It was so good to meet customers, customers-to-be, colleagues and the wonderful ethics and compliance community at the annual SCCE conference in Phoenix this week. Also, a great opportunity for me to get together with some of our US-based Vaulties – which is nothing but a treat! Here are some of my key takeaways from this year’s conference.

Compliance 2.0 is here

Today, the world of ethics and compliance is all about integrity and ESG. Even in a down market and maybe especially in a down market, the stakes were never higher and compliance leaders now play a crucial role in safeguarding their company, culture, reputation, and resilience.

The new generation

A new generation of ethics leaders has entered the market and they’re asking: “where’s my tech?”. This is an underserved, overlooked corner of the corporate from a technological standpoint. We have a community of professionals carrying out mission-critical work on clunky, manual, antiquated, siloed systems and running on very poor data & analytics capabilities. They deserve better, and now they know it.

Vault Platform stood out at the conference with digital solutions, anticipating the community needs of tomorrow while building the product of the future.

The tailwinds are blowing strong

The DOJ crackdown on corporate misconduct and its recent announcement of policies including individual & executive accountability shift the focus on integrity and compliance in a dramatic way. As one official said during the conference, “this is the moment for the Chief Compliance Officer to shine. The government is powering you to do so”.

A personal win for me: I sat in the audience for one of the sessions, and there was a great panel on stage discussing future trends and leadership in compliance and I realized that everyone on stage is a Vault customer! ❤️

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The post The Dos and Don’ts of ESG appeared first on Vault.

In this blog post, we take a look at how and why you should consider the full supply chain when building and improving your ethics and compliance strategy.

The Global Picture

Today, the vast majority of enterprise and mid-market businesses have global supply chains, which adds an extra level of complexity when it comes to monitoring their wider impact on the environment and the communities in which they operate. This broad, complex landscape also allows for serious ethical violations to occur without the brand’s knowledge.

Companies are under increasing pressure to ensure they’re taking action even if the issues in question fall outside of their everyday operations. This stems not only from the organization’s own push to do the right thing but also from regulatory bodies, investors, and consumers, all of whom are increasingly concerned by issues relating to income inequality, forced labor, discrimination, and climate change. Organizations can also retain employees if the business’ policies and actions demonstrate that they share the ethical beliefs of their workers and are committed to doing the right thing.

Fixing Kinks in the Supply Chain

With so many eyes on ESG performance, it’s no surprise that these areas have become critical strategic components for a growing number of organizations. Some businesses choose to greenwash, downplay, or disregard their true ESG performance. But if Volkswagen, Deutsche Bank, and other headline-grabbing scandals can teach us anything, it’s that the fallout and subsequent costs – financial and reputational – just aren’t worth the risks.

Instead, forward-thinking organizations are hyper-focused on the mission to do the right thing: act ethically; treat their employees with respect; nurture a speak-up, listen-up culture; meet customer expectations; and ensure their supply chain is just as ethical and sustainable as their own operations. Here are three lessons we can all learn from forward-thinking organizations and those falling behind when it comes to ESG and supply chain compliance:

1. Visibility

Firstly, you need to know who your suppliers are, what they provide to your business, how they operate, and who are your suppliers’ suppliers. With a clearer picture of the chain as it stands now, you can start to map frameworks and set expectations for your product and service providers.

2. Frameworks

The aim of E&C supply chain frameworks is to create a cascade of ethical practices. You may choose to only work with suppliers that adhere to the same ethical and environmental standards as your organization, for example. You may also choose to assess and stipulate cultural and social responsibilities into the operations and ecosystems throughout your supply chain.

3. Communication

As you put your suppliers and their suppliers to work for your company’s goals, it’s important to communicate your intentions with them, as well as to internal and external stakeholders. Firstly, this may be via email or newsletter setting out your intentions and deadlines. You might then decide to include information in monthly board reports and your company’s annual reports, keeping everyone abreast of any progress made and how it impacts your company’s goals.

Setting high ethical standards throughout your supply chain as well as in your own operations sends an unequivocal message to your investors, Board members, customers, employees, and other suppliers bidding for your business. You conduct business honestly and ethically, strive to be the best business you can be, and drive comparable standards of behavior throughout your supply chain.

Create a speak-up culture with our innovative misconduct reporting app and Open Reporting solution today! Book a demo now.

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The majority of ESG data is collected from the top-down, but more and more companies are beginning to understand that reducing the risk of ESG violations comes from every level of the business.

In this blog post, we take a closer look at the ESG violations that have dominated headlines and provide some key considerations for organizations looking to stay on the right track.

What is ESG?

ESG can be defined as three non-financial dimensions: an organization’s impact on the environment, social institutions and human relationships, and the way the organization governs itself and makes decisions. Many investors use ESG metrics to determine a business’s long-term sustainability and potential risk areas, aiding their decision-making process.

