Sustainability challenges companies say they face today

A closer look at the exclusive report created by Enhesa and Savanta, which explores the challenges and agile solutions for maintaining sustainability compliance

New and adapted regulations are shaping the future for corporate sustainability compliance. For businesses, knowing about, understanding, and implementing steps to address emerging legislation is an ongoing challenge. This is why Enhesa and Savanta collaborated to highlight common obstacles companies face as compliance standards change, and to offer actionable solutions. 

As part of the survey and interview process, all company and individuals’ names have been removed to respect anonymity.

Challenge 1: Promoting unity and collaboration across internal departments

Sustainability compliance has its foundations in EHS reporting. Many companies may find that the necessary data required to meet regulations already exists in their infrastructure, but the challenge comes in navigating the gap between existing and missing EHS data to continue to meet compliance. This requires communication and engagement across teams, departments, and stakeholders. 

Though one senior lead can take on the responsibility, it’s vital that employees work collaboratively to foster a holistic and centralized corporate culture, where everyone is aware of what they’re driving towards. The process of directing change, reporting, and benchmarking progress in sustainability is difficult because the necessary information is usually spread across departments, so you need to interact with various leads to gather what’s required.

Corporate culture is the main driver of the sustainability program within organizations.

Enhesa Client Survey, 2023

Promoting unity isn’t the easiest task. Different teams and departments will have their own technologies, systems, and processes that they follow daily. Ways of reporting and storing data may not be standardized, leading to inaccuracies or complexities in compiling the information. In the survey hosted by Enhesa and Savanta, the VP of GHR & OE said that when they’re “required to capture certain data, they’re asking for support from the folks in a particular department… so they need buy-in from the relevant leadership.” 

To build collaboration and begin the process of harmonizing sustainability procedures, senior leadership needs to establish the main drivers, or goals, for employees to agree to work on. The VP of EHS said that “the goals they set up a few years ago were global goals, and… before finalizing, it went through senior executive leadership, the board, and the committee that oversees sustainability at board level. They got full transparency and buy-in…” 

Embedding a sustainability culture into everyday operations requires support from leadership, transparent communication between teams, and patience. Going another step further, keeping that data transparent for stakeholders is another way businesses can ensure harmony across their supply chain. When everyone is aligned on the same sustainability goals, the company program is more likely to be successful.

Challenge 2: Meeting regulatory targets

As we’ve seen from the timeline of sustainability, beginning as a concept in the 1970s to now becoming a mandatory and expected practice across jurisdictions for brands to prosper in the world of ESG, the landscape of sustainable development and sustainability reporting is ever-changing. 

Although reporting is becoming standardized around the world to ensure company performance is aligned with expected EHS and ESG metrics, it can still be difficult for businesses to identify which regulations apply to them, establish the right goals to meet those needs, and distribute this information across their supply chain to achieve standardization.  

The VP of EHS notes that Europe is “much more advanced and more forward thinking about sustainability” compared to the US, who lack “the regulatory drivers pushing them.” The VP continues to conclude that they “know if they do the things that Europe is driving then it’s going to set them ahead of the curve in the US.” Making changes based on anticipatory or forecasted trends elsewhere in the world is a palpable tactic for companies to stay ahead of sudden and emerging regulatory developments. 

 

Who’s setting the standards? 

 

Corporate Sustainability Reporting Directive (CSRD)

Entering into force on 5 January 2024, the CSRD applies to EU companies with over 250 employees and a net turnover of EUR 40 million, companies listed on regulated markets, listed SMEs, and any non-EU companies with a net turnover of over EUR 150 million in the EU. 

These companies are subject to the CSRD’s double materiality method of assessment, digital and taggable formatting requirements, and third-party auditing and verification. Furthermore, the CSRD applies throughout the supply chain — meaning business partners of any size will also need to fulfil reporting criteria. 

 

International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards

Created by the International Sustainability Standards Board (ISSB), the IFRS Sustainability Disclosure Standards provides guidance for financial reporting. They’re mandatory for companies operating in 163 jurisdictions, who must follow a single materiality form of assessment. 

