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Blog | Thursday February 20, 2025

Navigating Change: How Business Leaders Can Respond to a Changing Policy Environment

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The new US administration has been in office for 30 days, and changes have come fast and furious, many of them relating directly and indirectly to sustainable business. The public response from business has been minimal thus far, despite the fact that many of these policy pronouncements and executive orders have created significant barriers to existing company commitments.

Some of the orders take direct aim at action on climate, diversity, international cooperation, and sustainable development. High profile moves including the withdrawal from the Paris Agreement, apparent shuttering of USAID, non-enforcement of the Foreign Corrupt Practices Act, and removal of all activities—and language—related to “DEI” have transformed the landscape.

Some of these measures seek to overturn well-established laws and regulations that have been in place for nearly a half century or more, noting that many have been challenged in the courts. This comes at the same time that the European Union’s “Omnibus” is about to appear, with the likely impact of reducing and/or delaying implementation of the world-leading regulatory architecture on ESG in the name of deregulation and competitiveness.

Put simply, there is now immense pressure on companies to diminish or abandon their commitments, de-emphasize climate, diversity, and human rights, and drop public advocacy on these subjects.

This presents a destabilizing moment for companies that remain convinced that sustainability is a way to deliver long-term value, ensure resilience, and innovate.

Through discussions with leaders at many of our member companies over the past month, we are hearing some common themes:

• Changes in direction from Washington present three interrelated challenges: policies are being reversed; funding and incentives are being withdrawn, and there is intense political pressure on companies to reverse their policies and practices.
• Corporate sustainability leaders are digesting the remarkable depth and breadth of recent executive actions. Many leaders expected a “rollback,” and instead have seen an attack. While withdrawal from the Paris Agreement was expected, the removal of well-established, long-standing laws and regulations such as the Foreign Corrupt Practices Act, and longstanding anti-discrimination requirements, are seen by many as departing from the kind of policy environment that enables a stable, predictable environment for business.
• With the European Union’s Omnibus expected to be produced in March, sustainability leaders are also looking at Europe with unease, with the potential for rollbacks or delays on the CSRD and CSDDD, for which companies have been preparing assiduously.
• Regardless of these abrupt changes to the policy and political context, fundamental drivers and stakeholder expectations for sustainable business remain powerful and relevant.
• Even as many companies have quietly–or quite publicly in some cases–reduced their commitments and sustainability communications, most maintain that they continue the lion’s share of the work. In doing so, they are refocusing on business relevance, overall strategy, and enterprise risk management.

Many sustainability leaders inside business also have expressed the concern that their companies are responding to recent developments with short-term thinking that bring negative long-term consequences. Some fear “anticipatory obedience” is diluting business autonomy and judgment, with lasting damage. They also fear that with the withdrawal of reliable policy and economic incentives, the private sector will be left to carry the burden on key issues on its own, resulting in increased costs and decreased predictability.

How should companies approach this moment? Here are some ways to navigate a period of uncertainty and challenge:

• Stay attentive to the underlying reasons sustainable business is important. Despite short-term political pressures and uncertainties, boards and business leaders can only effectively steward their companies if they stay resolutely focused on the strategic implications of changes that will impact them when the current political cycle passes. The mantra of “focusing on the fundamentals” remains important, and many companies are continuing to embrace this.
• Prioritize a sustainability agenda that addresses the needs of a skeptical public. There is little doubt that many aspects of the sustainability agenda have failed to resonate with much of the public. Sustainability should take greater account of the economic opportunities, livelihoods, and risk management that can deliver better outcomes for the public. The “new narrative” that so many have called for should do a better job of articulating how the average person can benefit from sustainable business.
• Decide what’s non-negotiable. Businesses and business leaders have faced pressure to abandon existing principles and commitments. In our view, this is not, well, sustainable. Every company, and every business leader will need to determine what “red lines” they are not willing to cross. Policy debate is a healthy and necessary part of a well-functioning society, and businesses will undoubtedly face moments when they will be expected to “find their voice” about their values and principles, as I noted in my recent chat with New York Times reporter David Gelles.

The abrupt policy changes coming from Washington in no way negate undeniable realities facing business. Challenging “DEI” (without defining the term in many instances) does not negate the fact that American and European societies are growing more diverse by the day, which means companies should be focused on inclusion. Reversing steps in the US and Europe to advance the energy transition should not mean that companies turn away from the real costs and risks of accelerating climate change, or the massive innovation opportunities for companies that meet this challenge. Withdrawing from international efforts to address shared challenges, as slow and imperfect as they may be, only creates more uncertainty and delay that will cost companies dearly; does nothing to stabilize the global economy, and detracts from important efforts to improve public health, address migration, and stabilize the international system.