When it comes to measuring their environmental impact, some organizations choose to ‘greenwash’ their results. The term ‘greenwashing’ was introduced in 1986, initially used to describe the actions of a beach resort in Samoa. Reusable towels were being provided as a way to help the environment but at the same time, the resort was expanding its facilities, leading to a greater negative environmental impact. Today, greenwashing is used to describe statements that exaggerate, mislead, or highlight certain facts and omit others in relation to environmental impact.

The ‘s’ of ESG should hold organizations to account for social issues within the company, such as harassment, racism, and discrimination. These areas hinder the career progression of underrepresented employees and are amongst the most common forms of workplace misconduct. If the organization is being run in such a way that violations and cover-ups are commonplace, this is an issue with the way the organization governs itself and makes decisions.

Making Headlines

One of the most notable incidents of ESG violation came in 2015 when the Environmental Protection Agency (EPA) found that many Volkswagen diesel engine cars were being sold with software that could detect when they were being tested, changing the performance to improve results. Similar investigations followed in Europe in what became known as Dieselgate and by 2019, Volkswagen’s costs associated with the scandal were estimated to be over $32 billion. Interestingly, one of the outcomes of the federal investigation into Dieselgate was a recommendation to improve the internal whistleblowing mechanisms within Volkswagen. 

A 2021 analysis of advertising related to the COP26 climate summit discovered ‘rampant greenwashing’ by companies on social media platforms. The same year, a unanimous decision by the UK Supreme Court found that Uber must classify its drivers as workers, entitling them to better workplace conditions and protections for the first time. In the US, the release of ‘The Facebook Papers’ proved that Facebook was well aware that its business practices were harming the public, causing considerable brand reputational issues.

In May 2022, the offices of Deutsche Bank and its asset management subsidiary DWS were raided over allegations that the firm had overstated the green credentials of its investments. DWS CEO Asoka Woehrmann subsequently resigned in the aftermath.

Goldman Sachs Group Inc is the latest institution facing a probe by the US Securities and Exchange Commission (SEC) into investments using ESG criteria. The investigation is specifically focused on the Wall Street giant’s mutual-funds business and whether some investments were in breach of ESG metrics promised in marketing materials.

What’s Driving This?

Social inequality, unethical operations, carbon emissions, and climate change are just some of the key issues we’re all facing, and society’s focus on these areas extends into investment decisions. Bloomberg reported that ESG assets are on track to exceed $53 trillion by 2025, with climate accounting for about 25% of ESG funds. Inevitably, some companies attempt to ‘game the system’ in order to benefit from green credentials and additional investment. A 2021 study by Quilter found that greenwashing was the biggest concern for 44% of investors when it comes to responsible investing, demonstrating that it’s a systemic problem.

ESG has also been linked to top-line growth and productivity as more and more consumers make purchasing decisions based on how ethical an organization is while employees gain a greater sense of purpose working there. Marketing activities that promote the environmental and social interests of an organization – whether real or greenwashed – will therefore catch the eye of prospective customers and employees.

Added to this are the potential loopholes in regulations and ESG metrics that allow companies to greenwash their performance. Procter & Gamble, for example, committed to reducing its annual emissions by 50 percent by 2030. However, it was reported in 2019 that these only included Scope 1 and 2 emissions, not Scope 3. P&G’s climate commitment, therefore, applied to just 2% of its supply chain emissions.

Things Need to Change

So, what can we do to combat ESG violations and the growth of greenwashing? As consumers and investors, we can be selective in the products and services we buy from and invest in, choosing responsibly based on the actual environmental and social output of companies. 

Regulators can set the standards for what ESG metrics offer the most value and continue to crack down on violations, increasing the risks to companies choosing to do so.

Organizations, meanwhile, need to take note of the violations being discovered and the huge costs associated in the aftermath, including the risk of soiling the brand’s reputation. 

An organization’s environmental and social impact shouldn’t solely sit with marketing departments that can mislead consumers. While dedicated individuals such as ethics and compliance professionals can take a lead in measuring the successes and shortcomings of their policies and activities, ultimately ESG should be a shared concern for the whole business. Organizations need to move to active integrity models and enable every person in the organization to report on ESG violations and keep the company honest.

Continuous improvements will help to raise the bar for what an ethical organization is, what is considered to be a positive ESG performance, why it’s so important to be truthful and transparent, and why doing good is good for business.

Keen to build a world-class E&C program that demonstrates your commitment to ESG? Book a demo to discover how Vault can be the most important asset in your toolbelt.

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Frequently asked questions

What is ESG?

ESG can be defined as three non-financial dimensions: an organization’s impact on the environment, social institutions and human relationships, and the way the organization governs itself and makes decisions.

Why is ESG important?

As well as being good for the planet and society, many investors use ESG metrics to determine a business’s long-term sustainability and potential risk areas, aiding their decision-making process.

What is greenwashing?

The term ‘greenwashing’ was introduced in 1986, initially used to describe the actions of a beach resort in Samoa. Reusable towels were being provided as a way to help the environment but at the same time, the resort was expanding its facilities, leading to a greater negative environmental impact. Today, greenwashing is used to describe statements that exaggerate, mislead, or highlight certain facts and omit others in relation to environmental impact.

