Latest news with #JamesFeltonKeith
Forbes
3 days ago
- Business
- Forbes
Compliance Playbook For US Companies In Response To Europe's CSRD
James Felton Keith is CEO at Inclusion Score Inc. and Labor Economist at Keith Institute. His latest book is #DataIsLabor. As Europe tightens the screws on corporate accountability through the Corporate Sustainability Reporting Directive (CSRD), many American business leaders may assume this legislation is a foreign affair. It's not. U.S. companies with European operations—whether through subsidiaries, branches or major supply chains—will be swept up in the CSRD's broad reporting requirements. And the clock is ticking. Having already started and phasing in through 2028, the CSRD will apply to over 50,000 companies, including thousands of U.S.-based firms. This includes if your company is publicly listed in the EU, has more than €150 million in EU revenues and at least one EU subsidiary or branch or is a large private company doing business in the EU. In other words, you can be subject to CSRD compliance, even if your headquarters is in New York, Houston or Silicon Valley. Compliance is not just about carbon disclosures. It demands a comprehensive environmental, social and governance (ESG) narrative—validated by third-party audits and reported in a digital format aligned with the European Sustainability Reporting Standards (ESRS). Social impact, particularly around human capital and workforce inclusion, is a major pillar. This is where I think many U.S. companies will stumble. American firms often lag behind their European counterparts in measuring and managing workforce equity in a systematic and certifiable manner. To communicate effectively across international borders, companies and governments are turning to the ISO-30415:2021 standard on diversity and inclusion, which provides a clear framework that supports the social reporting requirements of the CSRD. It breaks diversity and inclusion into four business functions: 1. Governance 2. Human resources 3. Product delivery 4. Supplier diversity These all mirror the key dimensions the CSRD asks companies to assess. Among the four, product and supplier diversity is typically the least developed, particularly across the S&P 500 and S&P Europe 350. Overall, though, I find that none of the four DEI categories are being effectively integrated into or conveyed through companies' operational risk management framework or personnel. This is not just a regulatory issue, but an insurance risk management cost. This is a global issue, and it is important to note that Lloyd's syndicates are using the ISO-30415 standard for DEI to segment underwriting of employment and professional insurance lines as grievances and lawsuits rise. According to a recent analysis by Bank of Montreal (BMO) and the Swiss Re Institute, the social inflation rate—the trend of rising insurance claims costs driven by increased litigation—is not expected to slow in 2025, posing a threat to insurer profitability and overall market stability. Under normal conditions, social inflation rates are about 3.7%. However, rates averaged about 7% between 2017 and 2023. For companies under CSRD scrutiny, this means focusing on audit-readiness for social impact statements, maturity models for continuous improvement and workforce data collection and analysis frameworks that can stand up to European regulators. My previous article explores the shift toward systematic DEI management through the adoption of ISO standards. To be clear, the ISO standard is the first and only global consensus on intentional equity and inclusion, designed as a risk management tool for complex organizations—particularly those operating across state and international borders. Companies should seek certification of both individuals and organizational silos in the standard to communicate their maturity to both insurers and regulators. In my experience, people often assume that there have been many "DEI" standards, but that is not the case. What we're seeing instead is the emergence of an industry focused on managing people alongside technology as central to the future of work. The ISO 30415 standard, in particular, is currently being adopted by a range of national and international regulators, including the French Association for Standardization (AFNOR) in France, the British Standards Institution (BSI) in the United Kingdom, the Standards Council of Canada (SCC) in Canada, the Colombian Institute of Technical Standards and Certification (IconTec) in Colombia and the National Science Foundation (NSF) in the United States. The ISO-30415 Diversity and Inclusion Service Management Forum currently offers certification in more than 100 countries and in four languages. The list of those who will be impacted within the United States is extensive and include: • Big tech (e.g., Apple, Meta, Microsoft, Google) with large European footprints • Pharmaceutical and healthcare companies (e.g., Pfizer, Johnson & Johnson, Abbott) with global clinical trials and EU sales • Financial services firms (e.g., JPMorgan Chase, Goldman Sachs, Citibank) with EU branches or listings • Multinational manufacturers and energy giants (e.g., General Electric, ExxonMobil, Ford, Caterpillar) • Retail and consumer goods companies (e.g., Procter & Gamble, Nike, Coca-Cola, McDonald's) selling to or sourcing from the EU If your company does over €150 million in revenue in Europe, has EU-based subsidiaries or trades in European markets, you're on the hook, and you will need a social accounting system to demonstrate compliance. Failing to comply with CSRD means more than reputational damage. It could lead to legal penalties, investor pressure and contractual barriers to market access in the EU. On the other hand, companies that take proactive steps to align with ISO-30415 stand to gain: • A competitive edge in global procurement and investment • A clear internal roadmap for DEI implementation • The ability to future-proof their workforce reporting in line with international standards As European regulators shift sustainability from voluntary to mandatory, American businesses must shift diversity and inclusion from a moral initiative to a measurable business function. I believe the ISO-30415 standard is the best tool to get there—and the CSRD is the reason you can't wait. Forbes Business Council is the foremost growth and networking organization for business owners and leaders. Do I qualify?
