highly politicised issue instead of a regulated standard.
Audia also argues that to navigate these diverse requirements properly, companies must look beyond any regional regulations and focus on global sustainability policies. Intergovernmental organisations like the World Bank and the United Nations have created broad frameworks that can give decision-makers a more consistent approach to ESG, helping them to align local actions with global standards.
How major organisations contribute
International organisations like the World Bank, United Nations, and regional development banks play a pivotal role in global ESG standards. Often, they only provide funding if applicants meet strict criteria around compliance guidelines and permits.
Before they give any actual support, those bodies have to enforce their standards through robust oversight, reporting and tracking mechanisms. For example, the United Nations makes sure that its sustainability mandates are met through continuous monitoring. At the same time, organisations like the Green Climate Fund and the Inter-American Development Bank insist that all recipients of their funds comply with established ESG criteria.
For companies that want to engage in projects funded by the aforementioned bodies a full understanding is critical. Barry emphasised that HLB firms have a unique opportunity to become key service providers to those international applicants if they offer strategic advice, accounting, or auditing services that align with the sustainability criteria.
How to ensure compliance
It's so hard to comply with ESG requirements as this involves a deep understanding of both global standards and local regulations. Global policies can provide a framework, but local jurisdictions often have unique rules that have to be respected. It's a dual obligation and creates significant challenges, especially when local expectations and global expectations diverge or conflict.
Barry pointed out that many companies are accustomed to a rules-based world, where they can see clear tax, audit, or accounting regulations. Yet ESG compliance necessitates a more dynamic approach. Organisations must understand the rules and adapt them to fit both global sustainability objectives and the reality on the local level.
The importance of local understanding
Audia stresses that effective ESG compliance requires a deep understanding of the local context. So, companies have to engage with local stakeholders and understand specific social and environmental conditions. They then need to tailor their compliance strategies accordingly.
Audia also talked about the role of global corporations like Amazon, Google, and Coca-Cola. These companies drive ESG compliance across their supply chains and have the power to set standards that smaller companies can follow. However, Audia argued that these big companies have to do more to promote sustainability practices among their partners and suppliers, so they set a high bar for ESG compliance.
The role of HLB in the world of ESG compliance
HLB has an extensive global network of member firms and is thus well-positioned to help organisations navigate the complexities of any ESG compliance. Barry emphasises that HLB can be both an advisor and a catalyst for organisations that aim to align their operations with global sustainability goals.
As it has such a combination of global experience and local expertise, HLB can help these companies understand regulations on the local level, while ensuring compliance with international standards.
The approach of HLB is multifaceted, as it offers strategic advice and develops robust compliance systems. It also delivers services like accounting and auditing to align with both local and international ESG criteria. Further, HLB can help organisations position themselves as suppliers to international bodies like the World Bank and the UN, which should place them at the forefront of global sustainability initiatives.
Looking for help with ESG management?
It can be a daunting challenge to manage ESG requirements across different jurisdictions, and this demands both a clear understanding of global standards and a full appreciation of local regulations.
As demonstrated by Tom Barry and Benedetta Audia, it is critical to bridge these gaps and often necessary for companies to reach out to an organisation like HLB for assistance. After all, HLB focuses on global sustainability policies, understands local nuances, and provides expert guidance.
So, if you want HLB to help your organisation thrive in an increasingly ESG focused world, reach out to one of our experts today for assistance.
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