Insights from NAEM Part II: Risk and Regulations

The NAEM conference on sustainability delivered expert insights on ESG, the impact of ESG on EHS professionals, risk and the outlook for environmental regulations in 2022. Read our summary of select sessions to learn how EHS is leading the way to ESG success.
A session on understanding risk and resilience in ESG gave attendees a solid grounding in the who, what, when, where and why of managing ESG. The discussion began by defining ESG as a collective consciousness for social and environmental factors with risk management and value opportunities.

Day Two of the EHS & Sustainability Management Forum from the National Association of EHS&S Management (NAEM) brought together subject matter experts to examine the impact ESG is having on the EHS practice, as well as new EHS regulations on the horizon for 2022. Here are some highlights from select sessions. 

Morning Coffee Roundtable 

The first discussion of the day explored some of the key themes relating to ESG and its place in the practice of EHS, including disclosure demands, data collection, team composition and supplier engagement.  

Participants discussed the overall increase in market pressure relating to ESG. Customer inquiries about ESG requirements relating to product compliance, human rights, governance, anti-bribery and Scope 3 emissions are increasing exponentially for many organizations, with some receiving between 80-100 requests each year. These requests are also increasing as private equity firms impose ESG requirements for acquisitions.  

For many organizations, ESG is breaking down siloes and facilitating more cross-functional communication as different departments become engaged in meeting ESG requirements. Even teams that are already making significant progress in ESG are creating partnerships with teams in different departments as they look for new ways to approach ESG. Despite that spirit of collaboration, EHS practitioners report that they are shouldering a considerable amount of the extra responsibilities for meeting ESG requirements, especially when it comes to data, since EHS frequently has existing data and a framework for collecting and analyzing it. However, there was general agreement that ESG is not simply the responsibility of EHS, and that it must instead have many different stakeholders throughout the organization. Different departments will have different types of data they collect, and they can tailor they way they present it to meet the requirements of diverse ESG stakeholders. 

ESG Risk and Business Resilience 

A session on understanding risk and resilience in ESG gave attendees a solid grounding in the whowhatwhenwhere and why of managing ESG. The discussion began by defining ESG as a collective consciousness for social and environmental factors with risk management and value opportunities. The who of ESG relates to stakeholders and responsibilities, with everyone from the board of directors to EHS, marketing, human resources, legal, investor relations and vendor management having significant roles to play. What refers to the broad selection of topics that fall within the scope of ESG, including, but not limited to, the following: 

Environment 

  • Greenhouse gas emissions (GHG) 
  • Energy management 
  • Sustainability management 
  • Ground and water pollution 

Social

  • Diversity and inclusion 
  • Health and safety 
  • Ethical supply chain 

Governance 

  • Executive pay 
  • Bribery and corruption 
  • Data protection 

The diversity of these concerns reflects the reality that different groups within the organization need to collaborate to meet the requirements of ESG. Many of the elements from each group might represent competing priorities, which means people need to understand the risks and financial opportunities that arise from being part of a larger mission that extends beyond their department. Waste reduction, for example, not only meets environmental requirements, but it also contributes to cutting costs, which enhances the overall value of the organization. Where is perhaps the easiest area to define. With climate change and social justice issues becoming prevalent concerns, ESG is a global priority in which every member of the international community is a stakeholder. The urgency of ESG leads to both when and why. Climate change, stakeholder demands and regulatory shifts mean that now is the time to act on ESG. 

A prominent theme during the session was the breadth and evolution of ESG. While environment gets most of the attention, social and governance elements are key to mitigating ESG risk. These elements broaden the application of ESG and the number of stakeholders. As a result, there is no single way to achieve ESG excellence. Every organization will need to find its own unique path. There are, however, some best practices for how to get started. Organizations should focus on developing their ESG program inventory, including reviewing existing policies, identifying risks and materiality in the short, medium and long terms, identifying resources, understanding internal processes and defining the internal team. The discussion also addressed the importance of stakeholder engagement and communication, advocating for messaging that is consistent, clear and informed by the overall ESG strategy. 

Updates to Global EHS Regulatory Content 

Making progress towards the goals of ESG requires regulatory enforcement. With regulations relevant to ESG increasing at a rapid pace, organizations need to understand what their obligations are. A session on some of the current updates for EHS regulatory content provided some much-needed insight into what to expect in 2022. 

There are two significant updates for environmental regulations in the United States, both related to chemical management. The Toxic Substances Control Act (TSCA) will broaden its comprehensive reviews for risk evaluations to include environmental justice issues. The Environmental Protection Agency (EPA) has issued five rules designed to reduce exposures and risk relating to PBT chemicals (persistent, bioaccumulative and toxic).

The other regulatory development relates to per- and poly-fluoroalkyl substances (PFAS), which are increasingly considered an urgent public health issue. These manmade chemicals have been used in industry since the1940s. Sometimes called “forever chemicals,” they are persistent in the environment and the human body and can aggregate over time. Research suggests that high levels of PFAS are carcinogenic and can be linked to increased cholesterol, decreased fertility and a host of other health problems. The EPA has implemented a roadmap to address the challenges of PFAS contamination. Some states, such as California, have banned PFAS in certain use cases. The EPA is expected to enhance reporting requirements for PFAS and to consider environmental justice more carefully in regulations. 

Additional regulatory action will include stricter emissions standards for vehicles, reducing hydrofluorocarbons (HFCs) by 85% by 2036 and a heat standard for indoor and outdoor work.

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