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Discover how to combine sustainability reporting compliance and ESG data analytics with a proactive, strategic approach to build transparency and sustainable success!

As regulatory scrutiny and stakeholder demands around sustainability grow, organizations worldwide need to ace their compliance with reporting rules and standards. But they also have an opportunity to combine materiality mapping, reporting, data analytics and strategy to smash their long-term goals and build a more sustainable business.

By identifying and disclosing performance on the most material topics as part of a strategic approach, organizations can not only meet regulatory requirements, but also enhance their reputation, gain insight with relevant data analytics to drive sustainable business practices and gain a competitive edge.

Here we explore why and how to take a strategic approach in identifying material topics that align with sustainability reporting regulations, address stakeholder expectations and incorporate double-materiality to drive long-term performance.

The global backdrop

The worldwide focus on sustainability reporting continues to intensify. Reporting rates are expected to grow as new regulation on non-financial reporting is introduced, according to 2022 research by KPMG. The Global Reporting Initiative (GRI) is the most common standard used globally, though some regions prefer Sustainability Accounting Standards Board (SASB) or local stock exchange guidelines. The number of organizations reporting climate-related risks is also rising dramatically, for example those reporting against the Task Force on Climate-related Financial Disclosures (TCFD) doubled, said KPMG.

In response, organizations should build a strategic approach to reporting and operating sustainably with a materiality assessment and stakeholder engagement at its core.

Engage with stakeholders

A 2022 report from McKinsey highlights that the growth in sustainability reporting rules and standards has not been driven by regulators, but by stakeholder expectations. The ‘social licence’ organizations gain by meeting these stakeholder needs will be critical to their future success, it says.

It is therefore essential that your business prioritizes asking your stakeholders – such as investors, customers, employees, suppliers and wider communities – for their input on material topics. This engagement helps ensure your reporting addresses their concerns and priorities, in line with regulatory reporting expectations and the wider need for social licence.

Done correctly, this engagement should also demonstrate your commitment to inclusivity and inform your business strategy too.

Use comprehensive materiality assessments

Robust materiality assessments are a key part of this stakeholder engagement and will form the cornerstone of compliance with sustainability regulations. These assessments evaluate the significance of sustainability topics based on their potential impacts and stakeholder interests. Follow these steps for an effective assessment:

1. Identify potential topics: develop a comprehensive list of sustainability topics relevant to your industry and organization, considering the regulatory requirements and stakeholder interests.
2. Assess impacts: evaluate the potential economic, environmental and social impacts associated with each topic. Consider operational risks, regulatory compliance, financial and reputational consequences. Use double materiality by considering not just climate-related impacts on your organization, but also the impacts of your organization on the climate as they relate to ESG.
3. Evaluate stakeholder significance: Gauge each stakeholder group’s level of interest and influence around each sustainability topic. This helps you prioritize issues for reporting.
4. Prioritize topics: Based on the assessment, prioritize the topics that are most relevant and impactful to your stakeholders, and that have substantial impacts on your organization. These topics will form the foundation of your reporting strategy, and ensure compliance with reporting regulations.

Align with reporting frameworks

To ensure compliance and comparability, align your material topics with reporting frameworks recommended or mandated by the regulators. These frameworks provide standardized guidelines, reporting indicators and disclosure requirements for specific sustainability topics. By adopting recognized frameworks – such as GRI, SASB and TCFD – you can show your commitment to transparent and standardized reporting, increasing the credibility of your sustainability efforts.

Review and update

Sustainability reporting regulations evolve continuously, as do stakeholder expectations. To maintain compliance, review and update your material topics on a regular basis. Stay informed about regulatory developments, engage with stakeholders frequently, monitor emerging trends, and adjust your reporting strategy accordingly. This iterative process will help you stay ahead of evolving requirements; maintain credibility with regulators, investors and other stakeholders; and hone your strategy.

Compliance with sustainability reporting regulations is no longer a choice but a necessity for companies seeking to build trust, foster transparency and drive sustainable growth.

