Procurement on the frontlines of ESG leadership
By
Ladanna James
Head of Marketing and Partnerships
The focus on Environmental, Social and Governance (ESG) disclosure is ratcheting up, not down. The Security and Exchange Commission’s (SEC) mandatory climate proposal for publicly traded companies is one case in point. Another is the Canadian government’s plans to require federally regulated financial institutions to begin reporting on climate-related financial risks.
The increasing scrutiny from regulators, investors, consumers and employees is driving the ESG agenda for many organizations. These various stakeholders want to know how an organization’s activities impact the planet (E), its communities (S) and how it governs itself (G). It’s fair to say that many organizations will not want to face the potential financial penalties associated with the failure to meet regulatory requirements.
But while some companies consider ESG as merely a compliance obligation, others see it as an opportunity for growth and a catalyst for digital transformation.
Adverse media monitoring can identify ESG-related risks
According to McKinsey, ESG leaders grow faster and have higher valuations than their sector peers. But an organization’s ESG footprint extends far beyond its own internal operations. An organization can do everything in its power to get its ESG house in order only to have its efforts undermined by ESG vulnerabilities in how their suppliers operate. In yet another McKinsey report, it states that “Two-thirds of the average company’s ESG footprint lies with suppliers.”
There are many steps companies can take to mitigate and manage third-party ESG risks, one of which includes ESG-related adverse news screening. It’s arguably one of the easiest first steps to take when evaluating third parties. This type of adverse news screening involves gathering publicly available information on companies that perform poorly on ESG matters.
This puts procurement teams on the frontlines of needing to drive ESG objectives, playing a key role in bringing ESG into their supplier sourcing programs.
Manual screening processes are inadequate
Valital’s new ESG focused adverse screening feature for entities provides organizations with the ability to scour open-source intelligence to gather key insights on the organizations they’re working with.
According to Ronny Aoun, Valital’s founder and CEO, “Procurement teams need real-time information about their third parties risk profiles and adverse media screening is one part of a holistic approach to safeguarding their organizations against a range of potential risks.”
With the robust ESG adverse screening feature, Valital’s clients can now screen both entities and individuals on the same platform, giving them a clearer picture to help them make more confident business relationship decisions.
“There’s a vast amount of information online about the people and the organizations that our clients already work with or want to work with. The challenge is to find the relevant negative information quickly and to be able to continuously monitor that person or organization so you’re never missing critical information. It’s a huge challenge exacerbated by the fact that so many organizations continue to do this work manually,” says Ronny.
The road to ESG leadership is not an easy one. It will never be a one-and-done exercise, but those organizations that see it as more than just a compliance requirement are positioning themselves for growth and transformation. Adverse screening for ESG-related news is one of the ways Valital is helping its clients on this important journey.