Top 6 ESG Trends and Risk Management Strategies for 2023 and 2024

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LRQA Leading the way: Top trends compelling businesses to reclaim their due diligence approach

The past year has significantly altered the landscape of Environmental, Social, and Governance (ESG) risks in global supply chains. With evolving due diligence legislation and increasing climate threats, businesses must navigate complex challenges to maintain responsible sourcing practices.

In 2023, US domestic suppliers faced heightened scrutiny for labor malpractices, challenging preconceived notions about high-risk regions. This report by LRQA highlights, the top trends of 2023, emphasizing the need for enhanced due diligence and sustainable business strategies. It also advises how companies should adjust their strategies to adapt for the near future Explore the top ESG Trends fully and learn how to proactively address risks in 2024.

Key ESG Trends in Due Diligence and ESG Risk Management

1. The evolution of due diligence legislation
Due diligence legislation is evolving to address the increasing need for corporate responsibility, particularly in areas of human rights and environmental protection. Recent laws mandate that companies not only monitor their direct operations but also scrutinize their entire supply chains for violations.

2.The emergence of risk in unexpected places
Risk management in supply chains is expanding beyond traditional boundaries. Companies are now facing increased scrutiny over their indirect suppliers and operations in previously overlooked regions. This heightened focus has revealed hidden ESG (Environmental, Social, and Governance) risks that were not apparent before.

3. Climate change: climate and human rights risks now go hand in hand
The integration of climate risks and human rights considerations in supply chain strategies is becoming increasingly essential. Climate change worsens human rights issues, such as forced migration and labor exploitation, as vulnerable populations are often the most affected by environmental changes.

4. Increased focus on the US, rising risk in developed nations
Traditionally, ESG risks have been associated with developing countries, but there's a rising awareness of labor risks in developed nations like the US, Germany, and Japan. Factors such as wage stagnation, labor rights violations, and increasing regulatory scrutiny are contributing to this trend.

5. Grievance mechanisms are now a necessity
Effective grievance mechanisms are crucial for managing supply chain risks and ensuring that workers' voices are heard. These mechanisms provide a structured process for workers and other stakeholders to report issues such as labor violations, unsafe working conditions, and environmental concerns.

6. The politicisation of ESG and the new trend of "greenhushing"
The politicization of ESG (Environmental, Social, and Governance) issues has led to a phenomenon known as "greenhushing," where companies downplay their sustainability efforts to avoid political backlash or controversy.

As businesses face increasing pressure to uphold responsible sourcing and ESG standards, adapting to these evolving trends is critical. Enhanced due diligence, proactive risk management, and robust grievance mechanisms are integral to sustainable business operations.

To read a more detailed report, download now: ESG Top Trends Report | LRQA SEA

How LRQA Can Support Your ESG Journey:

Experts at LRQA offer comprehensive support to navigate the complexities of ESG compliance and due diligence. From independent auditing, certification, and training to real-time assurance technology, LRQA provides innovative solutions to help your business manage risks effectively. With a focus on data-driven insights and a deep understanding of regulatory landscapes, LRQA is your partner in building a sustainable and responsible supply chain.

This article was first published on May 31, 2024