What is ESG reporting?

It’s important to be truthful and transparent when detailing a company’s impact on the environment, society and its inner workings by sharing accurate data and dealing with ESG violations.

The post ESG Violations: How Did We Get Here? appeared first on Vault.

When a concern is reported internally, an organization has three key opportunities to garner trust in the speak-up process, which in turn has a meaningful impact on the company’s culture and contributes to the sustainability of its business. These ‘three bites at the apple’ are:

• in the groundwork laid for a safe and respectful speak-up environment, with modern, easy-to-use tools and systems, a safe and transparent escalation path, and managers trained to listen
• in the confidential, respectful, and effective investigation, including a documented process carried out by trained professionals who are ready to respond, investigate, and take action
• in the fair and equitable remediating actions following the conclusion of an investigation, close monitoring with those involved and impacted for signs of retaliation and/or other adverse effects, and use of data to continue to improve

In this blog post, we’ll take a look at each of these considerations in turn.

Laying the Groundwork 

Employees will feel comfortable raising concerns about perceived, suspected, or actual misconduct when there is a net of psychological and physical safety in place. They must be confident that the company will pay attention to their concerns and they are assured of protection from retaliation. Employees also need easy access to, knowledge of, and confidence in the reporting tools and escalation path. Good awareness of their rights and obligations under company policies, including confidentiality and non-retaliation, and an understanding of the company’s investigations protocol all contribute to psychological and physical safety.

Employees are also more likely to raise concerns when their managers have the skills, tools, and willingness to maintain an open work environment and reinforce the importance and impact of reporting misconduct. Managers need proper training on how to help create this environment and on the principles of an effective investigation.

Conducting the Investigation 

Speaking up through formal reporting channels is not easy, and a reporter making a good faith report (i.e. believes it to be true at the time of the report) needs support. The immediate next step is to let the reporter know that their report has been received safely and is being taken seriously, as this gives the reporter a sense of comfort with the process and encourages cooperation going forward.

The investigation process is a team effort, so it’s important that all parties in the process understand their roles and responsibilities, as well as their limitations. When a determination has been made that the report warrants an investigation and the nature of the allegation is understood, an investigation plan is developed. It will include:

• the scope of the investigation (based on the report)
• details of the investigation team (internal or external) and other support (all of whom have gone through training on techniques for conducting an effective workplace investigation)
•  the contact list for notice of the report
• the list of interviewees and the order of the interviews
• any immediate actions required (such as preservation of records)

When scheduling interviews, keep in mind that not every employee welcomes a meeting invite from the Compliance or HR team. Engage rather than put the parties on the defensive; assure them that the meeting is standard practice and emphasize the importance of speaking up and investigating good faith reports to the company’s culture. 

Building trust during face-to-face interviews is key to the success of the process. Assure interviewees that the process is confidential and protected from retaliation. A good investigator is a good listener, makes eye contact, and asks open-ended questions to allow space for the interviewee to speak freely. By putting the interviewees at ease, you can better assess their credibility by observing their body language, eye contact, and general demeanor. 

As investigators of misconduct, we may sometimes have an interest in the outcome, but our job is to be objective fact-finders and it is crucial to avoid implicit bias that sways the outcome of an investigation. This includes asking leading questions, over or under investigating an issue, not investigating at all, or diminishing or dismissing legitimate employee concerns because of an answer we are unconsciously looking for. Conducting interviews with an open mind and without implicit bias ensures that those involved in the process are treated as fairly and equitably as possible. 

Once you have the facts well documented and stored in the case management system as the official place of record, give the decision-making team everything they need to decide on an appropriate, fair, and respectful response. Your report should include, among other things, the identity of the interviewed parties (if appropriate, as some may choose to remain anonymous), a credibility assessment, incident overviews and conclusions, recommendations, and an exhibit list.

Taking Remediating Action 

The reporter, witnesses, and the subject of the report have all gone through a difficult process, so may be anxious to know the outcome of the investigation and put it behind them. To ensure that they remain confident in the process and in the fairness of their treatment (even if they don’t agree with the outcome), it is crucial to close the loop as soon as possible by providing them with high-level information that the investigation has concluded and that appropriate actions have been taken. The conversation with the subject may differ based on the findings of the investigation.

However, this is not where the investigation ends. Follow-up with the parties in the aftermath of the investigation is essential – initially, to get feedback on their experience and learn from missteps or miscommunication in the process. Periodically thereafter, you’ll likely need to monitor for signs of retaliation, absenteeism, or impact on jobs or compensation and to take immediate action if detected. Each time a reporter feels respected and treated fairly throughout the investigation process, there is a greater likelihood that they will Speak Up again the next time and share their experience with colleagues, encouraging them to Speak Up. Conversely, there is nothing more disheartening, demotivating, and damaging to employee morale than feeling like collateral damage after having come forward in good faith in the first place.

