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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.

The incorporation of technology is taking the corporate world by storm. Let’s find out how it is influencing the ESG scene.

As environmental, social and governance (ESG) factors are becoming increasingly important considerations for investors and companies alike, the intersection of digitalization and ESG has become a hot topic in the business world.

The shifting demands of consumers and investors for greater transparency and accountability has led to a growing number of regulations and frameworks – such as the International Financial Reporting Standards (IFRS) developed by the International Sustainability Standards Board (ISSB) – being adopted and mainstreamed over the years. The regulatory push is coming from all angles and levels, including from the international, regional, commercial and industry-specific spheres.

As many of these regulations are or will become mandatory and have penalties for noncompliance, digitalization is a necessary step in automating, accelerating and scaling processes around emissions reductions, data management and auditing to keep up with the ever evolving regulatory requirements.

We are seeing an increased prominence of a technological race between regulations and ESG efforts, where digitalization is becoming an indispensable enabler for companies to be ESG compliant.

Technology can help to boost the efficiency of ESG reporting through aiding organizations in collecting, analyzing and benchmarking complex data on materially relevant ESG metrics. This is particularly pertinent in certain industries, such as agriculture, energy, transportation, buildings and real estate.

The problem faced during the process of generating ESG performance analyses and sustainability reports is often related to data collection, data management and the amount of work that needs to be invested into the process. With recent regulatory developments requiring Scope 3 emissions reporting, which encompasses supply chain emissions and has historically been the most challenging to measure of the three scopes, this task would be immensely time-consuming to accomplish manually on an annual basis, especially for larger companies. Digital tools not only enable tracking and analysis of data on a larger scale, but also helps to combat greenwashing through better accounting and verification.

What does this mean for SMEs?

Currently, small and medium-sized enterprises (SMEs) make up 90% of businesses and 50% of the workforce globally, harnessing great potential for positive impact. While it may seem that SMEs are still exempt from many of the regulatory requirements, these changes for multinational corporations (MNCs) have resounding ripple effects. As scope 3 emissions reporting becomes compulsory, companies are pressured to streamline their supply chains, which often comprise SMEs. What we would observe is a trickle-down effect whereby ESG regulations for MNCs would indirectly influence SMEs to adopt better ESG practices.

As digitalization increases the transparency of MNCs’ supply chains, SMEs would be placed under greater scrutiny for their ESG practices. Greenwashing allegations are expected to continue to increase with greater public attention on sustainability and greater pressure to comply with stricter regulations.

Through stakeholder interaction and engagement, MNCs would work with their suppliers to ensure compliance. This could include setting emissions reduction targets, selecting suppliers based on their ESG performance, and implementing sustainable procurement practices.

With available data on companies’ ESG performance, technology also provides predictive capabilities on companies’ performance trends, such as in energy production or consumption. This enables companies to identify risks, opportunities, and areas in which they can improve their operational efficiency.

How can Rimm help?

Rimm offers ESG performance analytics and automated reporting services that provide insight and capacity to help organizations understand and improve their sustainability. Whether big or small, businesses looking to optimize their operational efficiency and financial performance should leverage technology to stay ahead of regulatory requirements and climate risks.

To browse through Rimm’s catalog of sustainability and ESG solutions, click here or contact us for a free demo!

Rimm’s global team from Singapore, UK, Japan and Portugal gathered in Singapore for one week of strategy and team bonding sessions. Read on to find out about the experience!

Recently, our international teams from the UK, Portugal and Japan flew to Singapore for a productive week of bonding and strategizing for 2023. It was our first time bringing everyone together from our global offices, and we also had the chance to celebrate International Women’s Day with all the amazing women on our team.

To kick-off the week, we ran numerous strategy sessions with everyone to align our vision and goals for the year. Each department came together to discuss their goals, refine strategies and approaches, and share their plans with the rest of the team.

“The strategy sessions were a fantastic way to collaborate and share ideas! It was super informative and insightful to understand the goals and agenda for each team for the next year,” says Riya Sharma, Partnerships Manager in Rimm’s London office.

As we are currently in a very important stage in our growth, aligning our strategies is crucial in improving transparency and coordination across teams on our various projects and timelines. With 2023 poised to be a very critical year for us as a company, our time together helped to clarify our goals and how we plan to achieve them.