Regardless of the currently unfavorable political climate, no business leader can disregard the ongoing reasons why sustainable business delivers value, future-proofed companies, and stability. Turning away from these realities presents risks for business and society. Leadership comes from people who are able to see past daily developments to stay focused on strategic needs. That brand of leadership is needed now, more than ever.

Reports | Thursday February 20, 2025

Charting the Course: Navigating the Climate Transition Plan Landscape

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Companies are showing greater ambition in setting climate targets, yet a significant gap exists between targets and demonstrated progress. Climate Transition Plans (CTPs) are turning into the key medium for companies to demonstrate how they intend to reach their targets and to disclose progress

While there is mounting pressure on the private sector to publish CTPs, the ecosystem of frameworks, sectoral guidance, and regulatory requirements is complex. Consequently, businesses need more clarity so they can craft robust CTPs that meet stakeholder expectations.

BSR’s new report provides companies with a better understanding of the climate transition landscape, including awareness around existing regulations and frameworks as well as challenges business faces in complying with these regulations. With increased clarity, companies will be better equipped to navigate the complex and rapidly evolving landscape and develop credible CTPs.

Contents

• Three Questions about Climate Transition Plans
• From Soft Law Frameworks to Hard Law Requirements
• Focus on Key Climate Transition Plan Elements
• Connecting People, Nature, and Climate
• Conclusion

Blog | Wednesday February 19, 2025

Advancing Supply Chain Sustainability through Collaboration: Lessons from Action for Sustainable Derivatives

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Case Studies | Tuesday February 18, 2025

Conducting an ESRS and IFRS Gap Assessment

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Introduction 

BSR worked with a global technology company to conduct a gap assessment against the European Sustainability Reporting Standards (ESRS) and International Sustainability Standard Board's (ISSB’s) International Financial Reporting Standards (IFRS). This project enabled the company to prepare to report in accordance with the requirements of the EU Corporate Sustainability Reporting Directive (CSRD) and ISSB and to plan for short-, medium-, and long-term actions to close existing disclosure gaps. 

Background 

The sustainability field is shifting from voluntary to mandatory reporting standards. The CSRD provides rules on corporate sustainability disclosure within the EU and mandates compliance against the European Sustainability Reporting Standards (ESRS). Under the CSRD, large companies operating in the EU and EU-listed companies, as well as large companies with securities on EU-regulated markets, are obliged to report on all identified material topics based on a double materiality assessment. ISSB's IFRS Sustainability Disclosure Standards aim to equip investors with globally comparable, decision-useful sustainability information. Various national jurisdictions have also decided to adopt ISSB standards within their respective regulations or are consulting on their introduction. 

Given the evolving sustainability reporting landscape, a global technology company headquartered in the US identified the need to assess its preparedness for upcoming mandatory reporting requirements. Non-compliance with mandatory reporting regulations, such as those imposed by CSRD, could lead to fines and reputational damage, while failure to report in a manner that is comparable to international peers could impact reputation and limit a company's access to capital in the international markets.

BSR's 30+ years of experience with sustainability reporting and approach to assessing disclosure gaps resonated with the company's wish for a detail-oriented, thoughtful process. To ensure compliant and robust reporting practices, BSR helped the company understand which requirements are applicable to them based on their double materiality assessment, and the gaps between their current reporting practices and the desired future state. 

BSR’s Response

BSR worked with the company to assess all applicable general and topical ESRS standards, as well as IFRS S1 and S2 (focusing on climate). This aligned with the results of the company’s Double Materiality Assessment, which was also led by BSR as a separate project. Using BSR’s ESRS and IFRS gap assessment tools, which provide a detailed comparison between reporting requirements and relevant disclosures, BSR reviewed all publicly available sustainability information and identified no, partial (where some revisions were necessary to comply), and full (where the disclosure was missing) gaps in relation to all applicable ESRS and climate-related IFRS standards. The team then provided a summary of gaps per standard and developed recommendations and next steps to start the planning process for compliance with CSRD and IFRS. 

Impact 

The project allowed the company to take a forward-looking approach to reporting. Aside from identifying and prioritizing disclosure gaps, the information also highlighted potential areas where process changes could be considered. As a next step to this work, the company is working to assign different topical areas to appropriate departments, to work on closing data gaps and implementing necessary process changes.

Conclusion 

As the sustainability field solidifies mandatory reporting requirements, gap assessments will be critical to preparing for compliance. While CSRD is a regulatory requirement for all large companies operating in the EU and all EU-listed companies as well as large companies with securities on EU-regulated markets, compliance with IFRS sustainability disclosure standards may be requested by various investors in the future. To ensure consistency and the achievement of desired outcomes, all teams (finance, risk, procurement, sustainability, etc.) will need to collaborate closely and apply the same level of rigor to both financial and sustainability reporting. It is important for companies to invest in a long-term vision, prioritize, and focus on a mindset shift toward holistic approaches to compliance while not losing sight of broader sustainability strategies. 

