By Chrissy Blasinsky
ALEXANDRIA, Va. – Let me tell you – ESG is a boring acronym that sounds like an outpatient medical procedure. But unfortunately it is not. It stands for Environmental, Social and Governance, and ESG scoring has quickly become an indicator of a well-run company that is more focused on long-term vision than short-term gains.
In (some) other words, if you want to have access to capital or will do so later, you should read on.
An ESG report defines what your company does and commits to in the areas of environment, society and corporate structure. This is how your company manages its risk management, and it is also becoming common for financial institutions to consider ESG factors when lending to companies or granting lower interest rates to borrowers based on their sustainability profile, drawing attention to climate risks and areas such as executive compensation , political affiliation and working conditions.
Speaking of climate risks, the U.S. Securities and Exchange Commission earlier this year proposed two rules aimed at mitigating misleading or deceptive claims made by U.S. funds about their ESG credentials and increasing disclosure requirements for those funds.
NACS has major concerns about one of the proposed rules and the negative impact it would have on retailers of publicly traded stocks and debt, as well as those that are privately held and not subject to SEC regulation. Here are our comments:
“The industry takes its role in reducing carbon emissions seriously and recognizes that reporting structure and consistency are helpful goals. However, in our view, the proposal goes beyond the SEC’s statutory powers, is contrary to its mission, and creates unwieldy economic burdens on companies entirely outside its jurisdiction…”
The SEC’s proposal would also reinforce ESG, “highlighting the importance of supplier-retailer relationships at a level we haven’t seen before,” said Mike Roman, senior fellow on public policy and ESG at the American Council for Capital Formation and Member of the Fuels Institute Advisory Board during a recent Convenience Matters podcast.
In late October, the SEC announced it would miss its deadline and found a technical flaw in its commenting system. However, expect this issue to keep moving… just not as quickly as expected.
In the meantime, let’s get back to the “why” behind ESG planning and reporting, which Roman summarizes:
“I’ve talked to banks. They are asked by their shareholders: “Where do you invest your money and who do you finance?” In terms of financing, the discussions about gas stations and convenience retailers become important because banks are asking this question. …retailers…will buy new locations and introduce service equipment for electric vehicles and other types of fuel, but they will also need to maintain and modernize their existing facilities. To do that, You have to borrow money and explain to a bank – so that a bank can explain to its shareholders – where the money goes. It’s a challenge, and it’s a new one that they didn’t have to face.”
Regulatory Outlook: Expect Changes
Although ESG reporting is voluntary, that is about to change. The convenience and fuel retail industry sells 80% of the fuels purchased in the United States, which means that ESG requirements would absolutely impact your business. And it’s not just for listed retailers – privately owned retailers looking for investors, access to capital, insurance or credit will also be impacted by ESG policies.
Find out how ESG impacts your business in this week’s Convenience Corner blog post, Why You Should Care about ESG.
Chrissy Blasinsky is Content Communications Strategist at NACS.