But combining compliance with a proactive and strategic approach to sustainability reporting and data analytics brings many more opportunities. It safeguards your organization’s reputation, aligns strategy with stakeholder needs, sharpens competitive edge and contributes to a more responsible business. It could be the grand slam you need to build a more successful and sustainable organization long-term.

Want to find out the most material topics for your organization?

Generate your own materiality map for free with myCSO.

Uncover the truth behind “avoided emissions” claims and why companies’ Scope 4 methodologies demand scrutiny. Ravi Chidambaram shares his expert analysis – read about the importance of transparent standards in evaluating carbon reduction strategies.

Are scope 4 emissions a groundbreaking solution or just another greenwashing tactic? The new, “hot” strategy amongst MNCs, particularly in Japan, for carbon reduction is “avoided emissions,” also known as scope 4. Coined by the World Resources Institute, scope 4 emissions encompasses reductions that “occur outside a product’s life cycle or value chain but as a result of the use of that product.”

Avoided emissions are achieved when a company makes a new product, which means normally replacing an older generation product, that carries lower emissions over its lifecycle – from manufacturing to end of life recycling. The scope 4 emissions savings are then offset against the company’s scope 1, 2 and 3 emissions to present a more complete picture of its carbon footprint.

It sounds in principle like a great idea and is indeed at the heart of new reporting protocols, such TCFD, that want companies to map out and quantify their carbon transition plans. However, as is the case with most things in the sustainability world, things are never as straightforward as they seem.

At Rimm Sustainability, we have been doing more research on Scope 4 and believe that many avoided emissions claims deserve closer scrutiny. Our director, Kim Schumacher, a world authority on the subject of greenwashing, has also voiced his doubts on the methodologies used by companies to claim avoided emissions, which he recently shared in a Financial Times article.

The gist of the problem with Scope 4 methodologies can be summarized as follows:

• Companies often do not conduct a full lifecycle product analysis and may omit some aspects, such as raw materials sourcing or end-of-life recycling, making their claims incomplete
• Many claims are often made on a comparative basis, i.e. their new product is superior to those of competitors in the market or the company’s own older models, but the basis for comparison for which products were compared are often not disclosed
• Even if a company’s new product is demonstrably lower in emissions, it does not mean that all its customers will switch from the old product to the new one, meaning the overall market impact may be exaggerated based on optimistic new product sales forecasts

It would therefore be wise of all interested stakeholders, from consumers to regulators to investors, to be wary of scope 4 claims made by companies. As ever with sustainability, a set of published transparent and standard methodologies – akin to an audited accounting report – will be needed before scope 4 claims can be taken seriously.

Learn more about Rimm’s sustainability and ESG solutions – browse our solutions catalog or book a free demo today!

By integrating sustainability into their brand and culture from day one, SMEs can gain a competitive advantage, drive growth, improve performance, and attract clients who share their values. Dr Leeya Hendricks, Chief Marketing Officer at Rimm Sustainability, shares insights on how to do it.

Sustainability is no longer just a buzzword. It has become a critical factor for businesses of all sizes, including SMEs, in driving long-term success and positive impacts on the planet.

In today’s competitive business landscape, small and medium-sized enterprises (SMEs) have a great opportunity to integrate sustainability into their brand-building strategies. This can help them build significant competitive advantage while also contributing to global efforts on issues such as climate change.

Embracing the journey towards net-zero emissions is an excellent place to start for SMEs looking to bake sustainability into their identity and DNA. Achieving net zero emissions means balancing the greenhouse gases they emit with the amount they remove from the atmosphere.

But embedding other issues in the sustainability-related areas of environment, social and governance will also help them position for success. Customers are increasingly seeking brands that align with their values and prioritize sustainability. If the firm can demonstrate a genuine commitment to sustainability, it will become a magnet for customers who want to make ethical purchasing decisions.

By communicating their sustainability initiatives clearly and reporting progress transparently, SMEs can attract new clients who share the same values and build a loyal customer base.

Building sustainability into culture

For SMEs, sustainability should be more than just a standalone initiative. They should embed it in their brand, culture, values, and operations.

