ESG & Sustainability In The US And EU: Watch Your Language – And Your Regulations

ESG & Sustainability In The US And EU: Watch Your Language – And Your Regulations

I’m newly back from the GreenBiz conference in Phoenix, Arizona, where I moderated the panel “Selecting the Right ESG Software Stack”. The event was filled with inspiring and depressing insights into sustainability progress, best practice sharing, and countless conversations about language and the state of regulations.

Let’s start with the challenges on the regulatory side from the US. On February 11, the acting chairman of the US SEC, Mark Uyeda, announced that the SEC does not plan to defend its March 2024 climate disclosure ruling, essentially allowing the rule to fail. Uyeda’s letter removes any doubt about the SEC’s position – at least for this administration. Some states will fill the regulatory gap, with California being the most visible example. Plus, many investors recognize that sustainability factors carry significant financial implications – from the cost of recovering from climate-related events to harder-to-quantify issues such as impact on business resiliency and reputation.  The conference sentiment echoes my own: investors' increasing awareness of sustainability's value trumps (!) regulation any day.

In the EU, we have the European Commission (EC) Omnibus to simplify sustainability legislation (CSRD, CSDDD and EU Taxonomy) and lessen the administration burden – especially for small and medium-sized firms. The timing is frustrating – 20 EU countries have already transposed the CSRD, and many firms are releasing their first reports. Although the EC originally indicated it’d have more details on February 26, we expect that to be pushed into March. We may see more changes to the CSDDD, partly because it was approved so recently (May 2024), partly because of its emphasis on ‘doing’ rather than ‘reporting’. At the conference, it was clear that most large firms are already preparing for CSRD, but – as I’d expect – far fewer are doing so for the CSDDD. Because of the progress many have made on the CSRD, this is where I think competition will be the driving force in CSRD disclosures for large firms moving forward. Expect smaller organizations to lag behind.

Ultimately, does it matter that the US and EU appear to be decelerating their regulatory push? My response, and what I heard at the conference, is that it may have some effect but not a precipitous drop. I’m still optimistic that firms are continuing to gather information to understand and drive progress on their environmental and social impacts, risks and opportunities (IROs). A firm’s brand reputation increasingly depends on transparency and sustainable business.

But let’s revisit our language, which was a big topic of many conversations and sessions. Over the last few years, I’ve drafted many a blog about the frustrating debate over the meaning of ESG and sustainability. The GreenBiz conference has convinced me that exercising caution with language is even more critical today. For example, one of my panelists talked about how he doesn’t ask his colleagues for ESG data; he just asks for data. Other sessions at the event talked about alternative words to ESG, climate and even sustainability. Talk about nature, instead. A keynote presenter suggested that we identify the “keystones” that have broad appeal and can help us transcend our current language challenges. Others suggested we return to the language of corporate responsibility, responsible business and value creation. Feeling a little disappointed with where we are? Let me reassure you: all indications from the conference tell me that the sustainability work is still getting done.

Here at Verdantix, we’ll continue our research into sustainability tools, technologies and services. What are you doing to move forward? If you’re a corporate practitioner, join our Vantage community to learn more.