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How whistleblowing can help your ESG strategy

No business is immune from ESG risks, if only because of consumer consciousness, staff pressure, regulators’ and investors’ expectations. How an organisation treats its people, how it impacts and influences its communities and its environment are questions that can’t be ignored anymore: businesses are being held accountable for their social and environmental footprints. 

And the trend is only growing. Parent companies are increasingly liable for action (or omission) of their subsidiaries overseas. Directors themselves are at increased risks: their fiduciary duties mean that they cannot ignore ESG outcomes.  

The question is therefore not whether organisations need an ESG strategy, but how to define it, how to implement it, and how to monitor its effectiveness and value to the business. In all this, whistleblowing is key.  

Defining your ESG priorities  
An ESG strategy will allow you to measure your performance against key metrics or standards, and will need to cover what stakeholders (investors, employees, financiers, customers) expect of your business.

Staff expectations – and perceptions of what constitutes wrongdoing – will provide some useful pointers. What is raised internally as a whistleblowing concern allows you to keep track of what matters to your staff. It can also provide valuable suggestions for the specific strategic ESG concerns, KPIs or targets you may want to consider.  

Your staff’s perceptions of what is right and wrong closely follow society’s evolution. Over the course of Protect’s 30-year history, we have spoken to more than fifty thousand whistleblowers. Until 10 years ago, calls were all about patient safety and financial misconduct. But in the wake of the #MeToo and #BlackLivesMatter movements, the definition of what is and is not in the public interest has changed. Now discrimination and harassment, ‘toxic culture’ and ethical issues take centre stage. Whistleblowing allows you to detect emerging ESG risks. 

Whistleblowing will also give you data on the cost, risk and opportunity associated with your ESG agenda. Looking at concerns’ substantiation (or lack of), how the business responded to them, and the follow-up (whether this ended in litigation, commercial or reputational loss, etc) will give you valuable information on both risks and opportunities offered by your ESG goals.  

ESG is, by definition, a moving landscape. Your ESG strategy should make clear what you are measuring, how you will get there, and the policies and procedures you need to meet these targets. Analysing the type of concerns and behaviour your staff blow the whistle about is a key way to ensure your targets and goals remain relevant and effective.  

Implementing and monitoring your ESG strategy
Having an ESG strategy is obviously only the first step. Your stakeholders expect proof of commitment, you will need to demonstrate compliance and deliver results. An ESG strategy needs to be managed, monitored and promoted otherwise it will remain dead letter and prime territory for ‘greenwashing’ and ‘purpose-washing’ complaints.  

A healthy speaking-up culture is one of the best guarantors of a company’s compliance with its regulatory and ethical duties. It is also fundamental in monitoring whether your strategy is working, to get key measures of its impact, identify risks and difficulties posed by it, and demonstrate transparency and credibility.  

Arguably, an ESG strategy that is NOT accompanied by a proper whistleblowing system and culture is pointless and will do more harm than good. It sends a disastrous message regarding the trustworthiness and transparency of the organisation. The G of ESG stands for governance. There can be no accountability and no deterrence when people do not know how and/or feel too scared to speak up. 

Your staff are the eyes and ears of your organisation. They are likely to be the first to spot when climate and sustainability credentials are being misrepresented, when climate funds are being spent incorrectly, laws are being breached, or environmental harm is occurring. Many big organisations choose to make their whistleblowing reporting lines open to their suppliers, which offers a key route to identifying the risks within their supply chains. 

The whistleblowing cornerstones 
There are already minimum standards applying to all employers with 50 or more workers in the EU including maintaining the confidentiality of whistleblowers, having an impartial and competent person/department to investigate concerns, providing acknowledgement and feedback within set timeframes, and keeping records of reports.

Some regulators go further. The UK financial regulator, the FCA, for instance, requires organisations to allocate a board member to defend the whistleblowers against the rest of the organisation and to be their champion. 

A whistleblowing policy should clearly set out how staff should raise concerns, with typically multiple reporting routes. It should be easy to understand and set out who will do what, how the process will work and what it requires of key members of staff. 

But how a company approaches its whistleblowing policy is every bit as important as the policy itself. At Protect, we are experts at helping organisations create an ecosystem of supporting actions. One of those is training: ensuring staff are aware of how to raise concerns, and that managers understand how to respond to them. Are there particular demographics, locations or characteristics that make a member of staff more or less likely to report wrongdoing? If so, are there measures the organisation can put in place to empower them to do so? 

How concerns are investigated and dealt with will also be key. Our analysis of more than three thousand cases that we received last year revealed that two in five (41%) callers said their whistleblowing concern had been ignored by their employer.  Simply setting up a system and expecting people to “speak up” is not enough – employers must listen to and investigate the concerns to ensure accountability and keep track on how the systems work in practice. 

Protect’s flagship Whistleblowing Benchmark Tool is used by organisations to identify gaps in their systems and compare their progress against international best practice. Designed for use by larger organisations it covers all aspects of the EU Whistleblowing Directive and provides personalised recommendations tailored to an organisation’s specific needs and challenges. 

A version of this blog was originally published in Issue 13 of ThoughtLeaders4 Disputes magazine, June 2024

Sybille Raphael

Sybille Raphael, Protect Legal Director

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