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Last week’s VelocityEHS ESG Virtual Conference hosted a variety of sessions presented by VelocityEHS experts and ESG leaders representing both industry and the investor community. Here, we’ll re-cap the conference session, ESG Horizon Planning – What’s Happening? which took a look at some of the most impactful emerging trends in the field of ESG to help businesses prepare for future.   

Click Here to Watch the Recorded Session 

Session presenter Julian Moffatt, Principal Solution Strategist, ESG at VelocityEHS opened the session by laying out the current state of ESG in 2021, and providing a little background on how we’ve arrived where we are today. Some of the most notable factors driving the trend toward ESG include: 

UN Principles for Responsible Investment (UNPRI) 

Since their introduction in 2006, the UNPRI has drawn more than 4,000 signatories from the global institutional investor community in support of six founding principles that focus on how investment activities align with the broader interests of society. That number continues to grow at an exponential rate, applying pressure on businesses to adopt ESG into their business models and become more responsible corporate citizens.  

Emergence of Mandatory ESG Frameworks 

Along these lines, ESG is now viewed by many world governments as a financially relevant disclosure for public companies. New Zealand and the UK have adopted mandatory ESG reporting requirements for many businesses within their borders, and the EU is currently in the process of approving the Corporate Sustainability Reporting Directive (CSRD) that will require an estimated 11,700 corporate entities in the EU to report their performance in the areas of environmental, social, human rights, anti-corruption and bribery, and employee diversity.  

Customer Demand for ESG 

Customers are also applying pressure on businesses to adopt ESG principles, and that pressure continues to grow. This is especially true for B2B transactions, with many customers throughout critical supply chains making ESG disclosure a requirement to do business and including ESG criteria as part of their standard vendor/contractor approvals, RFP and bidding processes. At the same time, average consumers increasingly prefer to purchase goods from companies they perceive to be responsible corporate citizens. 

ESG Trends to Watch in 2022-2027 

Julian then introduced five emerging ESG trends that businesses should be on the look out for in the near term in order to stay ahead of the curve and remain competitive in an increasingly ESG-focused business environment. 

1. Double Materiality  

Materiality is a central focus of ESG and is already referenced by most ESG reporting frameworks. However, there are two aspects of materiality that businesses must consider to meet the requirements of these frameworks: financial and societal materiality. ESG frameworks like SASB focus more heavily on financial materiality while others like GRI focus more on societal materiality. As these reporting frameworks continue to evolve and intertwine, the concept of double materiality is something businesses need to prepare for.  

2. Reporting to Multiple Frameworks 

The number of ESG reporting frameworks continues to multiply, particularly as many industry/sector-specific reporting needs continue to be identified. Major framework organizations have made attempts to harmonize and consolidate their respective frameworks, but with limited success to-date. Businesses should anticipate the need to meet the reporting requirements of multiple frameworks in the future, particularly as the growth of mandatory ESG reporting continues. Julian suggested that businesses may need to meet the requirements of at least three reporting frameworks by the end of 2027.  

3. Customer Driven Demand Takes Off 

B2B customers are expected to be an increasingly critical driver of ESG reporting and disclosure as ESG is becoming a standard element in contracts and RFPs—not only as a means of selecting responsible vendors and partners, but also as part of ROI justification with full knowledge that ESG is an indicator of vendor risk and financial performance. As we mentioned previously, private consumer demand for ESG practices will also continue to apply pressure, but at a relatively slower pace than B2B customers.  

4. ESG Is Changing EHS 

EHS is becoming an increasingly influential driver of ESG performance. So much of ESG is built upon the functions of EHS, whether it’s environmental sustainability and compliance or occupational health and safety. As a result, the language and structure of EHS functions will increasingly integrate with ESG programs, and EHS managers can expect increased focus on their programs (including budget) as their companies prioritize ESG.  

5. Emerging Importance of Product Stewardship 

ESG is driving big changes in global supply chains, particularly in the areas of chemical and product safety. Green chemistry principles have been around since the early 90’s but are receiving renewed emphasis as ESG is driving businesses to evaluate the environmental, social and human health impacts of chemicals contained in their products.   

Looking for More Information? 

If you’d like additional ESG resources, we’ve got you covered. You can view recordings from all our ESG Virtual Conference Sessions at our conference homepage here:  

Visit the VelocityEHS ESG Virtual Conference Homepage 

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