Is Global Entity Solutions (GES) the natural home for your ESG data management and reporting?

Subsidiary management teams are all about local compliance. Should they take on the responsibility for ESG data management and reporting as well? Juan Torres, business development manager, and Rogier Bronk, head of global entity solutions – Americas, offer their insights for your ESG administration.

Corporations with entities in multiple jurisdictions need to keep a close eye on the rising tide of ESG regulation around the world.

The good news is that all jurisdictions are moving in the same direction – albeit at different speeds. The European Union is leading the way, with the US starting to close the gap and Asia close behind.

For multinationals, the key question is how to integrate their ESG strategy into current processes without reinventing the wheel (and piling on cost).

In many cases, responsibility for ESG data management and reporting is likely to be handed to subsidiary management teams, given the obvious synergies of purpose and process.

The link between ESG and subsidiary management

On the face of it, that makes a lot of sense.

By nature, subsidiary management teams have a holistic view. Combining central oversight with local expertise appropriate to every jurisdiction.

This chimes well with the implementation of an ESG strategy, which is only effective if applied consistently and filtered through every corner of a company’s operations. A piecemeal approach to ESG integration would be a fast track to confusion.

Subsidiary management teams work closely with other departments to gather the data they need to ensure their clients’ global entity portfolios maintain good legal standing.

With corporate governance professionals on the ground already monitoring the local regulatory environment, they’re well versed in anticipating upcoming developments, communicating and preparing businesses accordingly.

It’s easy to see how those skills could be applied to ESG data management and reporting as well. The accurate and timely collection, verification and reporting of company-wide information is a common imperative.

The challenges of ESG integration

At the same time, subsidiary management and administration teams are already stretched and collecting and reporting ESG data brings unique challenges.

To some extent, businesses are still making educated guesses about what they should be measuring and how they should be measuring it. There is no global consensus on what constitutes an ideal ESG qualification. Multiple conflicting classification and reporting standards in the industry (TCFD, SASB, GRI, EU taxonomy), make ESG data difficult to identify and source.

Global standards are unlikely to be agreed upon, and multinational companies will spend a lot of time and effort understanding what ESG data to report in each jurisdiction in which they operate.

But regulation isn’t the only ESG driver. A strong focus on ESG integration can help companies access credit on more favourable terms and attract a new generation of socially responsible investors and customers.

It can also be an effective recruitment and retention tool. Talent is in short supply, following the “Great Resignation” and candidates increasingly favour businesses that share their values.

Subsidiary management teams need ESG specialists

In this environment, companies can’t afford to pay lip service to ESG Integration. Subsidiary management teams may be in a good position to take on ESG data management and reporting, but they can’t do it effectively without specialist help.

That might entail creating a sub-team of ESG specialists or outsourcing subsidiary management of ESG functions separately. But both solutions risk adding costs and duplicating workloads.

The third option is to fully integrate ESG data management and reporting into the subsidiary management framework.

In smaller companies, with one or two global entities, that might be possible through close collaboration between the subsidiary management team and the sustainability officer, if such a position exists.

For larger enterprises, the most efficient and cost-effective option is likely to be a third-party provider that can combine subsidiary management and ESG data management and reporting in one holistic service.

Whatever the specifics of the solution, the obvious alignment between subsidiary management and ESG administration makes a clear case for combining the two.

Both functions need to sit at the core of the company. Both need a presence in every far-flung jurisdiction in which it operates.

The potential synergies are hard to ignore.

Why Intertrust Group?

• Our Global Entity Solutions (GES) department provides a broad menu of corporate secretarial services and is experienced in maintaining entities within global portfolios in more than 150 jurisdictions.
• Intertrust Group is a publicly listed company with 70 years’ experience in providing world-class subsidiary management and administration services to clients around the world.