The ESG questions companies need to be asking

Governments and regulators globally have started to implement codes and regulations to help organisations reach their ESG and sustainability related goals.

In the European Union, the Corporate Sustainability Reporting Directive will see about 50,000 organisations begin formal reporting on an annual basis from 2025. Locally, the JSE has released

Sustainability and Climate Disclosure Guidance specifically tailored to the South African context. While adoption is not mandatory, it is highly recommended and aims to guide listed companies and investors to better understand the climate crisis and benefits of good quality disclosure.

In SA, companies are facing more scrutiny from shareholders, communities and regulators than ever before in relation to their ESG practices and overall sustainability of their business model, says Shivan Hutton, head of Marsh Specialty, Africa.

“Shareholder activist groups, in particular, examine public reporting in detail and are not afraid to challenge companies where they feel disclosure does not represent the true picture of their business activities.”

Hutton says organisations need to determine the implications of ESG issue on their operations and implement both short and long-term strategies to ensure they are not exposed. While many companies have actively integrated ESG into their corporate strategy and enterprise risk management framework, he says those that have not could face issues in the future. Marsh is at the forefront of understanding how existing insurance relationships might change, and creating new solutions in response to emerging risks associated with ESG transformations.

He says the most pressing ESG-related questions risk managers should be asking are whether to include ESG risks in the company’s principal risks; deciding whether the company’s ESG commitments include its financials; ensuring the organisation is not at risk of being accused of green or social washing; establishing the impact the energy crisis could have on the organisations; thinking about how an extreme weather event could impact its operations; how secure its supply chains are; and the impact of the cost of living crisis on the organisation.