Beyond protecting reporters, a root cause analysis is necessary to understand the circumstances that led up to the reporting of the perceived, suspected, or actual misconduct and what can be done to prevent the conduct from being repeated. By collecting and analyzing data from reporting systems, you can detect trends that can help the organization identify any early warning signs of misconduct. The organization can then take action in the short term and make process improvements supported by policies, training, and communications to address any gaps in the longer term. 

Reports of misconduct made in good faith and effectively investigated based upon principles of transparency, integrity, equity, and respect mean more opportunities for the organization to listen, build trust and goodwill, encourage employees to Speak Up internally without fear of retaliation, and engage in continuous improvement for the benefit of all stakeholders. 

Conducting an effective workplace investigation is not a pure science – it is equal parts science and art. The art of it lies in how it is conducted and what is created in its wake. An effective response to misconduct and the fair treatment of those involved, organizational changes made to prevent it from happening again and the goodwill derived from the workplace being better than it was before.

Looking for an all-in-one system of record where all reports can be safely captured, tracked, and resolved centrally? Book a demo today.

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Our very own Tori Reichman, Chief Customer Officer at Vault Platform, spoke with special guest Lisa Schor Babin, Founder & Principal of Schor Ethics Consulting LLC, about the mounting pressure from investors, customers, and employees and the importance of ESG in today’s workplace. Here are some answers to the key questions that came up during the webinar.

1. How can E&C professionals identify ESG risks through data?

It’s important that organizations have the right technology in place to capture data. They can then connect the dots, identify patterns and prevent issues from becoming bigger. Lisa explained that E&C professionals can use all manner of systems to identify ESG risks, including misconduct reporting solutions like Vault Platform, risk assessments, employee surveys, and financial systems. The key is to bring together points of data that paint a picture and help to identify areas for improvement and risk areas.

2. How can E&C professionals demonstrate that ESG metrics are based on regulatory standards?

In December 2021, the EU Whistleblower Directive mandated that member states introduce common standards of protection for those who Speak Up about breaches of EU laws from retaliation or recrimination. By adopting a misconduct reporting solution that meets the criteria of the Directive, such as Vault Platform, companies with a presence in the EU can mitigate risks and take action when things don’t go to plan. Our solution reduces time to resolution and facilitates collaboration, creating a far more positive experience for everyone involved.

E&C professionals in the US should also consider leveraging the foundational elements from the Federal Sentencing Guidelines for Organization’s (FSGO) framework for an effective E&C program.

3. Is it possible to quantify the investment that is required in the ESG area?

Lisa flagged that an ESG strategy isn’t about politics; it’s about creating long-term value for a company and all of its employees, investors, and the wider community. A company’s strategy should therefore be tied to its mission and what it stands for and cares about rather than trying to measure ESG impact as a percentage of revenue or as a box that the company needs to tick. When thinking about your ESG strategy, consider what impact your organization is and could be having on the environment, community, and society and what you’re trying to achieve, as well as the risks your organization is facing.

4. How do prospective employees discover ESG information about the organizations they’re thinking of joining? 

One topic discussed at length during the webinar was the importance of trust between an employer and its employees. Organizations need to demonstrate to existing and prospective employees that their trust is important to the organization through its actions and investment.

For public companies, ESG results will form part of their annual reports and perhaps feature on their public-facing websites. Many organizations may also release separate ESG reports. The level of detail will likely vary depending on the ESG program’s maturity and impact.

5. Can ethics and compliance professionals work independently?

Typically, E&C professionals are hired internally to drive company ethics and compliance from the inside or as specialist consultants brought in to focus on key tasks and objectives.

Regardless of whether E&C professionals are hired internally or as consultants, they won’t be successful working in silos. From collaborating with misconduct reporters, team leads, the communications team, and other case managers, as well as agreeing on objectives and reporting results to leadership and the Board, collaboration is core to the E&C professional’s function and success.

Vault Platform unlocks ESG reporting from the grassroots. Keen to know how we can help your organization become an ESG Enabler and advocate for change? Book a demo today.

The post Leading the Way on ESG Webinar: Your Questions Answered appeared first on Vault.

According to Fink, “Boards with a diverse mix of genders, ethnicities, career experiences, and ways of thinking have, as a result, a more diverse and aware mindset. They are less likely to succumb to groupthink or miss new threats to a company’s business model. And they are better able to identify opportunities that promote long-term growth.”

Tone is set at the very top. A board that is diverse sends the message to its stakeholders that the company is willing and able to listen and respond to the diverse voices of its stakeholders; and signals to its employees that it is safe to be their authentic selves and to Speak Up without fear.

Corporate boards wield power, approving corporate strategy and its most important goals, including ESG, hiring the chief executive, and determining compensation for its senior executives, among many other things. In the current environment, stakeholders – employees, investors, consumers, and the communities in which they operate – are demanding that companies exercise leadership on an even broader range of issues, not the least of which is diversity, equity, and inclusion.