By making sustainability a core principle, SMEs can demonstrate their commitment to environmental stewardship and social responsibility. This includes integrating sustainable practices into their supply chain, adopting energy-efficient technologies, minimizing waste generation, and supporting ethical sourcing. Doing so doesn’t just reduce their environmental footprint, it inspires and engages their employees, customers, and stakeholders.

Competitive advantage and growth

Increasingly, consumers seek products and services from companies that align with their values, including environmental consciousness.

By demonstrating commitment to sustainability from start-up, SMEs can gain a competitive advantage by attracting a growing customer base that prioritizes ethical and eco-friendly choices. Moreover, most research shows sustainability-driven innovation can also create value by generating market opportunities, improving operational efficiency, saving costs and attracting clients.

Sustainability goes beyond environmental considerations. It encompasses social and governance aspects too. SMEs that prioritize these aspects enhance their overall performance by, for example, fostering a positive company culture, ensuring fair labor practices, promoting diversity and inclusion, and practicing transparent governance.

These factors contribute to a positive brand image and attract prospective clients who value responsible business practices. SMEs can then use sustainability to stand out in a crowded marketplace and forge long-term partnerships with like-minded clients.

Enabling the net zero journey

To embark on the net zero journey, SMEs need to set clear goals, establish a roadmap, and track their progress. This includes conducting a comprehensive assessment of their carbon footprint, identifying emission sources, and implementing measures to reduce and offset their emissions. Collaboration with sustainability experts, leveraging technology solutions, and engaging employees and stakeholders are essential for achieving net zero targets.

Sustainability and brand building are intertwined for SMEs on their journey to net zero. Integrating sustainability into culture boosts competitive advantage, growth, and performance; and attracts clients with shared values. Embracing sustainability and communicating it effectively will also help position the company as a leader in its industry, driving success while contributing to a more sustainable future.

It’s an opportunity to impact the planet positively, while ensuring long-term success and resilience for the company. With the right commitment, strategy, and tools, SMEs can lead the way towards a sustainable and prosperous future.

How Rimm can help

Companies can use technology to mitigate sustainability risks and optimize their environmental and financial performance. Rimm offers automated ESG reporting services and analytics tools that help organizations improve their corporate strategy, risk management and sustainability performance.

Learn more about Rimm’s sustainability and ESG solutions – browse our solutions catalogue or book a free demo today!

Lower-cost digital tools are breaking boundaries for SMEs in sustainability. From automated ESG reporting analytics and carbon calculation, to ESG risk ratings, embracing sustainability is at last achievable and cost-effective.

Do you want your firm to be more sustainable but worry about how much it will cost? Sustainability is becoming essential for businesses as stakeholders and regulators demand greater transparency and accountability on environmental, social, and governance (ESG) issues.

For small and medium-sized enterprises (SMEs), the cost and complexity of managing and reporting sustainability initiatives have been daunting. Although the global economy has so far avoided recession, it is still a strong risk, says the World Bank. A recession would tighten the financial squeeze on firms already struggling with the impacts of war in Ukraine, persistently high inflation, and higher interest rates.

Such worsening conditions could tempt time and cash-poor SMEs to delay critical sustainability initiatives. But help is at hand.

The perception that sustainability involves expensive, resource-heavy activities out of reach for SMEs is changing with the emergence of affordable digital tools. These tools help you automate ESG reporting, analytics and carbon calculation to reduce costs; and they make ESG risk rating more affordable and achievable too. Let’s explore how these new technologies can support your journey to sustainability and positive impacts.

1) Automated ESG reporting

In the past, ESG reporting has been a time-consuming and resource-intensive process that requires extensive data collection and analysis. However, digital tools have simplified and automated this process, enabling your SME to generate ESG reports efficiently.

By centralizing data collection and using pre-built templates, these tools streamline the reporting process, saving time and effort. For example, you can now easily track and report your environmental impact, social initiatives, and governance practices while reducing the burden on your internal resources.

