As for Demand for ESG Increases, Is Government a Partner or Regulator?
As the demand for transparent ESG disclosure increases, companies often find themselves pressured by regulatory authorities while unrewarded from their customers. As Pedro Ortun of the European Commission explained Thursday morning at the GRI Conference, all parties want clear material facts and relevant information available to shareholders and stakeholders. But how can companies stay compliant and competitive? And what does this mean if companies will soon integrate their sustainability and financial reports into one document?
Richard Howitt of the European Parliament suggested that European governments need to lead by example. While it is fair for governments to demand that companies share their environmental, social, and governance (ESG) information legitimately, government can show they are partners by doing the same. In recent years, more United Kingdom agencies have issued ESG reports, as have Austria's Foreign Ministry, the City of Amsterdam, and across the Atlantic, even the United States Army.
The Dutch Airline KLM is a compelling demonstration of how a company can integrate its ESG and financial reporting,- not to mention achieve impressive goals - yet is left wondering if its stakeholders and customers appreciate the steps it has taken. In recent years, Jan Ernst de Groot, a managing director at KLM, explained how the airline reduced its workforce without layoffs, merged with Air France, and initiated research on alternative fuels. Meanwhile, its management team is left wondering if passengers even care: and while the iconic Dutch carrier does the right thing, upstart competitors that disclose little or zero ESG data are laughing while charging 19-Euro tickets to Barcelona!
Nevertheless, if government and business share a foundation of trust, the macroeconomic benefits emerge. Jorge Samek of the Brazilian utility ITAPU gave a spirited account of his country's approach to economic development with transparency and suitability in mind. The results? As the world tumbled into recession, Brazil was the last to enter and first to emerge from the global economic crisis.
So government can be an equal partner when companies have incremental and clear objectives are for ESG reporting. Victor Kjaer of Denmark's Commerce and Companies Agency gave some common sense advice to his counterparts in Europe and abroad, "If you want to be a partner and engage your friends in the private sector, make the ESG reporting process seamless, and limit the reporting to one office, one agency."