Environment, social and governance (ESG) considerations were limited during the current Administration. Under President Joe Biden, companies active in the US can expect a different emphasis. ESG criteria are important to:
- Investors doing due diligence
- Applicants looking to work at companies with purpose
- Activists looking for corporate support of their values
- Consumers wishing to make a difference with their purchases
- Government intervention
The US has long had on the books ENVIRONMENTAL regulations. Many of these were weakened by Trump executive orders. Companies can expect these executive orders to be rescinded. Expect greater enforcement, new rules for existing legislation and new legislation funding the Solar Economy.
SOCIAL guidelines, such as fair wages, amenable working conditions, and diversity in purchasing will expand beyond government procurement. Those companies wanting to do business with the government will have to demonstrate they do not run the risk of lawsuits or negative publicity which could backfire on a new administration which promises to hold itself to a higher standard.
Redacted documents, closed hearings, withheld legal filings – Millennials are asking for transparency, and the Biden camp promises a much more open GOVERNANCE. In the age of Google and social media, young people believe they should be able to trace a tax dollar from origin to expense. Companies dealing with the government and most companies in the near future will have to adjust to scrutiny more intense than ever before.
Layer on an increasing number of ESG ratings and reporting protocols. It’s not government reporting which will burden companies, but reporting to stakeholders. Stakeholders are increasingly informed about corporate social responsibility (CSR). They have specific interests whether climate change, modern slavery in the supply chain or the diversity of a board of directors.
Expect the Biden administration to attempt to model the behavior and to support constituents expecting more CSR. Biden and future administrations will be able to navigate this change because ESG makes stronger companies; stronger companies make stronger economies.
The transition may take a while – with the new administration leading the way.