ESG compliance represents a rapidly growing area of emphasis for businesses, their vendors and their contracts. The expectation for businesses to demonstrate their ESG responsibilities comes from regulators, customers and employees alike.
- 79% of consumers are changing their purchase preferences based on social responsibility
- Companies with strong sustainability programs had 38% better employee loyalty
- More than 90% of S&P 500 companies now publish ESG reports in some form.
This is more than a trend; it is a movement towards more responsible, transparent, and sustainable business practices.
So how can you better manage your vendors and contracts with ESG responsibilities and compliance front of mind?
This article examines the growing importance of ESG and the role Vendor and Contract Lifecycle Management Software can play in overall compliance.
The Growing Importance of ESG Compliance
In recent years, the global marketplace has seen a significant shift towards more sustainable and responsible business practices.
ESG compliance is no longer an optional component of corporate strategy. Global regulatory bodies have started to set stringent ESG criteria and demand transparency from businesses.
And non-compliance can have huge consequences.
In 2022, for example, The Securities and Exchange Commission (SEC) fined Goldman Sachs $4 million over the investment bank’s failure to implement and follow ESG policies and procedures.
Non-compliance or lack of transparency can adversely impact your business’s reputation, market competitiveness and financial standing.
The risks associated with poor ESG compliance can't be understated. Businesses that are managing multiple vendors and contracts, with little oversight or understanding of their ESG criteria, compliance levels or controls are most at risk.
VCLM Software for ESG compliance
Picture the world of Vendor and Contract Lifecycle Management (VCLM) software, a vital tool that serves the purpose of managing, optimising, and efficiently streamlining all phases of the contract lifecycle with vendors.
And at the intersection of VCLM and ESG, software plays a huge role in helping your business to:
- Digitise their vendor and contract records
- Centralise information and improve visibility
- Complete due diligence across their supply chain
- Check if vendors meet ESG standards
- Monitor vendor performance against ESG-related KPIs
- Automate compliance tracking
- Trigger risk mitigation activities as and when required.
By using VCLM software to enhance its approach to ESG, your organisation can demonstrate its internal controls to auditors, safeguard compliance and protect its reputation.
VCLM software features that support your ESG efforts
If your business isn’t using VCLM software to manage its vendors and contracts, it’s likely that you have limited visibility of what’s going on in your supply chain.
Achieving ESG compliance means understanding which vendors you rely on, for what activity, their compliance with regulations and how they are performing against agreed KPIs.
Depending on the maturity of your business, and how holistic its view is of vendors and their activities, you may need to take a step back.
Assess who your vendors are, what services they provide, if there are any ESG-specific clauses in their contracts and if you have defined any KPIs. If your business’s processes and record-keeping are fragmented, this information may take a while to find. But centralising it all is a key step to strategising your ESG practices.
VCLM software such as Gatekeeper provides:
- A secure, searchable vendor and contract repository to centralise all of your records
- A Global Search Engine that makes it easy to locate ESG contract clauses
- Automated alerts based on key dates such as document expirations
- A workflow engine that automates ESG compliance management.
Best Practice Workflows for ESG
Businesses can take ESG compliance head-on by using a dedicated ESG Best Practice Workflow within Gatekeeper.
Used in combination with the Vendor Portal - a dedicated area for all vendor onboarding and communication - this workflow allows businesses to seamlessly integrate ESG factors into their operations.
With this advanced feature, your business can:
- Access a pre-configured ESG form that mandates information vendors need to provide
- Automate the process of internal review once the vendor has completed the questionnaire
- View a populated Social Governance field once the ESG assessment is marked as complete
- Easily see key dates such as when the next ESG review is due for a vendor
- Perform regular ESG checks in an automated and efficient manner.
The Benefits of Using VCLM Software for ESG Compliance
Adopting VCLM software for ESG compliance can yield significant benefits for your business.
The combination of a vendor and contract repository, best practice workflow and Vendor Portal provides a transparent view of vendor performance against ESG criteria.
It aids your business in maintaining compliance with evolving ESG standards and regulations, provides an early warning system for any potential risks or breaches and helps to keep operations running smoothly throughout the entire supply chain.
Wrap Up
ESG compliance and VCLM software represent two pieces of the same puzzle: efficient and compliant business operations.
Your business can leverage VCLM software to manage its vendors more effectively, maintain ESG standards, and thereby ensure regulatory and stakeholder compliance.
The role VCLM software plays in managing ESG compliance is not just critical; it is transformational.
If your business is looking to bolster its ESG compliance, it should seriously consider leveraging the power of VCLM software. Contact us today to find out more.
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