Navigating ESG regulatory changes: what you need to know
As
you’ll be well aware, the field of sustainable investing and environmental,
social and governance (ESG) factors has gained significant momentum in recent
years. As businesses strive to align with ESG principles, it’s essential to
understand the evolving regulatory landscape. In the EU, regulatory changes for ESG laws, which will include a specific
focus on reporting and equality quotas and will be mandatory for many
companies, are on the horizon.
Although
the exact details of these changes are not yet known, it’s crucial to start
preparing for them. This article aims to provide an overview of what you need
to know, what actions you should take, and how the partnership between
Illoominus and Hanover can assist you in navigating these regulatory changes
effectively.
Continue on to hear how the landscape is changing before our very eyes and open up our Leadership & Workplace Predictions for 2023 report for a more focused insight into how organisations are incorporating ESG into their agendas.
Understanding the ESG regulatory landscape
The
regulatory environment surrounding ESG data usage can
be complex – and added to that, it’s different across different markets. This
complexity often leads to confusion regarding what data can and cannot be
used.
When
it comes to utilizing data for ESG purposes, organizations face several
considerations, including data protection and compliance with the General Data
Protection Regulation (GDPR). Many leaders are unsure about what they can do
and where to start. However, it is crucial to recognize that regulatory changes
are happening in 2024, and companies must be prepared.
Even
in the absence of specific details about these changes, there are a number of
essential principles to keep in mind:
1. Compliance with GDPR and other
country-specific rules
Most
countries follow the rules set by GDPR, which serves as a fundamental practice
for data protection. While there are exceptions in countries like France and
Germany, where there are stricter rules, it is advisable for companies to
adhere to GDPR as a baseline.
2. Seeking employee consent and ensuring clear data
usage
To
track and utilize data effectively, companies should obtain consent for usage
from their employees. It’s also essential to clearly communicate how you’ll be
using employee data and for what purposes.
3. Aggregate and anonymized data
analysis
When
analyzing data for ESG purposes, companies should focus on aggregate data
rather than individual-specific information. You must remove any so-called ‘personally identifiable information’ (PII), so the data you use is
anonymized. PII includes any data that directly identifies a person, whether
that’s by their name, address, email, social security number, etc.
Illoominus,
Hanover’s partner that specializes in HR data solutions, offers actionable
insights and data to help businesses understand how they are tracking toward
their people goals, like diversity, equity and inclusion efforts. They
specialize in breaking down data at an aggregate level, enabling organizations
to understand trends and identify problems from a holistic perspective.
Example: Using aggregate data to understand what drives results
Illoominus
was able to help a large US Telco better understand what drives results by
pulling together multiple HR systems together to show key dimensions.
The
customer’s challenge lay in having a lot of disparate data that couldn’t be
analyzed well enough to provide meaningful insights. By bringing together data
from across HR systems, Illoominus provided a full understanding of the
employee journey across key dimensions like hiring, promotions and attrition
rates.
This
aggregated data resulted in targeted initiatives to address priority areas,
measurable results and learnings to support future strategy. Using these
insights, Hanover could help the customer address equity and inclusion issues
by revisiting company policies and de-biasing them, helping to create
empowerment programmes and supporting initiatives that allowed everyone equal
access to opportunities, such as promotions.
4. Data tracking and reporting
While
some companies are already invested in ESG data tracking, many have yet to
track and report on ESG-related metrics. However, the upcoming regulatory
changes will require additional reporting within the EU.
It’s
crucial to get everything in place now, so you’re prepared for what these
changes may bring. Illoominus, with its expertise in data analysis and
reporting, can support companies in gathering and organizing the necessary data
to comply with future reporting requirements. Getting on the front foot now will
save a lot of time and pain in the long run, and mean that your business will
be a lot more efficient and compliant when the changes are put in place.
5. Data security and storage
To
protect data, companies should prioritize encrypting data during transfer and
storage. Collaborating with IT teams can help ensure data remains secure and
inaccessible both when it’s stored and also during transit.
6. Navigating local regulations
Navigating
local regulations can be challenging due to nuances and variations across
jurisdictions. It’s essential to cross-check practices against GDPR and consult
legal experts to ensure that you’re compliant.
Change management and cross-company alignment
Implementing
effective ESG and DE&I initiatives requires buy-in from leadership and strong change management
processes.
At
Hanover, we specialize in supporting companies in incorporating data into their
workforce planning, identifying improvement areas and making strategic
decisions. We can help you foster cross-company alignment and ensure the
successful integration of ESG and DE&I practices throughout your operations.
Example: Sharing accountability across department leaders at a fintech
Creating
departmental reports or data access creates shared responsibility across
leadership. Illoominus recently helped a rapid-growth fintech company build accountability across
teams by disseminating aggregate data to key stakeholders.
Hanover
could use the insights this data provided by facilitating the creation of new
incentive structures for progress across departments and the ability to both
pilot and learn from new initiatives.
Taking action on ESG: How Illoominus and Hanover
can help your organization
Illoominus and Hanover complement each other’s
strengths. Illoominus provides the data and insights that enable you to
understand and progress towards your people goals, like diversity, equity and
inclusion.
Hanover
can translate those insights into actionable DE&I strategies that address
regulatory changes and align your business with emerging ESG laws. Hanover’s
DE&I maturity levels provide a framework for understanding where you
currently stand and how you can progress towards a high-performance DE&I
culture.
As
regulatory changes approach, it’s more crucial than ever to take proactive
steps to prepare your organization. Only by establishing a solid
foundation and leveraging data insights will you be able to navigate the
evolving landscape successfully.
If
you want to find out how Illoominus and Hanover can provide your organization
with the necessary tools and expertise to support you in gathering, analyzing
and acting on DE&I data, contact
Brent or Noelle
today.
Disclaimer:
This blog post is for informational purposes only and does not constitute legal
advice. Please consult with your company’s legal and IT teams for specific
guidance on compliance with ESG laws and regulations.