2) Analytics for performance insights

Digital tools offer affordable analytics that give SMEs powerful insights into their sustainability performance. These insights allow your SME to make informed decisions, prioritize initiatives, and optimize resource allocation effectively. By collecting and analyzing data on factors such as energy consumption, waste generation, carbon emissions, and social impact, you can also set sustainability targets, monitor progress, identify areas for improvement, and demonstrate continuous improvement in your sustainability efforts.

3) Carbon calculation tools

Calculating and managing carbon emissions is a crucial aspect of sustainability. Carbon calculation tools enable SMEs to measure and track their carbon footprint accurately. They consider various emission sources, including energy consumption, transportation, and supply chains, to provide a comprehensive assessment.

By understanding your SME’s emissions, you can target reduction strategies and offset programs, leading to cost savings and a positive environmental impact. The good news is digital carbon calculation tools are now affordable to SMEs. So even if the world nudges into recession and you’re feeling the financial squeeze, you can still start or continue your journey to carbon neutrality without it costing a fortune.

4) ESG risk rating and benchmarking

ESG risk rating and benchmarking tools enable SMEs to benchmark their sustainability performance against industry peers and established standards. These tools evaluate a range of factors, from environmental impact to social practices, governance structure, and ethical considerations.

By understanding your firm’s relative position, you can identify improvements and implement strategies to enhance ESG performance. ESG risk rating tools also assist SMEs in understanding potential sustainability-related risks and opportunities, enabling you to make proactive decisions and mitigate risk.

Cost savings and competitive advantage

Embracing affordable digital sustainability tools helps your SME achieve significant cost savings by optimizing energy consumption, reducing waste, and improving resource management. These tools help you achieve long-term financial benefits by identifying opportunities for process optimization and efficiency gains.

But integrating sustainability practices also enhances your reputation, and helps you attract environmentally conscious customers, investors, and partners. By enabling you to demonstrate this commitment to sustainability, digital sustainability tools can ultimately help you gain competitive advantage without straining your resources.

At Rimm with our myCSO product, we believe sustainability should be accessible, actionable and affordable. Let us be your Chief Sustainability Officer and handle all your company’s sustainability needs. Get started today.

Today on World Oceans Day, Dr. Lee-Ann Modley shares her expertise on ocean risks and opportunities and the steps SMEs should take to act responsibly and transparently on ocean-related governance.

“A healthy ocean is our most important ally in the fight against climate change.”

World Ocean Day is an international day that takes place annually on June 8. On this day, we aim to inform the public of the impact of human actions on the ocean, develop a worldwide movement of citizens for the ocean, and mobilize and unite the world’s population on a project for the sustainable management of the world’s oceans.

As a consequence of human actions that fragment wetland habitats and restrict landward migration, coastal ecosystems progressively lose their ability to adapt to climate-induced changes and provide ecosystem services, including acting as protective barriers.

Projections show that beyond 2100, sea levels will continue to rise for centuries due to continuing deep ocean heat uptake and mass loss of the Geographic Information System (GIS) and Air Insulated substations (AIS) and will remain elevated for thousands of years. Risk related to Sea Level Rise (including erosion, flooding and salinization) is expected to significantly increase by the end of this century along all low-lying coasts in the absence of major additional adaptation efforts.

The Blue Economy gives us the opportunity to produce economic resources related to the oceans, while restoring damaged ecosystems and introducing innovative technology that helps us efficiently and sustainably manage everything the seas can offer us.

What does this mean for SMEs?

Small and medium enterprises (SMEs) have a critical role in restoring ocean health as they represent 70% of employment and 90% of total enterprises in developing countries across all sectors of the Blue Economy. On the basis of research, knowledge and data, ocean industries and SMEs can drive the innovation needed to meet the Green Deal targets and address the grand challenges of climate change, biodiversity loss and post-pandemic recovery.

As a step in this direction, SMEs based on, depending on or affecting the ocean should integrate relevant ocean-related risks and opportunities into their corporate strategy, risk management and reporting. In supporting the use of sustainable ocean finance principles and other voluntary mechanisms led by the private sector and multilateral financial institutions in recovery and stimulus efforts, companies can guide, de-risk, incentivise and monitor investments in sustainable ocean activities to increase transparency and ensure reporting consistency.

