ESG compliance means making sure your business follows standards for environmental, social, and governance (ESG) practices. Here’s the breakdown:
- Environmental compliance. How your company positively contributes and reduces its negative impacts. An example is lowering or eliminating your company’s carbon emissions.
- Social compliance. How your company treats people, encompassing fair labor practices and investing in the well-being of your employees and communities where you work.
- Governance compliance. How your company is run. Is your leadership ethical? Are decisions made with transparency? Are business strategies actually sustainable?
From a strictly human resources standpoint, ESG is how you support employees, manage global teams responsibly, and ensure ethical labor practices across borders.
Why does ESG compliance matter?
ESG compliance is good for the earth. But is it good for business?
The answer may not matter; in a growing number of jurisdictions, ESG compliance is required by law.
In the EU, for example, companies must follow the Corporate Sustainability Reporting Directive, which requires certain companies to “publish regular reports on the social and environmental risks they face, and on how their activities impact people and the environment.”
Meanwhile, in California, companies whose revenues exceed certain thresholds must start to share their climate impact with the public.
From Los Angeles to Lisbon, laws like these make ESG compliance a necessity, not an option.
Business benefits of ESG
A strong ESG profile attracts talented people who want to work for and support organizations that align with their values. Such companies have an edge on engaging and retaining their talent, and they stand out to investors who tend to believe that such organizations are better, safer bets.
Take Patagonia. Their ongoing emphasis on ESG compliance has helped them grow and stay profitable. As a result, they have carved out a well-respected niche in the world of top-notch outdoor brands.
Put plainly, a company that reduces operational risks linked to environmental and social issues is better poised to succeed in the marketplace than a company that doesn’t. Although the story isn’t over yet, Target’s rollback of its well-respected diversity, equity, and inclusion programs—a pillar of the social compliance component of ESG—has cost the company billions of dollars in boycotts.
Is there a catch?
If there’s any catch to ESG compliance, it’s that, like most things in business, it’s easier said than done.
Here’s a summary of the most challenging parts:
- Complex, evolving regulations. ESG-related regulations are constantly changing and differ significantly across regions. You must stay agile and invest in strong compliance systems to manage these overlapping requirements and avoid costly penalties.
- Data collection difficulties. Regions tend to track different ESG metrics, with suppliers and business units often using inconsistent systems or reporting standards. This patchwork approach leads to gaps, errors, and fragmented information, making reliable compliance and transparent reporting tough to achieve (but not impossible) for multinational organizations.
- Aligning policies and practices across countries. It’s difficult to align ESG policies across multiple countries, as each region has its own regulatory standards, cultural expectations, and legal requirements.
How can Pebl help?
Compliance is one of those things you just can’t escape—so embrace it instead. You could hire dozens of experts across borders and continents to make sure you’re compliant…
Or you could just partner with Pebl.
Our employer of record services take the stress out of navigating local labor laws in 185+ countries worldwide, letting you operate without setting up a local entity. We handle compliance, contracts, and everything in between.
Here’s how we support your journey to ESG compliance:
- Put your global employment data at your fingertips, so ESG reporting is accurate and ready when you need it.
- Track DEIB the smart way, with intuitive tools that make compliance easy and help your business drive real progress.
- Stay ahead of climate-related workforce disclosures.
- Centralize your headcount and operations data to deliver transparent, actionable insights for every jurisdiction.
Let’s talk about how we can help you stay ESG compliant, wherever your business takes you.
This information does not, and is not intended to, constitute legal or tax advice and is for general informational purposes only. The intent of this document is solely to provide general and preliminary information for private use. Do not rely on it as an alternative to legal, financial, taxation, or accountancy advice from an appropriately qualified professional. The content in this guide is provided “as is,” and no representations are made that the content is error-free.
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