Spark Newsletter – February 2024
This month’s newsletter focuses on the top operational risks and key regulations that companies will want to make sure are on their radar this year.
What Are the Top 10 Operational Risks for Companies in 2024?
The past couple of years have brought immense disruption and change, creating great challenges and operational risks for companies. As we move past impacts from the pandemic, we see other risks — including geopolitical conflicts, labor shortages and extreme weather events — impacting operational risk management (ORM). To paint a better picture of the current operational risk landscape, Sphera’s subject matter experts compiled a list of risks that should be on ORM professionals’ radars this year.
Some of the considerations they took into account are:
Regulatory Roundup
We rounded up some key regulatory developments that you are likely already aware of and will want to be sure to keep on your radar this year.
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Sustainability and Climate-Related Regulatory Developments
In October 2023, California established itself as a climate leader by passing two bills that require public and private companies operating in the state to disclose their greenhouse gas (GHG) emissions and the climate-related financial risks they face. California’s Climate Corporate Data Accountability Act (SB 253), requires companies—both public and private—with over $1B in annual revenues operating in California to disclose their greenhouse gas (GHG) emissions, including Scope 3 emissions.?Other U.S. states may follow California’s lead, with New York likely to be next in line. California’s Climate-Related Financial Risk act (SB 261), requires public and private companies operating in California with revenues of $500M or more to report the climate-related financial risks they face. They must also report on the measures they are taking to manage those risks and adapt to climate change.
The Corporate Sustainability Reporting Directive (CSRD) introduced new obligations and stronger rules for the mandatory annual reporting of environmental, social and governance information and went into force in January 2023. Companies must report against the European Sustainability Reporting Standards. The CSRD will affect?all large companies?and?all companies listed?on EU-regulated markets. Information from their subsidiaries must also be assessed. Certain non-EU enterprises are included, though their reporting requirement kicks in later, in 2028.?
The EU Sustainable Finance Disclosure Regulation (SFDR) standards provide end-investors with transparent and comparable information to assess the sustainability performance of financial products. A public consultation period seeking input on how the regulation is working in practice closed in December 2023, so stay tuned for possible action based on the feedback received.
A big question on many business leaders’ minds right now is whether the U.S. Securities and Exchange Commission (SEC) climate disclosure regulation will include Scope 3 requirements. The timing of when the rules will be announced is still uncertain, but this is a key regulation companies will want to keep an eye out for this year.
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Supply Chain Regulations
Supply chains are under closer scrutiny in many parts of the world, with new regulations adding to corporate compliance responsibilities. Many of these newer regulations apply not only to the companies based in their jurisdictions, but also to those that work with them. The EU's Corporate Sustainability Due Diligence Directive (CSDDD) is one of those regulations. The directive will prompt businesses to examine their operations and those of their subsidiaries, as well as their supply chains for any negative environmental and social impacts. The text of the CSDDD is currently being finalized and will be published this year.
We hope you found this issue of the Spark Newsletter to be informative and insightful. Between issues, you can keep current with the latest from Sphera by following us on LinkedIn or by visiting us at sphera.com.