The issue of public company board diversity has intensified among lawmakers, regulatory bodies, shareholders, and investors. In 2018, California passed a law requiring public companies with their principal executive office in the state to have at least one female director by end of 2019; and in 2020, another law requiring these companies to have at least one board member from underrepresented communities or who self-identifies as gay, bisexual, or transgender, by the end of 2021. Other states have enacted or are considering board diversity legislation.

In December 2020, Nasdaq proposed a “comply or disclose” framework that was approved by the SEC in August 2021, requiring most Nasdaq-listed companies to have at least two self-identified diverse board members (one who identifies as female and one who identifies as an underrepresented minority and/or LGBTQ+) or to explain why they can’t comply. The SEC concluded that giving investors better insight into these companies’ approach to board diversity protects investors and the public interest.

Institutional investors have also been forcing board change on a case-by-case basis through shareholder derivative litigation, alleging toxic workplace cultures due to discrimination, retaliation, and gender and racial bias. Through litigation and settlement, these companies have been forced to not only completely revamp their DEI initiatives and related policies, procedures, and oversight functions but also to change the composition of their boards.

Boards need to pay attention to what’s being said by institutional investors about ESG and diversity. They are making no bones about being more aggressive if boards don’t understand the long-term strategy for the corporation, and if they don’t understand how ESG, and particularly diversity, fits into that long-term strategy.

To be clear, diversifying the board is not a tick-box ESG exercise. It is, instead, the engine powering a company’s purpose, people, and profit. From PwC’s 2021 Annual Corporate Directors Survey, 93% of directors surveyed believe that board diversity brings unique perspectives to the boardroom; 90% that it improves relationships with shareholders; 85% that it enhances board performance; 76% that it improves strategy and risk oversight; and 75% that it improves company performance more broadly.

Tony West, Uber’s Chief Legal Officer and Corporate Secretary, believes that having people from underrepresented ethnic and racial groups on boards helps executives better understand how to win the business and loyalty of customers. In September, West was quoted: “You can’t compete and win and design technology that’s innovative and inclusive if you don’t have those kinds of perspectives informing the entire process,” he said.

Directors who look more like their stakeholders are also more likely to be true advocates and representatives for their needs and interests. Pedro J. Pizarro, President and CEO of Edison International, a large electric utility in California, said input from directors from underrepresented ethnic and racial groups helped his company secure approval from state regulators for a $436 million investment in electric vehicle charging that involved understanding the needs of lower-income communities. “That’s a very real example, and that’s a very important capital program for us,” he said.

A diverse board is also more likely to appoint diverse directors and encourage hiring of diverse corporate leaders. In the words of Marvin Ellison, President and CEO of Lowe’s, “It’s encouraging to see someone who looks like you be successful, and it creates a rising tide. It gives you confidence that you can get there too.”

Perhaps less discussed, but no less important is the fact that a diverse board sends the message that having differences, celebrating those differences, and speaking up for those differences is safe and supported by the company.

Board diversity laws passed in California, NASDAQ listing standards, and calls from investors have put a new emphasis on the need for boards to have gender diversity, as well as racial and ethnic diversity. As a result of these pressures, board searches are changing. When asked in one survey about the single most important attribute being prioritized in the board’s next director search, racial and ethnic diversity topped the list. Gender diversity was lower on the list, likely because boards have done some work already to bring on female directors in the past few years—even if only one or two.

Despite these initiatives and efforts, as of 2020, just 20.9% of Fortune 500 board seats were held by White women and only 5.7% were held by Black and Latina women. By 2021, S&P 500 companies tripled the share of new directors who are Black and more than doubled the percentage who are Latino. Still, nearly 80% are White, and about 70% are men.

Boards are historically slow to change. One reason offered by directors is the lack of “qualified” candidates. However, a more likely explanation is that current (non-diverse) directors are overly reliant on their own networks to source board candidates—networks that are not yet broad or diverse enough to deliver the right diversity of candidates. In other words, it’s not a pipeline issue, it’s a perception challenge. From the 2021 PwC survey, 60% of directors surveyed think board diversity is “driven by political correctness” and about a third think it is resulting in “unqualified” and “unneeded” candidates.

According to the 2021 PwC survey, boards can hasten their progress by thinking about what it’s composition should look like two, three, or four years from now; and by creating a plan to get there. New initiatives, like The Board Challenge and Board Diversity Action Alliance, are helping companies increase the representation of racially and ethnically diverse directors on their boards. Private companies, used to being under the radar, should also act quickly if they have short-term plans to go public. Stock exchanges like Nasdaq and banks that underwrite offerings will not work with them if they don’t have the minimum level of boardroom diversity.

Clearly, there is a groundswell of pressure on public company boards to mix it up. Those boards that are choosing to respond and act are sending a clear message to their stakeholders that aside from profit, they are serious about purpose and people, and by extension, DEI and ESG. Those who still think they have a choice will very soon find themselves lagging.