How can Rimm help?

By leveraging technology, companies can mitigate risks to optimize their environmental and financial performance. Rimm offers automated ESG reporting services and analytics tools that provide insight to help organizations improve their corporate strategy, risk management and sustainability performance.

To learn more about Rimm’s sustainability and ESG solutions, browse our solutions catalogue or book a free demo!

For asset managers, tracking sustainability performance in portfolio companies is complex. manage+ simplifies the process.

Asset managers are increasingly under pressure from investors, regulators and other stakeholders to disclose information about the environmental, social and governance (ESG) performance in their portfolios. In response, many managers need to shape up their processes for tracking and organizing ESG performance in their portfolio companies.

But this requires aligning with a complex mesh of sustainability frameworks and standards. So many asset managers are desperately seeking something that helps them more easily track and manage sustainability reporting. But they can relax – a one-click ESG reporting solution is at hand, and it’s called manage+.

4 ways to improve ESG data management and reporting

manage+ helps asset and fund managers reduce the time, cost and resources they spend on ESG data management and reporting across their portfolios. manage+ provides a bird’s eye view of your portfolio sustainability performance, helping you track it seamlessly from one dashboard; boost communication with your portfolio companies; and generate your portfolio’s aggregated metrics in one click.

Here is more detail about the four key ways manage+ helps asset managers.

1. Comply with global sustainability standards and frameworks

manage+ enables you align with frameworks relevant to your company, such as Task Force on Climate-related Financial Disclosures (TCFD); Sustainable Finance Disclosure Regulation (SFDR); Institutional Limited Partners Association (ILPA); Global Reporting Initiative (GRI); Sustainable Accounting Standards Board (SASB); and ESG Data Convergence Initiative (EDCI).

Asset managers invite their portfolio companies to input their details and create a myCSO account, including information about their industry and sub-industry. myCSO then automatically generates assessments tailored to material topics for each company.

This aligns companies with the relevant international standards and frameworks to make compliance and reporting hassle-free for them and the asset manager.

2. Auto-populate your ESG data to any LP or regulatory template

manage+ integrates a natural language processing (NLP)-driven tool that enables precise auto-population of the asset manager’s ESG data into any LP or regulatory template. 

This eases reporting; significantly streamlines data collection and reporting processes; and saves time and effort for your fund managers and regulatory compliance teams.

3. Easily manage and analyze your portfolio’s ESG performance in one place

Get a holistic overview of your portfolio’s ESG and sustainability performance across industries on one portfolio dashboard. This includes an overall ESG score that also breaks down to show how well each company performed on various ESG topics and indicators.

Once companies have submitted their assessments, myCSO will auto-generate a performance dashboard and reports analyzing their ESG performance.

This analysis helps you identify and target areas of weakness to work on and improve sustainable impact and value across your portfolio.

4. Benchmark and compare ESG performance and track KPIs

The dashboard shows how well each company performed on common indicators against its peers of the same or similar industry, region and size.

This enables asset managers to analyze and benchmark performance, track key performance indicators and extract insightful data that benefit you and your portfolio.

Want to learn more about manage+?

Book a demo and start managing your portfolio companies’ ESG with ease today.

Asset managers have an opportunity to strengthen their ESG propositions to improve performance, risk management, sustainability, and recruitment.

Asset managers have a major opportunity to better align their sustainable investment practices, products and reporting with investor expectations globally. That’s the verdict of two recent reports from credible sources.

The first is a 2023 Deloitte survey, which concluded that, in a highly competitive market, ESG investing offers asset managers a significant opportunity for organic growth. But they have to meet investors’ needs for transparency and well-defined causes.

The second is the latest Sustainable Signals survey from the Morgan Stanley Institute for Sustainable Investing. This highlighted several areas where asset managers have an opportunity to meet growing sustainable investing interest and demand from asset owners; and better differentiate in a maturing market.