Apart from our strategy sessions, we also had the opportunity to visit a local permaculture farm to learn about sustainable farming practices. As we toured the farm, we explored how they set up self-sustaining irrigation systems and closed ecological systems. Towards the end, we got to relax with food and drinks made from natural ingredients found in the farm.

“It was inspiring to see how the volunteer community builds the organic farm using their expertise and trial and error of natural methods,” shares Wei Ti Goh, our data scientist from the Singapore office.

“Overall it was a great experience. I’ve gotten to know how badly we treat the soil, something we depend on to grow the food we need to survive, and how small and simple sustainable practices can be applied to restoring it,” says Fábio Duarte, our Head of Development based in Portugal.

On our third day, Rimm explored the city on an amazing race around Singapore, centered around Singapore’s areas of heritage and culture.

“The amazing race was a fun and exciting way to explore Singapore! Having never visited before, I really enjoyed getting to know the local areas and understand the heritage behind the different sites. Lots of lessons learnt and lots of team bonding!” says Riya.

We rounded off our strategy and bonding week with a delightful dinner at Barbary Coast, where we looked back on an eventful time together and had one last meal before our overseas colleagues had to catch their flights back home.

It was sad to say goodbye, but I think most of us at Rimm will agree that we had a wonderful time walking the talk and living our brand ethos, ‘Real Impact Matters Most’ (Rimm), as a team. We look forward to our next reunion!

We are currently hiring!

As Rimm continues to grow, we are looking to expand our team. If you are interested to join our team or know anyone who might be suitable, please head over to our LinkedIn Jobs Page.

With the rise of ChatGPT and other AI tools, hear our expert speakers on how automation is shaping the sustainability space and providing solutions to challenges.

On March 16, Rimm held our first hybrid event of the year, “The Rise of Automation in Sustainability”. The event centered around a panel discussion, focusing on how automation can be used by companies to promote sustainability and the associated benefits and challenges. We were honored to have Ravi Chidambaram (Rimm, CEO), Vincent Caldeira (Red Hat, CTO), and Steven Newman (Menicon, CTO) on our panel to share their expertise with Dr. Darian McBain (OCSO, CEO) as our distinguished moderator.

With a multitude of regulations and frameworks increasingly mandating sustainability reporting, it may seem daunting for small businesses to embark on their sustainability journey. Automation enables easy access to sustainability for all companies, including those that may lack the necessary resources and manpower to implement more sustainable practices.

“Reporting to us is really just the starting point. You could get green loans, sustainability certifications, and be supply chain compliant… There are so many use cases around sustainability, and the idea is to go way beyond reporting.” – Ravi Chidambaram

Here’s a brief summary of what our panelists had to share.

Key takeaways:

• Automation can aid companies in their necessary transition toward sustainability by demystifying and simplifying adoption, helping them overcome logistical and financial hurdles to beat the rising cost of compliance and stay competitive.
• By starting with sustainability disclosure, companies can get a clearer idea of issues that are material to them, allowing them to identify areas for improvement to implement effective strategies.
• Beyond reporting, automation can be used for data scraping, benchmarking and auditing, all of which contribute to data verification and combating greenwashing.
• Although we are still in the early days of automation and sustainability reporting, automation can help to boost the credibility of self-reported data.
• Some ESG data might be inaccurate due to the lack of verification and lack of standardization between taxonomies.
• Automation and sustainability can also bring together ESG reporting companies to capitalize on each other’s strengths to come up with better and more holistic solutions for all companies.
• Sustainability and automation will continue to grow as a key topic area as businesses continue to realize its importance and as taxonomies become more standardized.

“The idea is if we can have this combination of data management and customization, we can create many positive outcomes for clients around sustainability adoption.” – Ravi Chidambaram

Our team at Rimm Sustainability would like to thank everyone who attended the event. We hope to see you at our next one!

Want to learn more about how you can automate your sustainability analytics and reporting processes?

Watch “The Rise Of Automation In Sustainability” on demand.

Rimm Sustainability and Zeroboard have joined hands to democratize sustainability through tech and automation, read our press release below to find out more.