The post How a Diverse Board powers Purpose, People, and Profit appeared first on Vault.

ESG is not a new concept. In fact, most publicly traded companies in countries like the UK, France, Germany, and the USA have implemented ESG initiatives; and elements of ESG are already embedded in corporate compliance programs – in Codes of Conduct, compliance training, and in due diligence processes.

But there is decidedly a new wave of interest in ESG from employees, customers, investors, regulators, and the courts. With reputation recognized as one of the most important corporate assets, companies must have a perspective on ESG and a plan for demonstrating its value, or risk giving the impression they don’t care. Investors are also paying more attention to ESG with an uptick in ESG-related shareholder proposals; growing initiatives in the investment philosophies world; emerging frameworks and indices to guide company disclosures, and more focus on ESG metrics and sustainable profitability. With the recent SEC approval of Nasdaq’s proposal to include gender and race in its listing rules, regulators are clearly focused on ESG.

Global events of 2020 have also moved ESG to the forefront, with a broad range of stakeholders demanding action and companies responding with expanded programs in support of social justice, inclusion, and human rights. Leaders were asked to speak out and step forward to drive change. In the Finance sector, Larry Fink, BlackRock’s Chairman and CEO, wrote in his “Dear CEO” letter in 2021, “Over the course of 2020, we have seen purposeful companies with better environmental, social and governance (ESG) profiles have outperformed their peers.”

Public awareness and media attention borne of outcries from economic, public health, equality, and social justice crises, as well as the increasing size and scope of environmental disasters, have brought ESG into intense focus for corporate executives and their boards, investors, customers, suppliers, and employees, and increasingly onto the agendas of ethics and compliance leaders. Businesses are being challenged to make a difference with their ESG programs. New areas of ESG focus, such as disability inclusion, are gaining traction. According to Ethisphere’s recently published report from 200 data points in its database of 136 companies representing all industries from around the world who were recognized as the 2021 World’s Most Ethical Companies®, 60% of these companies tie ESG risks and opportunities into risk management processes; 86% formally evaluate stakeholder feedback to identify ESG risks; 83% release publicly available ESG goals and targets; and 77% have a formal ESG or other corporate reports.

To embark on the ESG journey, companies start with a plan and then figure out how to tell their story. The framework for an ESG plan is built in service to the company’s purpose and consists of ESG goals and milestones; initiatives to help move the needle; metrics for measuring success; and executive compensation tied to ESG targets. Thoughtful assignment of ownership for the strategic execution of the ESG program and its oversight is crucial, with compliance officers already well-versed in many of the ESG concepts who can play an important role as cultural ambassadors and agents of change.

But to build a plan and tell the ESG story first requires a look inward. The first step is to hold up a mirror, to take an honest look at what the company does for its employees and other stakeholders. In the words of Lisa Beth Lentini Walker, “Do an “ESG check-up!” Go through a thorough risk identification process, assess the likelihood and impact of ESG-related risks, and develop plans to address and minimize the risks. The more a company can articulate its purpose and goals and demonstrate its progress in delivering value to its customers, employees, and communities, the better able the company will be to compete and deliver long-term profits for shareholders.

Companies typically deputize the Legal team, Internal Audit and/or ERM to conduct risk assessments. They often take a top-down approach by starting with the Board and senior management. They may conduct employee focus groups or administer employee surveys to supplement.

But, there is a strong argument that says that the first step in building an ESG plan is to listen to your employees! A company’s employees can be its strongest advocates for ESG and good corporate citizenship, which includes speaking out when they see something is wrong – on topics that include physical or environmental safety, discrimination, forced labor or corruption in the supply chain, or illegal payments, to name a few. The insight derived from employee reporting provides company leaders with a window into the day-to-day work of the organization and potentially early visibility into some of the company’s biggest risks.

When an employee witnesses or experiences misconduct or has concerns about certain conduct and reports these concerns, the company has an opportunity to listen and understand what is happening within the organization and conduct a thorough and fair review. By doing a root cause analysis of what went wrong and most importantly why, they are then able to fix the broken or missing controls that either caused or failed to prevent the issue, and help stakeholders do what is right.

Reports by employees (anonymous or otherwise) give the company the opportunity to look inside by digging deep and seeing what employees see. This data is but one part of the ESG story, but it’s an essential one that should not be missed. According to ECI’s 2021 Global Business Ethics Survey Report, the strength of an organization’s ethics culture is measured through multiple indicators of employee behaviors, including reporting misconduct, at various levels within an organization. If your company is serious about its ESG journey and telling its ESG story – an essential part of your commitment to ethics, it must also utilize and understand the employee reporting data to see clearly who you are, make changes that will get you where you want to be, set, measure and report on progress against your goals, and demonstrate value.

Companies should continue to build a culture of trust, transparency, and integrity through implementing speak-up programs so that employees are encouraged to voice their concerns without the fear of retaliation and their voices are heard, heeded, and clearly reflected in the company’s ESG story.