Our experience at Rimm is that there are significant gaps in ESG data at many companies, which impede their ability to provide the transparency investors need. There is an increasing focus for asset managers to manage their portfolios and drive disclosures in alignment with Institutional Limited Partners Association (ILPA) principles, Task Force on Climate-Related Financial Disclosures (TCFD), the Sustainable Finance Disclosure Regulation (SFDR) and other reporting standards and frameworks.

If asset managers can bridge these gaps, they could boost growth opportunities significantly. Conversely, those who fail to meet these challenges risk losing valuable clients, and underperforming in the long run.

Let’s explore in more detail how and why asset managers need to strengthen their ESG propositions.

ESG improves long-term returns

The vast majority of asset managers believe ESG strategies will improve returns. And many say using ESG strategies has already yielded higher performance. We also know that the majority of investors say they would pay higher fees for this performance premium.

There is an increasing body of independent evidence to support these claims of outperformance.

For example, a 2023 study from MSCI showed that the ESG factor consistently posted positive or neutral performance across sectors and this effect gets clearer over longer periods.

Other studies have shown ESG-prioritized companies have higher returns, especially over longer periods, thanks to factors such as improved risk management and greater innovation. Some suggest that companies with strong ESG profiles are less vulnerable to disruption from regulatory or market changes, thus lowering costs of capital and buoying share prices.

By the way, some asset managers are currently finding investment returns hard to come by in the economic downturn. But with many companies driving new innovations in ESG, as highlighted in 2023 research by the World Business Council for Sustainable Development, these dynamic firms could prove a valuable hunting ground for outperformance.

Demand keeps growing

Despite uncertain economics, demand for ESG and impact investing continues to grow. PwC predicts that between 2021 and 2026, global ESG investment will more than double to $33 trillion – much faster than the wider asset and wealth management market.

At Rimm, we know investors are increasing their attention on ESG areas such as data security and privacy, corporate governance and reducing greenhouse gas emissions.

Most asset managers already implement or plan to implement sustainable investing in response. But, in this competitive market, any asset managers with weaker ESG options risk losing clients to stronger competitors, and missing growth opportunities.

It’s a future-proofer

Integrating ESG factors can help asset managers manage long-term risks and ensure sustainability. A strong ESG proposition helps you identify firms that can benefit from long-term ESG trends. But it also enables you to screen out companies whose long-term performance may be damaged by ESG risks, thus future-proofing your portfolios.

Alternatively, if you engage actively with such companies, you can also encourage them to follow more ESG-related practices. This helps further reduce risk and support long-term performance.

Win the talent war

Sustainability and social responsibility are increasingly important for younger employees, and they are more likely to choose employers that reflect their values.

From talking to clients, we know a strong ESG proposition can help asset managers get ahead in the talent war by attracting and retaining valuable staff. With talent shortages reaching critical levels in 2023, this is more important than ever. Conversely, a weak ESG strategy can create a social stigma and cause companies to lose key workers or face a restricted talent pool.

In conclusion, asset managers need to focus on strengthening their ESG proposition for multiple reasons, including the impact on investment returns; growing demand for sustainable investing; better risk management; ensuring long-term sustainability; and attracting and retaining talent. This shows why developing a strong ESG proposition is not just right, but smart – a great business decision that can benefit asset managers and their clients long-term.

manage+ can help you bridge data gaps and manage your portfolio companies’ ESG performance in alignment with major global standards, including ILPA, TCFD, SFDR and more. Book a demo to learn more today.

With the ever evolving ESG reporting and regulatory scene, it can be difficult to keep up with key developments. Let’s look at 5 up and coming standards that will impact your business.

Sustainability reporting is becoming an integral part of business operations. For many companies, this trend goes beyond brand positioning and making a positive impact, affecting their regulatory compliance, financial statements, and funding from investors. With more complex and comprehensive sustainability disclosure requirements being introduced, navigating the sustainability reporting scene can be daunting, but remains key.

Here’s an overview of some of the important new standards and frameworks to keep on your radar in 2023.