Rimm Japan (Shibuya-ku, Tokyo; Chairman & CEO: Masashi Yamashita) and Rimm Sustainability Pte Ltd. (Singapore; CEO: Ravi Chidambaram; hereinafter “Rimm”) announced today that they will collaborate with Zeroboard Inc. (Minato-ku, Tokyo; CEO: Michitaka Toketsugu; hereinafter “Zeroboard”), a solution that supports the calculation, disclosure, and reduction of GHG (greenhouse gas) emissions, on February 24, 2023, to consider providing services that contribute to Rimm’s ESG assessment. We aim to integrate the functions of both companies’ solutions by the end of FY2011.

The announcement was made at the MOU signing ceremony of the Asian Zero Emission Community (AZEC) Public-Private Investment Forum hosted by the Ministry of Economy, Trade and Industry on March 3, 2012.

Rimm Japan Company Profile

Rimm Japan was jointly established by Rimm Sustainability Pte Ltd. of Singapore and SDG Impact Japan K.K. (co-presidents: Mari Ogiso and Bradley Busetto) to develop myCSO, a sustainability management assessment platform in Japan for the purpose of assessment improvement (co-presidents: Mari Ogiso and Bradley Busetto) to develop “myCSO,” a sustainability management assessment platform for the purpose of improving sustainability management in Japan.

About myCSO

Rimm, with its vision of “Sustainability for All”, provides a SaaS-type sustainability management platform based in Singapore that enables companies to conduct ESG assessments.

In recent years, an increasing number of companies have been implementing sustainability initiatives such as SDGs/ESG environmental management. In addition, with the growing interest in ESG investments, financial institutions, investment firms, and other investors in companies are also becoming more active in making investments and loans based around ESG contributions, such as green loans and positive impact financing.

However, these companies are currently forced to rely on costly consulting services by external experts, and rating and research firms to assess their ESG performance. The cost of such evaluations, especially for small and medium enterprises (SMEs), is a bottleneck that restricts their ability in improving their sustainability performance.

Rimm’s platform enables companies to visualize the progress in which they have achieved their sustainability initiatives and to evaluate and score their sustainability efforts using AI. We aim to improve the sustainability of society as a whole.

Rimm Japan has also been selected as a recipient of the Tokyo Metropolitan Government’s “Green Finance Foreign Business Start-up Support Program,” which supports foreign financial companies involved in green finance to establish operations in Tokyo.

Quotes from the involved parties:

Zero Board Corporation / Representative Director Michitaka Watakeiji

We are very pleased to have entered into a business partnership with Rimm, a Singapore-based developer of a sustainability management assessment and scoring platform. We are in a position to support companies in their decarbonization management by providing them with solutions specialized in the E (environment) of ESG, and we are in a good complementary relationship with Rimm, which is in a position to evaluate these solutions, both functionally and in terms of the geographic area of operation. We look forward to working with both companies to support decarbonization management aimed at increasing corporate value, as well as to promote initiatives that contribute to the realization of carbon neutrality on a global scale.

Rimm Sustainability Pte Ltd. / CEO Ravi Chidambaram

We are pleased to have signed an MOU with Zeroboard, a leader in decarbonization in Japan, for a business alliance. We are confident that the combination of Rimm’s rating systems in all ESG areas and the Zeroboard’s capabilities will help more companies in their sustainability efforts. We will also support the company’s overseas expansion by providing our accumulated data and knowledge.

Rimm Japan / Chairman of the Board Masashi Yamashita

We welcome the signing of a Memorandum of Understanding (MOU) for business cooperation with Zero Board. ESG initiatives, including decarbonization management, are an urgent issue in Japan. By organically combining the functions of Zero Board with those of myCSO, we believe we can assist companies at all levels in their sustainability management.

Read the Japanese press release here.

About Rimm Sustainability

myCSO is an accessible, end-to-end suite of sustainability solutions to address the sustainability needs of companies, as a Chief Sustainability Officer would. Developed by Rimm (Real Impact Matters Most) it helps small businesses measure, record, implement and assess actions which aid the delivery of greener business operations. The company leverages science, technology and data to make sustainability accessible and actionable for all, providing SMEs with the tools to advance on their sustainability journey.

Founded in 2020, Rimm is a SaaS company offering full sustainability management solutions to SMEs. The team is made up of sustainability, tech, ESG and data science professionals across three offices in London, Singapore and Tokyo.

For further information, please visit https://www.rimm.io/

Join us in celebrating and recognizing the achievements of women and explore how they are leading the charge towards a more sustainable future!

