Navigating the complex compliance landscape
In the face of shifting and ever-changing compliance requirements, new e-reporting requirements, and new types of control technologies; the compliance management landscape is becoming an increasingly complex and challenging one to navigate.
ESG shapes new compliances
ESG has moved from the margin to the centre-stage and ESG compliance is fast becoming policy imperative. Investors and other stakeholders are demanding greater transparency and accountability in the functioning of businesses. However, there are many considerations to be addressed by companies – from complying with different local regulatory laws for different countries, different compliance risks for different processes, knowing what data is where, to deciding whether or not to pursue legal appeals against a heavy-handed fine. Regulations are on the rise, and it’s becoming increasingly difficult for businesses to keep up. It was found that making sure a product is compliant with regulation and that it stays compliant – is one of the top three concerns for business owners.
Audit fatigue is real
It is not surprising, then, that audit fatigue has risen to become a real issue. A complex, confusing environment, and compliance management fatigue can cause a frustrating bottleneck for organisations trying to grow with speed and agility. It can also be a costly affair – in terms of finance as well as time and effort.
For companies working with buyers in the EU, it has gotten more complicated as compliance standards vary, depending on the local regulatory laws of each country. There is a high level of national variation from one member state to another, and the problem for organisations is working out which of those natural variations actually matter. For this, many experts have suggested that when in doubt, an organisation should adopt the strictest approach and apply it to all EU operations. This approach is very simple — once the strictest approach has been identified, an organisation will be compliant everywhere. However, there is a disadvantage as well; because a company is adopting the strictest compliance audit, it’s leaving a gap between what it’s doing and the minimum that it has to do to achieve compliance management in those EU member states that have lower standards on that issue.
In favour of EPR
At the same time, Extended Producer Responsibility (EPR) is becoming a hot topic in the business world. Under EPR , manufacturers are responsible for the collection, disposal and processing of their product or packaging. In 2019, The Indian Ministry of Environment, Forest and Climate Change (MoEFCC) announced that they prepared the national framework for EPR. The laws make it mandatory for companies to collect-back and recycle their plastic.
Some countries like France, Germany, and the United Kingdom—are going above and beyond the already robust recycling regulations across the European Union with EPRs.
The EU Parliament has also recently backed a legislative initiative paving the way for a new EU directive on Corporate Due Diligence and Corporate Accountability.
As part of this initiative, lawmakers called for the urgent adoption of an EU-wide regulation that will require companies to identify, address, and remedy the environmental, social and governance (ESG) risks in their supply chains.
The current roadblocks
ESG business risk concepts and compliances are still evolving and currently lack global standards and framework. This makes it increasingly challenging for companies to assess. Without global standards, many ESG compliances overlap in terms of assessment. Multiple regulatory compliances are working towards the same goals of emissions or fair trade and so on, however, companies often have to undertake multiple audits for similar ESG standards which can be a burdensome task. At Snowkap, we are working towards a common assessment program for companies to manage their compliances more efficiently through the platform. Through a common questionnaire based on the main ESG standards, brands will know where they stand, and how they can be where they need to be.
The regulations that govern ESG are still nebulous and a work-in-progress. Regulatory compliance requirements vary from business to business, but every organisation can take steps to adapt to changing regulations, improve risk management, avoid bottlenecks, and optimise audits. Here are a few of them:
Digitization of the data
Digitization of the audit data can improve efficiency, streamline processes, and engage the appropriate stakeholders when necessary to help manage compliance requirements more holistically. Digitization would help analyze and use the growing volume of information to deliver high-quality audits and allow auditors to put greater emphasis on risk identification and business insight. The more digital your business data is, the better and continual the assessment, ensuring a higher compliance quality for your business. Digitization would also save the auditor more time on preparing audit reports allowing him/her to spend more time on aspects that add value to the audit process.
Digitization through sustainability reporting tools such as ESG solutions can help companies achieve a state of continual compliance, where risk and compliance requirements are met and then maintained on an ongoing basis. This approach can also reduce compliance fatigue by improving visibility, collaboration, and efficiency throughout the organization to help everyone manage risk and drive growth together.
Implementation of quality management tools
With quality digital management tools that are secure and efficient, organisations can achieve the role of continuous credible assessments through technology rather than annual assessments. Continued regulatory compliance gives businesses confidence that they are complying with all applicable laws, regulations, and directives whether local or international. It is also crucial to maintain a strict overview of constantly evolving regulations.
Improving your traceability
Traceability is undeniably a key element in an effective compliance audit strategy. Since compliance depends on sharing facts throughout the entire supply chain, it can be a complex task for many companies. Companies that work with a vast number of suppliers can have a difficult time sharing data with their suppliers, and making sure that they are compliant. Transparency and clarity is imperative for all parties in the supply chain, as a route to faster and more productive applications, and as a way to avoid breaches in regulations.
The choice of compliance is fundamental, especially with so many to choose from and so many demanded by the customers. Implementation of compliance needs to be a part of the work process rather than being minimal in approach. It is extremely helpful to have the support of an expert partner who can help you navigate the complex pool of mandatory compliances and client expectations. A competent compliance partner or a partner ecosystem will guide you through the landscape strategically to assess, design, implement, and evaluate the effectiveness of your regulatory compliance program
As the ESG business regulations evolve and become more stringent, companies and industries are breaking out of their silos to work together and design a more standard framework that would make it easier for all parties. With increasing pressure to adhere to the ESG standards, businesses are becoming transparent. In the process, technology has a vital role to play in capturing the necessary data, and producing efficient audit reports