The post The Keys to the Castle: How Employee Reporting Can Help Your ESG Program appeared first on Vault.

Three years ago, we started Vault Platform with a revolutionary thesis: that companies can be protected from major risks if their people are protected, too; that sweeping problems, such as conduct breaches and ethical failures under the rug aren’t something modern organizations can afford to continue doing and that the best way for companies to avoid the next big crisis, scandal or lawsuit, is by giving their people a REAL opportunity to Speak Up. By revealing the blind spots, and communicating and engaging with employees through a trusted channel, businesses can drive the resolution of cases in a proactive way that’s never before been possible.

This cannot be achieved with the existing, passive reporting tools which companies have in place to tick a box for their audit committee. A new, human-centric approach leveraging the latest technology has to offer, is acutely needed in this space. 

With this thesis, we approached both clients and investors. The response? We were made to feel absolutely out of our minds. “Why should we want this?’ market leaders and compliance executives asked us, as we pushed them to give us their honest feedback. Investors thought the same “Uncovering the weak spots in our company goes against our interest”. But luckily, not all companies, and not all investors. We found our luminaries, we found our pioneers, and in turn, we ourselves pioneered a new category of ethics & trust-enabling products. Fast forward three years and no one doubts that this is a market and category that is thriving and growing by the day. And organizations nowadays? They want to know. They want to be on top of any risk and any problem, not behind the curve. 

What happened? Well, the tailwinds could not have been stronger. Social movements such as #MeToo and #BlackLivesMatter gained global attention and it wasn’t long before employers had to take note and listen. So powerful in their message, these grassroots movements have started to establish new expectations and norms, becoming very much a business problem on top of a societal problem. 

ESG, ethics and non-financial risks have become a prime concern for boards, and the regulators both in Europe and the US are doing their fair share too. In the EU, a new Directive is coming into force at the end of 2021, mandating every company with 250 employees or more to enable internal reporting and protect reporters from retaliation. In the UK, the FCA has taken a strong stand that non-financial risk is the biggest risk to a company’s culture. In the US, where such requirements already exist for all public companies under the Sarbanes-Oxley Act, Biden’s administration is taking a strong stance against corruption. The SEC is paying out enormous awards to whistleblowers, incentivizing people to turn straight to the authorities when they witness securities law violations or other wrongdoings. The outcome, no doubt, is that every person responsible for their company’s ethics & compliance program in the US now understands they must up their game when it comes to internal reporting, and ensure everything is done to solicit more reporting by employees in-house. No wonder the role of Chief Ethics Officer is on the rise. 

This is exactly where Vault Platform comes in. It has now been two years since our first product launched and began being used by clients. Progressive responsible and caring companies looking to do the right thing by their employees and give themselves the best shot against internal ethical failures are now using Vault Platform. Two years in, it’s an enormous privilege to see how our product, which combines behavioral psychology principles with cutting-edge technology, transforms workplaces worldwide, uncovers serious issues, safeguards people, and protects companies’ bottom lines. Here are three things we learned about the impact of Vault Platform, and what it means for our direction of travel: 

1. Culture eats technology for brunch. 

Tech matters, greatly, but above all – it’s the company culture and the message from the top that directs the entire organization down an ethical path (or not). When leadership teams launch Vault Platform it sends a very strong message about its intentional integrity and stance on ethics. 

Launch after launch, we are delighted and amazed to see how Vault is received by employees, and how management is praised and appreciated for it. The product increases internal trust by virtue of being launched, even before the tech has had its chance to shine and prove its value (which usually happens within the first days from launch). 

Alongside meeting increased customer demand and market expansion, we will continue to invest and enhance Vault’s launch experience, and support our clients by providing them with a launch experience that amplifies their own values and culture. The high bar we’re setting extends beyond the launch. We’ve been hearing time and again how frustrated the market is with the customer experience and service they’ve been getting from legacy providers in our space, and at Vault Platform we pride ourselves on unrivaled customer experience. More on this to come. 

2. GoTogether™ is a real game changer

For our readers who are not familiar with Vault’s app, one of the defining features and capabilities is GoTogether™, which enables employees to surface a report under the condition they’re part of a pattern. This gives employees confidence through a ‘strength in numbers’ approach, and companies with an opportunity to identify problematic patterns and recurring issues. Empowered to take immediate action, using our technology to connect the dots. Already, this gives Vault a unique position as it enables early risk detection which other incident reporting tools simply can’t provide. In the words of our investors, “Vault is the safety rail at the top of a cliff rather than the net (or ambulance) at the bottom”.

Where are we taking this technology? Well, the fact we were invested by Gradient, Google’s AI-focused fund gives a big hint. We are developing the GoTogether™ capability even further through the application of NLP (Natural Language Processing) to connect the dots between the description of events and uncovering underlying problems that are witnessed by multiple, and potentially remote employees in any given organization. Imagine the impact of this technology in the context of Volkswagen’s “Dieselgate”, or the Boeing 737 Max crisis. It’s no surprise that federal investigations into crises such as these concluded that internal reporting programs needed a serious shake-up. Vault Platform is that shake-up. 

