A Refinitiv-hosted webinar clarifies the distinction between compliance and sustainability, and looks at how organizations can mitigate third-party risk by developing a holistic view of these two critical areas.
- Compliance and sustainability share many areas of common interest, such as third-party risk management, supply chain oversight, transparency and reputation.
- Non-governmental organizations (NGOs) focus attention on emerging sustainability issues and draw the attention of organizations towards them, and also provide insights into how these issues can be managed.
- By developing a holistic view, organizations are able to develop strategies to mitigate third-party risk and ensure supply chain transparency. This will help to guard against green crime, which is connected to money laundering, corruption, and organized crime.
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Balancing the interests of all stakeholders is an important role for the compliance and sustainability teams within any organization.
A Refinitiv-hosted webinar, Where Compliance ends and Sustainability begins, analyzed how, with no clear distinction between these two critical areas, a more coordinated and strategic approach to integrating them is required.
During the webinar, Alison Taylor, Executive Director at Ethical Systems, highlighted the significant overlap between “the regulated and the voluntary”, explaining the divergent origins of compliance and sustainability.
The origins of compliance and sustainability
The origin story of compliance centers on setting up processes, systems and controls to ensure compliance with global regulatory demands.
The origin story of sustainability, on the other hand, progressively helps companies become more responsible about their social and environmental impact.
Despite these differing origins, the two areas share many common interests, including third-party risk management, supply chain oversight, transparency, and reputation.
When developing strategies to mitigate third-party risk and ensure supply chain transparency, it is important to view compliance and sustainability holistically, and in line with their ongoing convergence. This convergence is being driven by a range of factors, including:
- The hyper-connectivity revolution, which requires organizations to manage reputational risk and transparency demands in real time.
- Activism and the urgent need to re-build public trust.
- A shift from siloed risk management to assessing the real impact of corruption, for example in cases where human rights are compromised.
- A new focus on culture and behavior that promotes integrity and ethics beyond legal compliance.
- The need for new approaches to supply chain oversight and third-party risk.
- The ongoing and meteoric rise of interest in environmental, social and governance (ESG) data.
What role do NGOs play?
Paying attention to NGO activity is crucial.
At the webinar, Robert Blood, founder and managing director of Sigwatch explained that NGOs create political impulse, and that they can help organizations better understand emerging sustainability issues, as well as deliver insights on how to manage these issues.
Sustainability remains a broad and ill-defined concept, but NGOs are enormously influential in focusing attention on critical areas that demand attention by:
- Defining issues and material risks that organizations need to be aware of.
- Identifying problems — such as human rights abuses — within supply chains, even in remote areas.
- Challenging organizations, and often entire sectors, to raise their standards.
- Influencing and setting expectations for both customers and key stakeholders.
Moreover, NGOs are increasingly drawing attention to firms that are making progress on the issues activists care about and using this “good behavior” to call out the “bad behavior” of other organizations.
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Developing a holistic view
As organizations strive to manage and mitigate third-party risk within often vast, international supply chains, ever-growing regulatory pressure means that those firms adopting a holistic view of compliance and sustainability will be best placed to respond to and comply with regulatory requirements.
Read our white paper Global Sustainable Development to discover how green crime, which is closely linked to corruption, organized crime and money laundering, can be mitigated through supply chain risk tools, ESG data and greater collaboration.
Actively monitoring ESG factors within supply chains has become an essential aspect of enhanced due diligence (EDD).
EDD delivers detailed integrity and advanced background checks on entities and individuals across all geographies, and provides targeted information to help organizations mitigate third-party risk.
By analyzing essential ESG data alongside existing EDD initiatives, organizations can gain invaluable insights that can help them navigate an environment in which regulatory risk is no longer clearly defined, and can actively support sustainable practices for the benefit of all stakeholders.
Companies adopting a best-practice approach and promoting the convergence of compliance and sustainability by embracing “voluntary” requirements alongside regulatory obligations can meet regulator demands, as well as transforming their compliance functions from cost centers to strategic centers of innovation.