Get in Touch 

Interested in learning more about BSR's approach to voluntary and mandatory reporting? Please contact BSR's Reporting team. 

This case study was written by Verena Nüchter and Anna Zubets-Anderson. 

Audio | Thursday February 13, 2025

A Year of Uncertainty: Maintaining Progress Amidst a Battle of Ideas

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Following his recent blog about the “Ten Big Questions Facing Sustainable Business Leaders in 2025,” BSR President and CEO Aron Cramer chats with David Stearns about the EU Omnibus package and its potential impact on regulatory requirements, why sustainability goal setting remains a valuable exercise in an environment of political pushback and uncertainty, the future of COP (with or without U.S. involvement), and why sustainable business must shift the language it uses to describe—in tangible ways—its connection to improving people’s lives and wellbeing.

Blog | Wednesday February 12, 2025

Healthy Planet, Healthy People, Thriving Businesses: Four Steps to Center Health Equity in Climate Action

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People

Mario Abreu

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Audio | Thursday February 6, 2025

A Conversation with Mario Abreu, Group VP, Sustainability, Ferrero

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Mario Abreu, Group VP, Sustainability at Ferrero chats with BSR Managing Director, Transformation Christine Diamente, and host David Stearns about the cross-functional role of sustainability at Ferrero, how he maintains a focus on ambition, and why the nexus between climate change, people, food, and planetary limits should be humankind’s top priority.

Blog | Thursday February 6, 2025

CSDDD: Using a Risk-Based Approach to Address Human Rights and Environmental Impacts in Supply Chains

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In many ways, the EU’s Corporate Sustainability Due Diligence Directive (CSDDD) effectively codifies the UN Guiding Principles on Business and Human Rights (UNGPs) and the OECD Due Diligence Guidance for Responsible Business Conduct into law. It includes one of the most critical concepts from those voluntary standards: the expectation that companies take a risk-based approach to addressing upstream and downstream human rights and environmental impacts across the value chain, rather than focusing on impacts associated only with direct business partners (i.e., Tier 1), which tend to be less severe.

With good reason, companies are asking practical questions regarding the feasibility of assessing impacts across entire networks of direct and indirect business partners. Fortunately, these are the same questions the business and human rights field has been grappling with for more than a decade, and practitioners have made significant progress in developing practical ways of fulfilling such a challenging requirement.

Risk-based due diligence concentrates less on following the chain of business relationships tier by tier and more on high-risk value chain segments where adverse impacts are more likely. In practice, this means that when companies are determining where to conduct an impact assessment, they can skip a Tier 1 relationship and jump directly to the main source of the human rights or environmental impact, e.g., at the extraction site of a key commodity, which has well-documented concerns regarding discharge of chemicals into local water sources.

The CSDDD’s risk-based approach, which aligns with the UNGPs, OECD Guidelines, and the Corporate Sustainability Reporting Directive (CSRD), involves mapping activities across the supply chain, identifying areas of risk, and assessing existing efforts to mitigate impacts. Crucially, relevant stakeholder engagement informs each phase of the approach, with the CSDDD articulating a clear expectation for meaningful engagement with stakeholders—including rightsholders—throughout each step of the due diligence process.

Mapping Activities Across the Supply Chain

In CSDDD Article 8.2.a., the first step entails an actual mapping of a company’s “chains of activities,” (CSDDD Article 3.1.g) which means not just Tier 1 relationships, but understanding the broader context related to the supply of raw materials, products, or parts of products that are connected to a company’s Tier 1 relationships. For example, if a company produces electric vehicles, then there is an expectation to map (and eventually assess and engage, as described below) down to the lithium and cobalt extraction sites, where typically the greatest human rights and environmental impacts lie.

Stakeholder engagement should inform the mapping exercise and can mean different things in the supply chain context, depending on where in the supply chain such activities are being conducted. Where direct stakeholder engagement is not possible (e.g., direct interviews with workers at the cobalt mine), CSDDD allows for engagement by proxy, such as with representative NGOs or civil society organizations, academics, or other types of experts who have a good understanding of human rights and environmental impacts on the stakeholders and rightsholders.

Identifying Areas of Risk

The second step involves conducting a high-level risk analysis to help prioritize due diligence efforts. Many companies deploy a mix of sources to apply risk categorization to their extended supply chains, considering factors such as country risk, product/service/commodity risk, and more. These often rely on a combination of publicly available indices as well as fee-based databases and involve qualitative and quantitative considerations.

