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North American businesses feel exposed to ESG risks

Data shows that while businesses in North America are increasingly aware of and feel unprepared for the risks posed by a failure to comply with new ESG-related requirements, in the US this is particularly the case for the biggest and the smallest businesses surveyed (32% under US$1m and 35% for US$1bn plus). 

The direction of travel in some US states is in direct contrast to the ESG landscape in Europe, where there is a considerable degree of convergence between nations when it comes to ESG regulation and attitude towards ESG more broadly.  

Differing approaches to ESG regulation pose problems for multinational businesses to do the ‘right thing’, as it is growing more complex by the day to ensure operations comply with ESG regulations in parts of the US whilst simultaneously complying with ESG regulations in Europe and the rest of the world. 

While many businesses are embracing their duty to help protect the environment and are taking bold steps to uphold this responsibility, there is a fine line between promoting work intended to minimise the size of a business’s carbon footprint and simply greenwashing – over stating green credentials or actions.  

Greenwashing can have a significant impact on the reputation of a business, as legal action combined with social media pressure can prove particularly damaging. The threats associated with greenwashing serve as an important reminder to businesses about the need to accurately report on the impact that any initiatives aimed at reducing carbon emissions have made.   

The approach adopted by the EU will no doubt spread to other jurisdictions, consequently exposing businesses that specifically market their products as being environmentally friendly open to a significant degree of risk. This is an instance where the value of D&O liability insurance is undeniable.