ESG and Building Trust in Today’s Enterprise - Image by Gerd Altmann from Pixabay Environmental, social, and governance (ESG) issues have become more important now than ever. The record-shattering heatwave throughout Europe and alarmingly high temperatures recently impacting the US have further demonstrated the need for companies to prioritise ESG. Today, global organizations are increasingly committing themselves to ESG initiatives to ensure they are paving a positive path toward sustainable growth with consideration for the environment and society.

As climate change pushes temperatures to profound levels worldwide, ESG commitments will be imperative, particularly the focus on the environment. They will also play an increasing role in building trust between businesses, companies, and their customers.

Icertis commissioned a study with Economist Impact to uncover what defines trust in business relationships and what companies can do to build the trust necessary to achieve their sustainability goals. The report on Building Trust in Business Relationships found respondents felt that they were doing well overall. Nearly 60% said they outperformed peers on ESG strategy. Two-thirds (64%) felt they were ahead of competitors on supply-chain visibility and transparency.

However, the study discovered disconnects when it came down to implementing an ESG strategy. Three quarters (75%) of respondents recommended employing dedicated ESG compliance staff as a best practice, yet only 15% had done so. Similarly, 72% of respondents recommended adopting new technology to track progress or enable reporting processes, yet only 22% had done so. More significantly, 70% of respondents believed in aligning ESG goals with overall business strategy, but only 43% had implemented such steps.

Building trust in relationships

Another missed opportunity to build transparency and trust is found in contractual relationships. Business executives have yet to harness the power of their contracts to build and maintain trust, especially around ESG reporting. For instance, only a third of respondents had embedded ESG obligations into partner contracts. Only 5% had terminated a contract based on misalignment with ESG goals by a business partner.

Most survey respondents see the visibility and transparency of supply chains as a means to achieving sustainability targets and building trust in their relationships with business partners. But as the study revealed, there remain gaps between the steps executives see as enhancing trustworthy business relationships and their organization’s efforts.

With ESG compliance becoming essential to businesses and society at large, companies must do more to cultivate how business partners and customers alike perceive their brand’s trustworthiness and commitment to ESG goals and ideals. And, with ESG reporting becoming more central to a growing number of companies, addressing ESG within contracts and complying with those commitments will help generate trust between businesses while simultaneously building customer loyalty.

Where Companies Can Do More

Proactively addressing ESG within contracts can drive trust in business relationships in the following ways:

  • Embed the parties’ ESG commitments into contracts – Businesses who value ESG are utilizing contracts to forward this agenda. This includes ensuring the clauses that address environmental or sustainability covenants, representations, or warranties are present in the agreement. The contract can also have obligations related to reporting and auditing requirements to assist these companies in monitoring these ESG efforts.
  • Utilize contract intelligence to surface existing contractual obligations – Leverage AI-powered contract intelligence to digitally transform and gain unique insights into mission-critical contracts. Contract intelligence allows businesses to structure their contract data and connects that data to the systems they touch to ensure supplier terms and conditions around environmentally sustainable business practices remain in compliance.
  • Improve supply chain visibility and transparency using advanced technologies – Historically, buyers do not have visibility beyond their tier one suppliers. Those suppliers have been reluctant to share details of their own sourcing strategies for fear the buyer will circumvent them. Using Blockchain technology, organisations can enable all supply chain participants to upload their supplier contracts to a restricted consortium. It is then possible to extract critical ESG information without divulging sensitive pricing information.
  • Hire dedicated ESG compliance staff – ESG initiatives cannot be integrated successfully without a dedicated ESG compliance team or external consultants building the strategy and ensuring oversight. Dedicated compliance staff can help facilitate contractual obligation fulfilment on ESG initiatives and ensure that commitments are met with business partners. Some organisations may opt to engage with external consultants to support ESG initiatives.

In conclusion

The successful implementation of ESG initiatives remains a critical concern among enterprise leadership. Fortunately, building healthier and more trusted relationships can be addressed in the contracts that memorialize these business bonds. Ensuring contractual obligations address a company’s commitment to ESG will allow these companies to walk the walk among employees and stakeholders and successfully build customer loyalty.

IcertisWith unmatched technology and category-defining innovation, Icertis pushes the boundaries of what’s possible with contract lifecycle management (CLM). The AI-powered, analyst-validated Icertis Contract Intelligence (ICI) platform turns contracts from static documents into strategic advantage by structuring and connecting the critical contract information that defines how an organization runs. Today, the world’s most iconic brands and disruptive innovators trust Icertis to fully realize the intent of their combined 10 million+ contracts worth more than $1 trillion, in 40+ languages and 90+ countries.

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Bernadette Bulacan
Bernadette Bulacan is a frequent speaker regarding the digital transformation of corporate legal departments and global enterprises. As Chief Evangelist for Icertis, the recognized leader in contract lifecycle management, she is charged with sharing contract management best practices with legal and contracting teams and evangelizing the use of innovative technologies like AI/ML and blockchain. Prior to Icertis, Bernadette was a co-founder and Assistant General Counsel of Serengeti Law, which created e-billing and matter management platform, Serengeti Tracker (acquired by Thomson Reuters.) She has held leadership roles at Thomson Reuters and QuantAI, an intellectual property AI analytics start-up. In recognition of her significant contributions to the development of commercial and contract management, Bernadette was recently named a 2021 Fellow of World Commerce and Contracting. She was also recognized as one of the 2020 Women of LegalTech by the American Bar Association. Bernadette advised start-up technology companies at Graham & Dunn, a Seattle firm and Venture Law Group, a Silicon Valley firm. She received her undergraduate degree from Yale University and her law degree and LL.M from the University of Washington.


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