Stakeholders should also be consulted to offer insights on the analysis, reflecting on both the risks themselves and the prioritization of risks. Such risk analyses are usually done on a periodic basis (e.g., once a year), but the best approaches can factor in both real-time and future-scenario considerations, such as a war or an adverse climate event happening in a sourcing country not previously identified as high risk.

Assessing Existing Efforts to Mitigate Impacts

The third step considers whether existing management systems are robust enough to manage the identified impacts and whether existing information can be leveraged to paint a more complete picture. For example, if a buying company uses a human rights or environmental impact assessment report of a supplier closely connected to a particular supply chain, then the buyer obtains a clear understanding of the actual and potential human and/or environmental impacts of a particular supply chain far upstream (CSDDD Article 8.4). This helps prioritize buying companies’ and suppliers’ resources, avoids repetition, and leverages the efforts of peers and other stakeholders.

Together, these three steps in the risk mapping process help answer the very important question of where to begin: by identifying the activities of the company’s chain most at risk and providing an informed set of priorities. Once this exercise has been completed, the company should have a much clearer sense of where to focus its energy and resources when conducting human rights and environmental assessments, focusing on the areas of greatest human rights and environmental impacts—as confirmed through stakeholder engagement—and applying a severity and likelihood analysis as informed by the UNGPs.

Identifying Human Rights and Environmental Impacts through Multi-Stakeholder Initiatives

In addition to direct stakeholder engagement, multi-stakeholder initiatives offer a way for companies to identify actual or potential human rights and environmental impacts deep in supply chains in a way that individually may otherwise be too burdensome. Such initiatives can also serve as critical proxy representatives, with the added benefit of potentially reducing engagement fatigue of suppliers, NGOs, or other groups receiving numerous requests from companies across supply chains. Depending on the nature of the initiative, they may help companies aggregate resources and leverage to address a particular issue, achieving greater positive impact in a given sector over time than any single company could acting in isolation.

One such example is Action for Sustainable Derivatives (ASD), a collaborative initiative co-facilitated by BSR and partner organization Transitions, which conducts collective grievance monitoring on behalf of its members. It also organizes monthly discussions with key NGOs to align on priority concerns, deepen mutual understanding of details and root causes of grievances, and agree on recommendations for the sector to address the impacts.

A Pragmatic and Logical Roadmap

Mapping, identifying, and assessing human rights and environmental impacts in upstream and downstream value chains is a comprehensive task that should not be underestimated, and makes up the first major step in an overall due diligence process, before those impacts can be remedied and/or mitigated. This is not only due to the breadth and depth of most corporate supply chains, as issues like a lack of leverage, lack of transparency and traceability, and more, exacerbate these challenges. Regulations requiring companies to take these actions have increased significantly in recent years, and failing to take the necessary steps can have legal, reputational, and financial consequences.

Fortunately, CSDDD provides a pragmatic and logical roadmap that acknowledges these challenges and encourages companies to seek out solutions through a methodical approach and active stakeholder engagement. Such collaboration and engagement with stakeholders is explicitly called out in the CSDDD and includes civil society, NGOs, national human rights and environmental institutions, defenders, and more. Each can play a role in the identification, mitigation, and remediation of human rights and environmental impacts.

If you would like more information on meeting the CSDDD’s expectations, please reach out to BSR’s Human Rights team.

Reports | Tuesday February 4, 2025

Centering Health Equity in Climate Action: A Toolkit for Businesses

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As the world experiences escalating physical and chronic effects of climate change, including intensifying wildfires in California, extreme cold across the United States, and the increase in floods, hurricanes, and droughts globally, the well-being of people, the planet, and businesses is increasingly affected. Businesses must recognize the interconnection between business health, human health, and environmental health, as all three are mutually co-dependent for long-term prosperity. 

When businesses integrate promoting health equity into their climate and nature strategies, they create co-benefits that strengthen business resilience, support vulnerable communities, reduce healthcare costs, and promote a healthier and more prosperous society. 

In this toolkit, Centering Health Equity in Climate Action (CHEC), a BSR collaborative initiative, demonstrates how climate change negatively impacts the health of vulnerable communities and, in turn, affects businesses. Intended to help companies on their climate and health equity journey, the toolkit provides real-life examples from CHEC members who have successfully integrated health equity into their existing sustainability initiatives. 

The following four practical steps are expanded upon in the toolkit and offer businesses a path forward to centering health equity within their climate strategies:

• Understand the company’s climate and health equity impacts
• Start with the most impacted in the value chain
• Measure, manage, and monitor
• Embed climate and health equity throughout the organization