1. Sustainable Finance Disclosure Regulation (SFDR)

The SFDR was proposed by the European Commission in 2019 and aims to promote sustainable finance and minimize greenwashing in the EU. The regulation requires financial market participants (FMPs) and financial advisers (FAs) to provide greater transparency around the sustainability of their investments and is divided into three levels of disclosure requirements: (Level 1) mandatory disclosure of sustainability policies by FMPs and FAs, (Level 2) detailed information on the environmental, social, and governance (ESG) characteristics of investments and how these are incorporated into the investment decision-making process, and (Level 3) mandatory disclosure of the impact of investments on sustainability.

2. Corporate Sustainability Reporting Directive (CSRD)

The European Commission has developed the CSRD framework to strengthen and standardize sustainability reporting for businesses operating in the EU. With its goal of offering stakeholders a thorough and consistent system of sustainability reporting to make decisions that will promote sustainable growth, the CSRD expands reporting requirements to all major corporations and companies listed on EU regulated markets, replacing the current Non-Financial Reporting Directive (NFRD). This initiative is estimated to affect over 50,000 European companies and over 10,000 foreign companies, which would bolster a new degree of confidence for sustainability reporting.

3. Corporate Sustainability Due Diligence Directive (CSDDD)

Proposed by the European Commission in February 2022, the CSDDD aims to hold businesses accountable for their impacts on the environment and society. With the overarching aim to make Europe climate neutral by 2050, the directive is currently in the feedback stage and is projected to impact approximately 13,000 EU and 4,000 non-EU companies once implemented in 2024. In order to comply with CSDDD, organizations must detect, prevent, mitigate, and account for any potential negative effects of their activities and supply chains on the environment, human rights and social issues. This has a ripple effect on SMEs that are involved in the supply chains of many of the affected larger companies as they may need to disclose information and minimize their own risks.

4. Sustainable Disclosure Regulation (SDR)

The UK Financial Conduct Authority (FCA) has also come up with their own measures targeting investment firms and distributors of in-scope investment products to combat greenwashing in the investment scene. The SDR incorporates the TCFD recommendations and double materiality. Some of the requirements of the SDR include three sustainable investment labels for retail investors to navigate the complex sustainable investment scene and more in-depth sustainability disclosures at the product (consumer, more general) and entity (stakeholders, more granular) level. While this measure is still in the early stages of implementation, it will have a significant impact; the FCA estimates that the SDR will affect about 450 funds managing £10.6 trillion in assets.

5. Climate-Related Disclosure Rule

In the US, the Securities and Exchange Commission (SEC) has proposed a new rule in 2022 requiring registered domestic and foreign companies to disclose information on climate-related metrics by February 2024. Under the new regulations, companies will be required to provide information on the physical and transition climate risks and impacts, governance practices around risks and risk management, mitigation plans, Scope 1 and 2 emissions, Scope 3 emission if material or a target has been set, and climate-related financial metrics in a note to audited financial statements. Building on the TCFD framework, these regulations aim to help businesses disclose climate risks and opportunities and standardize information for investors.

With the increasingly stringent and comprehensive regulations set to take place, organizations need to keep up with mandatory requirements under the new frameworks and standards for sustainability reporting and disclosure to be ready for compliance. Awareness, followed by appropriate planning, is key to mitigating the potential negative effects on your business and society.

Want to know what to include in your sustainability report?

Read our previous post on ‘What to Include in Your Sustainability Report’

Rimm collaborates with RFI to lead the sustainability module at their Global Virtual Innovation Hub (GVI) FinTech Program for startups and SMEs.

In early February, Rimm was invited to facilitate the Sustainability Module in the Global Virtual Innovation Hub (GVI) FinTech Program organized by the Responsible Finance & Investment (RFI) Foundation in collaboration with HSBC. With participants from around the world, the 10-week program sought to develop FinTech SMEs and startups’ capacities in responsible finance and sustainability, with a focus on the Middle East and North Africa (MENA) region.

The session marked our third collaboration with RFI’s GVI FinTech program, ever since the first iteration in October 2021. Shaleen Shahrin (Sustainability Expert and Strategic Partnerships, Rimm) began with the orientation, where participants were briefed on what to expect from the program over the subsequent days.

