A clear trend has emerged over the past several years: Consumers, investors and policymakers are expanding their expectations of the private sector. Interested stakeholders increasingly want reassurance that companies are avoiding forced labor, are transparent about the environmental impact of their value chains and are engaging in good governance practices, among many other factors. As a result, those tasked with implementing compliance training throughout their organizations have more responsibilities than ever.
As with the compliance measures we think of as “traditional,” an effective environmental, social and governance (ESG) strategy depends not only on policies, but on the people. Compliance teams should invest in ESG training for the whole value chain, build a culture that prioritizes ethical business and carry those efforts beyond required training.
Policies and pronouncements from the C-suite are meaningless unless they create concrete change throughout the organization by educating employees, suppliers, subsidiaries and agents about proper conduct and potential risks. For example, human rights violations could result from a lack of awareness by procurement personnel or from a third party intermediary’s unscrupulous business practices.
Genuine ESG progress depends on quality training that directly addresses human rights, environmental, corruption and governance risks and red flags. To truly be effective, training must be delivered not only to employees but also to contractors and affiliated third parties, from first-tier suppliers to the very ends of a company’s value chain.
Consensus on the Need for Effective ESG Training
Globally, there is a growing consensus that effective ESG training is critically important for compliance, given increasingly robust regulatory requirements and the focus on multinational company best practices.
The U.S. Department of Homeland Security strategy for implementing the Uyghur Forced Labor Prevention Act, signed into law in 2021, places particular emphasis on training and states that importers must provide training to their employees or agents responsible for selecting suppliers, including on risks of forced labor identified by the risk assessments.
In compliance with the U.K.’s Modern Slavery Act, companies should track and disclose information related to training about slavery and human trafficking available to employees. Meanwhile, European Union guidance on avoiding forced labor endorses enhancing training for staff and suppliers in high-risk areas.
The Organization for Economic Cooperation and Development advocates for providing effective ESG training to workers, suppliers and other business relationships, while the United Nations Principles for Responsible Investment encourage ESG training for investment professionals.
We know that effective training is essential in other aspects of corporate compliance. Companies have seen tremendous returns from training professionals and suppliers on issues including anti-bribery, anti-money laundering, antitrust and sanctions compliance. But ESG presents new challenges as the landscape continues to evolve, and many companies are uncertain about which training is necessary or valuable. Notwithstanding the fact that ESG laws and best practices are developing by the day, there is considerable agreement about what ESG training should cover.
What (and Who) Should ESG Training Include?
Companies across different industry sectors may face their own unique ESG risks and opportunities. An enterprise-wide ESG risk assessment can be a helpful starting point for training-related decisions, as training should target the most salient risks in a company’s value chain.
For most organizations, it makes sense to train employees and third parties on a number of baseline ESG issues, including:
- What ESG is and its impact on the business.
- ESG policies and procedures.
- Human and labor rights, including worker health and safety, worker rights, forced/child labor and slavery.
- Environmental risks and mitigation strategies.
- Climate issues and risks.
ESG training should be prioritized for employees in high-risk roles, decision-makers and gatekeepers, those likely to spot ESG red flags, such as inspectors or procurement personnel, and all managers and supervisors.
With respect to third parties, companies should also ensure training is provided to anyone in the value chain that conducts business on the organization’s behalf, all high-risk third parties, first-tier suppliers and those working in regions or industries of concern, such as textiles, extractives, agriculture and forestry.
What Makes ESG Training Effective?
Effective ESG training should:
- Hold learner’s attention to build engagement and ensure learner retention.
- Cover relevant topics.
- Provide concrete examples.
- Motivate learners to behave ethically on behalf of the company.
ESG training should tell a story of how companies, their employees and their business partners can take direct action to improve the communities in which they operate. Training should provide a persuasive case for why ESG issues are important, responsibilities of learners and how they can contribute, the consequences for inaction and where to turn for help.