3. The operational pain is real

We reinvented misconduct reporting by building technology for humans. We took an employee-centric approach and developed the world’s most advanced reporting app because we realized that ethical, culturally-leading organizations can’t be built on the shoulders of even the best-intended Chief Compliance or Ethics Officer – you must take your people with you, and start with your people. No doubt, this is the approach that wins us clients. But we were surprised at how much operational pain exists on the corporate side – the teams responsible for leading investigations and resolution (sometimes dealing with hundreds if not thousands of cases a year at the big multinationals). The systems being used for case management are archaic, clunky, and cumbersome. They hinder investigation speed and are simply not fit for purpose. They introduce so much inefficiency in the process. Vault’s Resolution Hub solves a tremendous operational burden and significantly shortens investigation time. We will soon introduce to the market a collaboration tool, built into our Resolution Hub, which enables HR, Legal, and Compliance teams to work together on the resolution of cases, whilst enabling privacy and data access controls. (Yes, “together” seems to be a theme for us at Vault. And we like it!)

Few more words about the company we have built and continue building. Vault Platform aims to promote diversity, equality, and inclusion in every workplace where it is implemented. Amplifying employee voices, uncovering cultural problems, and resolving these matters is perhaps the most important step every company should take to promote its D&I agenda. It’s astonishing how many companies in our category, which are equally supposed to promote diversity with their product, have no diversity at the top of their own organization. It’s not lost on me that female founders and CEOs are significantly outnumbered in tech, and in the compliance-tech and reg-tech space in particular. But this doesn’t stop with me – from our investors to our leadership to our designers and developers, Vault takes pride in its own diversity, and still, there’s so much more we can do. As we grow, this will continue to be a priority for us. It will be baked into our recruitment, retention, and the way we invest in, promote and develop our team. We are the change that we want to see in the world. We are excited about building a product that makes companies more ethical, safe, and diverse. And we are proud to be building a company that is all of the above. 

Responsible companies run on Vault Platform – so join us! 

Neta Meidav
Co-Founder & CEO 

The post What’s next for Vault Platform: Pioneering the future of workplace integrity & ethics technology appeared first on Vault.

Undeniably, all stakeholders – from regulators to investors, to employees, to customers – are paying more attention to the three-letter acronym, but not all letters have equal weighting. 

A nice article in the FT this week highlights the lack of a consistent disclosure framework as an issue that allows companies to avoid talking about components they are performing less admirably on. 

Typically, much of the focus in ESG is on the Environmental, with many companies preferring to stay quiet on the Social and Governance fronts. 

More focus on ‘E’, less on ‘S’ and ‘G’

“According to FTSE Russell [the investment benchmarking arm of the LSE], about 60-70 percent of large and midsized companies in developed markets provide data on the most disclosed environmental items that are tracked by sustainably-minded investors. But there is only 5-15 percent disclosure at the other end of the spectrum. Those least-elucidated areas tend to be the “social” ones,” says the FT. 

Coincidentally, an ECI Working Group on ESG, in which Vault Platform has participated, released its own whitepaper this week, A Guide to ESG: What Ethics & Compliance Professionals Need to Know About the Rise in ESG Investing and How It May Impact Their Work.

The working group drew a similar conclusion on the lack of a consistent framework for ESG disclosures and internal reporting but established some best practices for addressing this challenge and leveraging opportunities created for Ethics professionals in this area. 

ESG focus opens up opportunities for Ethics & Compliance

One way of looking at it is that the challenge for Ethics & Compliance is to adapt to the new pressures generated by ESG investing and reporting so the E&C function is a true partner in the company’s long-term sustainable success.

Meeting this challenge starts with acquiring the relevant knowledge and skills including the relevant regulatory frameworks and the disclosure landscape. But as it has always been the case that E&C professionals must “know the business,” this challenge is not insurmountable. 

A slightly more thorny issue is that of a significantly expanded surface area for risk. Understanding what constitutes an ESG risk as well as getting a grip on the array of internal players with ESG roles and determining how they fit into this array today, and what changes need to be made for the future. Part of the solution here is leveraging employees as your first, best line of defense when exposing risk across a broad spectrum.

In terms of opportunities, because ESG focuses attention on the non-financial aspects of a company’s performance, E&C teams have a wealth of expertise to share to help their companies improve “performance” across these ESG dimensions. This may make the contributions of the E&C function more visible. 

So, instead of its traditional role of adding value by preventing potential compliance failures – something notoriously hard to measure – E&C can help deploy tools and processes that improve a company’s ESG rating, making the organization more attractive to investors and generating trust from multiple stakeholders.

Essentially, E&C professionals can increase their own value to their organizations by getting ahead of the curve and developing a strategy that helps their companies take advantage of this opportunity.

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