Happy International Women’s Day! This year, the theme is “Embrace Equity,” highlighting equity as a must-have in today’s society.

Women are taking the traditionally male-dominated tech and sustainability industries by storm, and studies have shown that companies with greater gender diversity at the top perform better financially and are more likely to prioritize sustainability in their operations. We also find many women at the forefront of social impact initiatives, whether it’s through philanthropy, community organizing or social entrepreneurship.

Gender equality and diversity and inclusion (D&I) have become crucial performance indicators in almost all forms of ESG assessments and reports because, after all, ESG is not just about the E. There is a growing consensus among investors, regulators, policymakers and corporations in favor of greater representation of women in leadership, gender-balanced workforces, and equal opportunity and empowerment for women.

By prioritizing gender-inclusive data and reporting, we stand to gain a more comprehensive understanding of sustainability and ESG issues and develop more effective solutions. Through a data-driven approach, organizations can identify risk areas and industry benchmarks for D&I so that they may take appropriate action as quickly as possible.

At Rimm, we commit to having gender-balanced teams and creating an inclusive and supportive work environment where all our employees can thrive. We recognize that gender equality is not just a moral imperative, but also a business imperative, and we strive to promote gender diversity and inclusion in everything we do. Hear from our team, below, as they share what embracing equity in the workplace means to them.

This International Women’s Day, we reaffirm our commitment to promoting gender equality and empowering women in pursuit of sustainability. We recognize that our work is not complete until all women are able to participate fully in creating a more just and sustainable world, and we pledge to continue working towards that vision.

To see how your company compares to its peers when it comes to D&I, you can complete a short assessment on myCSO.

Click here to learn more about myCSO.

Confused about which ESG issues matter the most for your business? Use a materiality map to identify the material issues you should address first.

Carbon emissions, stakeholder engagement, product safety, data security, occupational health and safety, human rights, ethical governance… The list of environmental, social and governance (ESG) issues to report on and track your business’s performance is endless. Knowing where to focus is key, and that’s where materiality comes in handy.

What is materiality?

Materiality refers to the relevance or importance of an ESG issue to your company. In simple terms, it means to identify the issues that matter the most to your business and stakeholders. 

According to the Global Reporting Initiative, material topics are “topics that represent the organization’s most significant impacts on the economy, environment, and people, including impacts on their human rights.”

In reality, not all ESG issues carry the same importance across industries, and not all ESG metrics may be relevant for your organization. Understanding materiality will help your organization conduct ESG assessments and reporting in an efficient and effective way. It can guide your ESG reporting processes, help you devise your sustainability strategies on key areas your business needs to prioritize and improve your engagement with stakeholders.

One way to quickly identify the material topics for your business is through a materiality map.

What is a materiality map?

An ESG materiality map is a visual representation of the most significant ESG issues faced by your organization. It is generated through a process that involves analyzing company data, benchmarking against peers and industry best practices, and engaging with stakeholders to understand their perspectives on relevant ESG topics.

By identifying the topics that have the highest potential to impact your financial performance, reputation and long-term sustainability, materiality maps can help your organization strategically plan its business operations. Insights gleaned from a materiality map can better inform decision-making around resource allocation and goal-setting, as well as position you to perform better in ESG.

How do I interpret a materiality map?

Materiality maps come in different shapes and sizes, but each one has two key components in common: a set of material issues and their relative materiality. Determinants of materiality can differ map to map, so keep a lookout for what methodology a map is using to determine the material issues.

Here’s an example below of a materiality map that shows a set of ESG topics ranked from highest to lowest materiality. The vertical axis represents the frequency of topics mentioned in mainstream media, and the horizontal axis indicates the frequency of topics mentioned by industry peers in their publicly disclosed sustainability and annual reports. The size of the bubble indicates the frequency of topics flagged as material across various global sustainability standards, such as GRI, SASB and MSCI. Hence, larger bubbles in the top-right show topics that are highly material based on industry and media data, and come up frequently in global sustainability standards.

Materiality maps are a crucial part of ESG and sustainability reporting. Once you have identified your organization’s material topics, you can focus on directing your resources towards understanding the key ESG risks and opportunities your organization faces and work towards improving your performance.

Want to find out more about the material topics to your organization?

Generate your own materiality map in just a few clicks with myCSO!

