Risk Trends 2025 and Beyond: Environment, Social, and Governance (ESG)
Risk Trends 2025 and Beyond: Environment, Social, and Governance (ESG)
Navigating the complexities of ESG (Environmental, Social, and Governance) is becoming a critical priority for businesses worldwide.
As new regulations like Bill S-211 and Bill C-59 demand heightened accountability and transparency, many organizations find themselves struggling to keep pace with evolving laws and mounting sustainability targets. This article explores the risks and challenges of the ESG landscape, from climate adaptation to avoiding greenwashing, and offers insights on how businesses can effectively prioritize their efforts.
Are you aware of both the opportunity and risk — like greenwashing — related to ESG?
As a business leader, you’re likely used to adapting to new laws that require you to track and report on everything from carbon emissions to labour practices in distant countries. Welcome to the world of ESG trends, where the pressure to meet sustainability targets is mounting, and the rules are constantly changing.
Many businesses are under scrutiny to make real progress on ESG goals, but the reality is, they often lack the time, money, or resources to do everything they’d like. Prioritizing is key, but it’s no easy task, especially when the government introduces new regulations like Bill S-211. This law requires companies to issue a public report on their risk assessment related to forced child labour. Miss the deadline and you may face a fine as high as $250,000. For many companies, especially those dealing with thousands of products, this is a massive challenge.
Tackle ESG challenges head on
Climate change and carbon emissions are significant ESG risks. Businesses must adapt to extreme weather events and transition to low-emission operations, which can be costly and complex. Yet, this shift is essential for long-term sustainability. To survive, businesses need to brace for changes but also recognize the necessity of these adjustments.
Adopting sustainable practices and efficient technologies early on can help businesses mitigate risks related to resource scarcity, as well as waste and pollution management. Strong corporate governance is essential for managing ESG risks, ensuring compliance with regulations to maintain legal standing, investor trust, and a positive reputation. Additionally, businesses must avoid greenwashing, where ESG data is misrepresented to appear more favourable. The new Canadian Bill C-59 has been created to target greenwashing; however, it will also target those whose might not have evidence to support ESG claims and unintentionally could be violating this bill. Ensuring the accuracy of ESG reports is crucial, and data analytics can help verify this information.
In a world where ESG awareness and compliance are increasingly demanding, staying agile and proactive is key. By prioritizing these efforts and embracing sustainable practices, businesses can navigate challenges and build a resilient future.
Why stop there? Here are other risks to consider:
- Reliance on potentially inaccurate or unavailable third-party data
- Social inequality and community impacts
- Employee well-being and diversity not meeting industry expectations
- Supply chain management being disrupted by climate change
- Regulatory and policy changes leading to new fines
- Customer and stakeholder ESG expectations not being achieved
Questions to consider:
- If the risk and return associated with ESG needed to change, how fast can your organization act? Has your board established its risk appetite related to ESG?
- What are your top ESG priorities, and do they align with your stakeholders' expectations? Have you assessed the risks in relation to these strategies?
- Are you at risk of losing competitive advantage because you are not meeting customer ESG expectations?
