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| 1 minute read

Progressive paths to a responsible future – ESG compliance

It has never been so trendy to be responsible.

The demand for ESG (Environmental, Social and Governance) compliance is indescribable. Every sector of the economy is facing ESG enquiries providing the opportunity to thrive.

The well-known publisher of the MSCI (Morgan Stanley Capital International) index does see more demand for its business in terms of ESG ratings than for its previous traditional standard index.

But not only investors and financial companies notice the boom: Product manufacturers also have an entire new market perspective. Sustainable and responsibly produced products are in vogue.

This trend is also more and more picked up on in laws. Germany has already presented a draft for a supply chain law. According to the draft, German companies have the obligation to exercise diligence with regard to human rights violations in their supply chain – leading to an enhanced focus on risk management.

The Legal Affairs Committee of the EU Parliament voted by a large majority for an even more far-reaching proposal. According to this proposal, companies may even be liable under civil law if violations occur in their supply chain. It remains to be seen whether the Commission will support this proposal.

Companies should recognise the trend in time and align their business to the new aspects of responsibility in order to lead the field progressively. In this way, they will prevent potential disputes in the future and benefit actively from the market sentiment. Modifying contractual provisions with suppliers and implementing monitoring methods are therefore to be tackled sooner rather than later.