Learn more about some of the most important developments in recent years accompanying the UK ESG regulatory landscape and how you can be better prepared.

As organizations across the globe ramp up their focus and strategies on ESG and sustainability, the need for consistent and transparent reporting has increased. The United Kingdom (UK) is already leading the way by establishing a range of ESG regulatory requirements for public companies. These reflect the need to facilitate disclosure and promote the management of climate-related financial risk and opportunities across the British economy, particularly for financial institutions and asset managers. Furthermore, with the British leadership announcing its intention for the UK to be the world’s “first net zero-aligned financial centre”, a common feature underpinning these developments is how ESG regulations and requirements are designed to strengthen disclosure and facilitate management of climate risk.

Recent and upcoming developments

The shift towards mandatory corporate responsibility for ESG issues in the UK is gaining traction. For instance, companies and limited liability partnerships (LLPs) “with the greatest economic and environmental impact” are now subject to new laws and regulations which include the Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022, as well as the Limited Liability Partnerships (LLPs) (Climate-related Financial Disclosure) Regulations 2022, which took effect on 6th April 2022. These new regulations stipulate a legal requirement for affected companies to assess climate risks and disclose climate-related financial information of their companies and to climate-related disclosures in their annual strategic report. Furthermore, the regulations require certain LLPs to provide a similar sustainability information statement on climate-related disclosures in their annual strategic report or their energy and carbon report.

The UK’s Financial Conduct Authority (FCA) is also the first securities regulator to mandate the Task Force on Climate-related Financial Disclosure – TCFD-aligned disclosure requirements for asset managers and asset owners. In December 2021, asset managers and certain asset owners, including life insurers and pension providers are required to make climate-related disclosures aligned with TCFD recommendations by 30th June 2024 – with a reporting period commencing on 1st January 2023.

In addition to asset managers and asset owners, the FCA has made the annual TCFD reporting mandatory for over 1,300 of the country’s largest UK-registered companies and financial institutions with effect from 6th April 2022. This will affect most of the UK’s largest publicly-traded companies, banks and insurers, as well as private companies with over 500 employees and £500 million in turnover.

Furthermore, the UK’s Sustainable Disclosure Requirements (SDR), which is currently underway, will be a key development in the UK’s trajectory of strengthening disclosure requirements and combating greenwashing. The SDR will encompass a set of measures and modifications, including sustainable investment labels, disclosure requirements and restrictions on the use of sustainability-related terms in product naming and marketing with the objective of clamping down on greenwashing.

The emergence of these developments indicate the UK’s heightened focus and commitment to increase transparency and accelerate the management of climate-related risks and opportunities across UK corporations. These are also designed to enhance competition and risk management while protecting consumers from unsuitable products and greenwashing, as well as bolster investment and the mobilization of capital towards sustainable projects and activities.

What do these ESG developments mean for businesses?

Developments in the regulatory regimes in the UK highlight the burgeoning pressure on companies to manage ESG related risks effectively across their corporate groups and supply chains. With increased levels of scrutiny on corporates who are increasingly questioned on their sustainability claims and levels of action by consumers, investors and shareholders, a failure to mitigate these risks and ramp up accountability could result in legal liabilities and even the possibility of being subject to litigation for companies.

While most of the recent regulatory developments affect major companies, asset managers and financial institutions, the emergence of these mandatory requirements and disclosure rules have implications for thousands of businesses connected with affected UK companies through their extensive supply chain networks and portfolios. This makes it increasingly critical for companies of all sizes and industries to be prepared for changes in the regulatory landscape especially since in light of rigorous disclosure requirements and growing stakeholder and investor pressure which indicates how ESG reporting and companies is becoming a key business priority.

It is critical for companies to embark on actionable steps to navigate the complexities in the ESG reporting landscape and ensure compliance.

3 Actionable Steps for Companies to Navigate ESG Compliance

Adopt quality control systems across ESG: Implementing quality controls and governance mechanisms are critical to ensure that companies adhere to their human rights and environmental due diligence and/or disclosure obligations, as well as any ESG related standards or targets.

Ramp up engagement with supply chain partners on disclosure: ESG-related reporting obligations should extend to relationships with a companies’ supply chain partners and there should be strategies in place to communicate on a companies’ reporting obligations and the management of supply chain risks.