 

US SEC’s Climate-Related Disclosures

Released in May 2024, the US SEC’s Climate-Related Disclosures establishes reporting regulations for climate change activities, such as greenhouse gas emissions. It currently impacts around 6,000 to 8,000 US stock exchange-listed companies.

Those operating in both the US and Europe are working towards the highest common denominator to ensure needs and expectations are met…

Market insight: Navigating corporate sustainability in a rapidly evolving landscape

Unintentionally missing a new rule or legislation can prove a costly error, with the cost of non-compliance skyrocketing in various countries. Not only can non-compliance result in direct costs — such as fines, penalties, and litigation — it also has indirect impacts, like brand reputation and plummeting share value. These regulatory drivers are only enhanced by the demands of consumers and risks of non-compliance. Upholding brand reputation to maintain consumer relationships is a huge driver in reaching sustainability goals — and keeping up with changing consumer demands is another tricky climate to navigate.

Challenge 3: Consumer demand and stakeholder complexity

Noted as the “second main driver of the ESG program” (Enhesa Client Survey, 2023) customer demand means there are high expectations around the materials, chemicals, and quality that businesses push to market. 

Nowadays, customers expect more from the brands they support and purchase from, particularly where increasing concerns about greenwashing come into play. Claims on labels and packaging must be substantiated and verified, as supported by the EU’s ban on greenwashing and the US’ FTC Green Guides. Not doing so will have dangerous impacts on reputation and revenue — with consumers unlikely to buy from deceiving brands, and stakeholders taking note of the decline in ROI. The presence of greenwashing serves to exemplify the need for measurable evidence and data-led reporting. 

Considering this, customer demand has become one of the largest drivers in developing and maintaining an effective sustainability program. 

We had to pivot and place more emphasis on sustainability because we saw how important it was for our customers.

VP of EHS

When customers clearly demand changes, businesses can either adapt to meet those new sustainability goals, or risk losing their customer base and, therefore, incur financial losses. The VP of EHS notes that the main challenge lies in consistency, “in what they’re being asked for from various customers or associations”, with varying metrics and criteria.  

The hope is that as mandatory regulations become more standardized across the globe, companies will be able to work centrally so they all meet the same milestones, rather than some companies being exempt or falling behind the curve.

Sustainability solutions from Enhesa

The findings from the joint survey by Savanta and Enhesa discovered that the three main challenges companies are currently facing with regards to meeting sustainability compliance are:

  • Collaboration across the business
  • Fast-changing regulatory landscape
  • Consumer demand

To tackle these challenges, companies need to standardize their sustainability compliance management, identify upcoming regulatory changes in their jurisdiction and react before they become mandatory, and comply with third party reporting requirements to invoke trust in consumers and stakeholders.

A service like Enhesa — which helps organizations identify the applicable regulations at jurisdictional level — is invaluable for businesses looking to stay on top of current and future requirements.

Market insight: Navigating corporate sustainability in a rapidly evolving landscape

See how Enhesa’s solutions can help you

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Jurisdiction Compliance

The Jurisdiction Compliance tool allows users to understand and track regulatory topics applicable to their business. It covers regulations for more than 50 major global markets, including disclosure requirements from ESRS, GRI, and ISSB.  

  • Track compliance in multiple jurisdictions
  • Identify upcoming regulations to plan ahead
  • Ensure streamlined processes across your organization

Within the tool, our Compliance Intelligence and Sustainability Forecaster solutions monitor regulations so you can plan ahead, report accurately, mitigate risks, and elevate your program.

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Global Guidance

The Global Guidance tool features a curated list of mandatory and voluntary practices referenced from more than 400 global frameworks. As stakeholder interest remains in sustainability practices, reporting on these will elevate your business in the supply chain.  

  • Global insights across industries
  • Foresee relevant developments via monthly newsletter, reporting, and forecasters 
  • Standardized, customizable, and digestible dashboard

Navigate corporate sustainability

For a more in-depth analysis of our survey results, read the whitepaper: Navigating corporate sustainability in a rapidly evolving landscape 

Download the paper