“It was great to share Rimm’s sustainability insights with another cohort of RFI’s GVI FinTech program. It is important for FinTechs to understand what sustainability means for their organization, and how they can incorporate sustainability into their business strategy,” shares Shaleen.

We led an ‘Introduction to Sustainability’ session, which focused on the rising presence of sustainability and reporting in the world of small and medium enterprises (SMEs). The interactive session shed light on some key trends driving ESG and sustainability engagement based on our ESG research. We covered various ESG frameworks, materiality and complementary strategies to enhance sustainability reporting, focusing on topics most relevant to the audience.

At Rimm, we believe in helping organizations implement sustainability right. Our program debunked some common myths around sustainability, challenges and solutions to reporting and the long-term risks of greenwashing. One of the topics covered was ‘ESG 2.0’, a new approach to ESG that steers away from minimalist ESG measures that merely satisfy internal and external requirements. It recognizes the importance of embedding ESG policies and frameworks into organizations’ operations and calls for impactful strategies to implement ESG right.

We also led a hands-on practical session, involving a demo of Rimm’s myCSO platform, to demonstrate the capabilities of myCSO in streamlining sustainability management and reporting for SMEs. We were happy to provide free trials of myCSO Essential for the program participants to explore and assess their own sustainability performance and potential for improvement. Rimm also conducted a carbon calculation exercise wherein program participants were able to calculate their Scope 1, 2 and 3 emissions intensities through our platform’s Carbon Calculator feature.

Our engagement with RFI’s GVI FinTech cohort concluded on a successful note as we received the opportunity to share our sustainability insights and capabilities with yet another group of SMEs. We hope to continue engaging with like-minded organizations and individuals in the future with our end goal to democratize sustainability for all.

Looking to automate and simplify sustainability reporting for your organization?

Speak with our team to learn more about our solutions!

There is a wide range of ESG ratings systems available with inconsistent results on ESG scores for different companies. Hear Ravi Chidambaram (CEO, Rimm) on navigating this challenge.

ESG ratings provided by firms like MSCI and Refinitiv have come under increasing scrutiny by corporations, regulators and investors. These companies have been criticized for using opaque, inconsistent methodologies in developing ratings, making it difficult for practitioners to compare ratings between providers or predict ESG-risk outcomes.

Another overlooked shortcoming amongst current major ratings providers is their “one size fits all” ratings system. In this model, virtually the same criteria are used to judge the ESG performance of a company from the United States or Europe with a similar company in the same industry in an emerging market. As the chart below shows, average ratings for emerging markets companies are often lower than companies from the West.

A recent academic paper by Professors Jeff Chen, Zenquan Li, Ting Mao and Aaron Yoon (“Global vs. Local ESG Ratings: Evidence From China”) demonstrates that local ESG ratings were much better than global ratings for predicting how ESG risks can materialize in Chinese companies. This was particularly the case in predicting social and governance risks in areas like corruption, legal violations and employment conditions. The authors conclude that the main reason for this is that local raters had a much better appreciation of the “contextual” nature of ESG risks in China.

ESG is a function of the local cultural, social, political and regulatory environment and varies greatly between countries and regions. For example, many Asian businesses are family-owned with multiple, related party transactions between different family entities. In Western corporate governance, this would normally be a red flag, but if managed responsibly, the risk posed by such related party deals may be benign. In a similar vein, a Nigerian or an Indonesian bank may be unfairly penalized for having greater lending exposure to fossil fuels than a Western bank though those countries derive the majority of their GDP from fossil fuels.

At Rimm, we see a clear demand from our clients in emerging markets for a more localized and contextualized ESG rating model. These companies want a more nuanced rating to better understand performance in the context of the local environment to set more realistic sustainability goals and targets. Local ESG ratings can also drive domestic, green capital markets growth as local investors are better able to price risk and opportunity within a local framework. We have already started developing a local ESG rating system for Indonesia and expect to trial it there soon.

Want to learn more about Rimm’s sustainability and ESG solutions?

Speak with our team to learn more about our ESG solutions.