New reporting regulations covering environment, social and governance (ESG) practices are on the close horizon for companies doing business in the EU and UK, but many organizations are not prepared to measure those variables, according to a report from the British smart pallet and logistics tech vendor PalletEarth.
And with nearly 50,000 companies subject to mandatory reporting rules starting in fiscal year 2024, the ripple effect could be felt across the global economy, the firm warns in a whitepaper titled “Is your business ready for a new era of ESG reporting?”
The new rules come from a regulation known as the Corporate Sustainability Reporting Directive (CSRD), scheduled to take effect in 2024, requiring that certain companies doing business within the European Union (EU) must report annually on their past and present greenhouse gas emissions.
“From January 2024 companies will need to be able to report across a range of new environment, social and governance (ESG) topics that are more complex than ever before,” Dave Cashmore, GM of PalletEarth, said in a release. “Having a robust understanding and visibility across your supply chain will ensure companies are able to both comply and maximize the wider benefits that these insights provide to their business. However, when we investigated this, we found that many companies simply don’t have the infrastructure in place to do this.”
Companies that fall out of compliance could see large financial penalties and broad sanctions such as warnings, bans, or potentially criminal convictions. That’s a problem because research shows that 75% of businesses are yet to engage with suppliers to reduce emissions; 60% of UK businesses are ill-prepared for Scope 3 emissions reporting requirements; and 87% of procurement professionals are yet to fully map their supply chain network, the white paper found.
Pressure to improve sustainability measures also comes from shoppers themselves. “Today, consumers and companies alike are increasingly demanding lower impact and better sustainability measures from the companies they buy from or work with. Recent research from Kantar found that 47% of global consumers have stopped buying products because of their impact on the environment or society,” the report said.
According to PalletEarth, technology such as their smart pallets will be a critical part of the solution, enabling companies to measure, track, and clearly report against their ESG performance. That improved visibility could also lead to related improvements by providing companies with actionable changes to internal systems, processes, and infrastructure to deliver workplace improvements for their staff, helping to retain their workforce while also making it easier to comply with health and safety governance reporting needs.