CSR Policy Update: H1 2024

Corporate Social Responsibility (CSR) continues to evolve, with significant policy updates in the first half of 2024 in both the EU and North America. These changes happen behind the scenes but their impact will be enormous. The primary goal of this article is to answer simple questions: What changes have happened? Do they apply to my company? Am I in trouble? What does it all mean? We take a view over the first 6 months of 2024. The most critical topics will receive their own deeper-review in a later post. Let’s dive in.

European Union (EU) CSR Policy Updates

1. Corporate Sustainability Reporting Directive (CSRD)

The CSRD now mandates a broader range of large companies and listed SMEs to report on sustainability. The European Sustainability Reporting Standards (ESRS), published in December 2023, will be the basis for these reports. These standards aim to enhance transparency and accountability in sustainability reporting, aligning closely with EU policies and contributing to global standardisation initiatives.

🧩 Impacted Companies: Large companies and listed SMEs across various sectors, including manufacturing, technology, and retail. Examples: Siemens AG (manufacturing and technology) Philips (healthcare and consumer electronics) & Volkswagen Group (automotive)

🧩 First Step for Hardware-Producing Companies: Conduct a gap analysis to identify current sustainability reporting practices versus new ESRS requirements. This involves assessing existing data collection methods, aligning them with the new standards, and training relevant staff on the updated reporting protocols.

2. Environmental, Social, and Governance (ESG) Integration

New policies emphasise the integration of ESG factors into corporate strategies and reporting. This includes requirements for climate-related disclosures and human capital management, reflecting a push towards greater corporate accountability in environmental and social impacts.

🧩 Impacted Companies: All publicly traded companies, with an emphasis on those with significant environmental footprints, such as manufacturing, energy, and automotive sectors. Examples: BASF (chemical manufacturing), TotalEnergies (energy) & BMW (automotive)

🧩 First Step for Hardware-Producing Companies: Implement an ESG risk assessment to identify and mitigate potential ESG-related risks. This includes integrating ESG metrics into corporate strategies and establishing robust data management systems for ESG reporting.

3. AI Regulation (AI Act)

The upcoming AI Act introduces stringent rules for General Purpose AI (GPAI) models, requiring detailed documentation and transparency measures to ensure ethical AI deployment. This regulation also imposes substantial penalties for non-compliance, aiming to mitigate the systemic risks associated with advanced AI technologies.

🧩 Impacted Companies: Tech companies, particularly those developing or using General Purpose AI models, including hardware and software producers. Examples: SAP SE (enterprise software), ASML (semiconductor equipment) & Ericsson (telecommunications).

🧩 First Step for Hardware-Producing Companies: Develop a compliance framework for AI systems, including documentation of AI model functionalities and limitations. Establish protocols for transparency and adherence to EU copyright laws.

4. EU Strategic Agenda 2024-2029

This agenda underscores the EU’s commitment to sustainability, with a focus on climate action, digital transformation, and economic resilience. The strategic plan includes measures to enhance corporate responsibility in achieving these goals.

🧩 Impacted Companies: All companies operating within the EU, with a focus on sectors like energy, technology, and transport.

🧩 First Step for Hardware-Producing Companies: Align corporate sustainability goals with the EU strategic agenda. Revise business strategies to focus on climate action, digital transformation, and economic resilience.

North America (USA) CSR Policy Updates

1. SEC Climate Disclosure Rules

The U.S. Securities and Exchange Commission (SEC) has introduced new rules for climate-related disclosures, requiring companies to include climate-related information in their financial statements. This move aims to provide investors with better insights into the climate risks and opportunities faced by companies.

🧩 Impacted Companies: Publicly traded companies, especially those in high-emission industries such as energy, manufacturing, and transportation. Examples: ExxonMobil (energy), General Electric (industrial manufacturing) & Ford Motor Company (automotive).

🧩 First Step for Hardware-Producing Companies: Develop and implement a robust system for tracking and reporting climate-related data. Ensure that climate-related financial information is integrated into existing financial reporting processes.

2. Human Capital and Board Diversity

The SEC is expected to release new disclosure requirements related to human capital management and board diversity. These changes reflect growing investor interest in the social aspects of ESG, pushing companies to be more transparent about their workforce and governance practices.

🧩 Impacted Companies: All publicly traded companies. Examples: Apple Inc. (technology), Procter & Gamble (consumer goods) & Johnson & Johnson (healthcare)

🧩 First Step for Hardware-Producing Companies: Conduct a comprehensive review of human capital management and board diversity practices. Collect relevant data and prepare for transparent disclosure in line with anticipated SEC requirements.

3. Federal Acquisition Regulations

New rules proposed by the Federal Acquisition Regulatory Council mandate climate disclosures for large government contractors, enhancing the government's role in promoting corporate transparency and environmental responsibility.

🧩 Impacted Companies: Large government contractors. Examples: Lockheed Martin (aerospace and defense), Boeing (aerospace) & Northrop Grumman (aerospace and defense)

🧩 First Step for Hardware-Producing Companies: Establish a compliance team to monitor and implement new climate disclosure requirements. Collect, verify, and report environmental data as required by the new federal guidelines.

4. Private Sector ESG Initiatives

Private sector efforts, led by investor coalitions like the Global Financial Alliance for Net Zero (GFANZ) and the Principles for Responsible Investment (PRI), continue to drive corporate action on ESG issues. These initiatives have been influential in shaping corporate policies towards greater sustainability and stakeholder engagement.

🧩 Impacted Companies: Companies across all sectors, with significant influence in those with active investor engagement like finance, technology, and energy.

🧩 First Step for Hardware-Producing Companies: Engage with key stakeholders, including investors, to understand their ESG priorities and expectations. Integrate ESG considerations into corporate strategies and adopt best practices for ESG reporting and performance.

General Trends

1. Increased Regulatory Focus

Both regions are experiencing heightened regulatory scrutiny on sustainability reporting and ESG disclosures. This trend is driven by a need for standardised, comparable, and reliable sustainability data.

🧩 Impacted Companies: Broad spectrum, especially those with substantial environmental and social impacts. Examples: Dow Inc. (chemical manufacturing), Nestlé (food and beverage) & Schneider Electric (energy management)

🧩 First Step for Hardware-Producing Companies: Develop internal audit processes to ensure compliance with new regulations and reporting standards. Regularly update compliance protocols to keep pace with evolving regulations.

2. Investor Influence

Investors are playing a critical role in pushing for more comprehensive and transparent ESG reporting. Their engagement priorities are shaping corporate strategies, encouraging companies to integrate ESG considerations into their core operations and long-term planning.

🧩 Impacted Companies: Primarily publicly traded companies across all sectors. Examples: Microsoft (technology), PepsiCo (food and beverage) & Unilever (consumer goods).

🧩 First Step for Hardware-Producing Companies: Strengthen investor relations by enhancing transparency in ESG communications. Provide detailed and accurate ESG reports that align with investor expectations and regulatory requirements.

The first half of 2024 has brought significant CSR policy updates in both the EU and North America. These changes underscore the growing importance of sustainability, transparency, and accountability in corporate strategies. Hardware-producing companies must take proactive steps to align with these new regulations, ensuring they remain competitive and meet the evolving demands of regulators, investors, and consumers.

❔How do you see the latest trends in CSR policy impacting on your business? We hear about the ‘fashion’ industry being impacted a lot, is the policy positively-impacting progress, or creating unnecessary work in your opinion? Share your thoughts in the comments.❔