In-depth understanding on rules and requirements: Firms, whether directly or indirectly affected, should familiarize themselves with the details of the rules and guidance in the industries and jurisdictions they are based in, and consider how they would be impacted to ensure that they are able to meet the requirements.

→ Download our guide to find out what are some of the latest ESG regulations in the UK, when they have taken effect and affected stakeholders

The upcoming UK’s Sustainability Disclosure Requirements (SDR) will be a key development in 2023. Find out what the SDR will entail, the affected stakeholders and requirements in the UK’s ESG reporting landscape.

As the world ramps up its focus on sustainability disclosure and risk management, the UK’s ESG regulatory regime is no exception to this trend. In recent years, proposals as well as new statutory instruments and regulatory requirements that are currently underway reflect the need to strengthen disclosure and promote the management of climate-related financial risk and opportunities across the British economy, particularly for financial institutions and asset managers. This is also in light of heightened concern that companies resort to misleading or unsubstantiated sustainability-related claims about their products, or ‘greenwashing’. Given the need to protect consumers as they navigate an increasingly complex investment landscape and strengthen trust, the UK’s Financial Conduct Authority (FCA) had recently issued a consultation paper (“CP 22/20”) on its proposed regime of the Sustainability Disclosure Requirements (SDR). The upcoming SDRs are intended to create an integrated and streamlined framework for corporates and financial institutions to comply with all sustainability-related reporting requirements.

Following the UK Government’s Roadmap to Sustainable Investing published in October 2021, the FCA’s CP 22/20 builds on responses to the discussion paper on sustainability disclosure requirements and investment labels which is critical in advancing the FCA’s anti-greenwashing initiatives. With increased scrutiny from investors and a demand for wider sustainability-related measures to be considered, the proposal is aimed at increasing transparency regarding the sustainability of investment products and facilitating like-for-like comparisons, particularly for retail investors.

The proposals outlined by the FCA in the consultation paper introduce a range of measures and modifications which include sustainable investment labels, disclosure requirements and restrictions on the use of sustainability-related terms in product naming and marketing with the objective of clamping down on greenwashing.

Among some of the key proposals of the SDR is the introduction of sustainable investment labels (SIL) designed to facilitate the provision of accurate information for investors on how the funds impact social or environmental sustainability, and how this is measured and reported. Under SDR, financial products will be labeled based on intentionality and their actual contribution to positive sustainable outcomes. If a product does not meet the criteria for a label, certain restrictions apply regarding the use of sustainability-related language; and its marketing may not include words such as ‘sustainability’, ‘responsible’, ‘green’ and much more.

What will the SDR mean for companies in the UK?

While some requirements are expected to be implemented via a phased approach, others are likely to be enforced soon. The SDRs are currently in the midst of legislative approval and feedback from stakeholders. The current proposals apply to certain FCA-regulated firms and the rules are expected to be finalized by the end of Q2 2023, with disclosure rules applying from 2024 and reporting commencing in 2025. Firms that manage investment products for retail investors and their products are expected to be subject to the product labeling and disclosure rules which include wealth, fund and asset managers.

How can firms be better prepared?

In light of the upcoming requirements, it is critical for firms to embark on concrete steps to understand the nature of their products in the context of the SDR and determine which disclosure requirements their investment products would be eventually subject to. To ensure appropriate labelling of investment products, conducting a detailed scoping and product classification exercise to determine the extent of alignment with the proposed labels is essential.

For existing products tied to sustainability objectives, these objectives should be specific and measurable. In addition, when investment policy and strategy are aligned to sustainability outcomes, the disclosures should be adequately explained in terms of how the outcomes are measured and the appropriate key performance indicators (KPIs) that are linked to the disclosure. Given the evolving nature of ESG regimes, the asset management industry, particularly those with asset management businesses on a global scale will have to be cognizant on how the upcoming SDR regulation will align with global frameworks and ESG regimes outside the UK.

In essence, while the SDRs provide asset owners with critical insight into the environmental and social impacts of companies in their portfolios, it also means that they would have to be adequately prepared for changes in the landscape and their exposure to increased regulatory risk as a result of misleading representations on the sustainability-related features of investment products or services. The more an entity associates itself with sustainability, the more it will run the risk of exposing itself to regulatory investigations and even litigation. It is thus critical for companies to regularly review their sustainability communications and marketing materials to ensure compliance with the anti-greenwashing rule.