Forbes
02-05-2025
- Business
- Forbes
The Business Impact Of New York's New DEI Constitution Compliance
James Felton Keith is CEO at Inclusion Score Inc. and Labor Economist at Keith Institute. His latest book is #DataIsLabor. Among other complications, companies are now having to navigate a maze of new executive orders and political pressures. But here's the kicker: Despite all the headlines and debates in Washington, D.C., the actual federal laws haven't changed. What has changed is the level of risk, and New York just made that risk very real. While much of the country was focused on the presidential race during the 2024 election, New Yorkers voted on something I see as equally transformative: Proposal 1. Known as the Equal Rights Amendment (ERA), this ballot initiative amended the state constitution to explicitly prohibit discrimination based on ethnicity, national origin, age, disability, sex, sexual orientation, gender identity and expression, pregnancy and reproductive healthcare access. This isn't just symbolic. It's law—and it carries real teeth. I followed this amendment closely, believing it represented a significant legal and cultural shift. It's no coincidence the state-level ERA shares a name with the long-fought federal Equal Rights Amendment, which aimed to protect women's rights for nearly a century. The last administration described it as a would-be 28th Amendment after the 38th State Legislature ratified it. Though the federal version has faced hurdles, New York is moving forward, leading the way as it often does. New York isn't just any state—it's the financial heartbeat of the planet. When New York updates its constitution, it doesn't just affect public offices and schools. It impacts any business tied to the state through regulation, funding and contracts. We've seen this move before. Back in 2017, New York led the charge on cybersecurity regulation in response to the GDPR and skyrocketing insurance premiums. The Department of Financial Services rolled out "the Cyber Regulation," allowing it to audit nearly any business with financial ties to the state. That meant banks, insurers, manufacturers and even IT shops with a handful of employees in New York all found themselves under scrutiny. The result? Compliance became non-optional. Let's draw a powerful parallel. According to IBM, 95% of cyber breaches are caused by human error. The easiest way to cut cyber risk? Improve your people practices. But here's the twist: Human risk isn't just a cyber issue—it can also be seen as a DEI issue. A disengaged or harassed employee can be a business liability. And with DEI-related grievances, it's not just reputational risk at stake—it's financial. Insurance claims tied to discrimination or retaliation often trigger massive payouts through Directors & Officers (D&O) or Employment Practices Liability (EPL) coverage—two markets now worth over $30 billion globally, with Gallagher reporting that they are growing at 10% to 25% annually. Ignoring inclusion isn't just a moral misstep anymore; it's a balance sheet problem. If your business fits any of the following categories, there's a chance you could be impacted: • Receive New York State funding. • Contract with New York State. • Earn over $7.5 million annually from New York residents. • Employ 15 or more people in the state. In short: If you touch New York in any meaningful way, this law touches you. Here's the bottom line. While DEI programs have come under increased scrutiny in some federal discussions, for now, the legal foundation remains largely unchanged. Scaling back inclusive practices as a legal precaution could, paradoxically, increase exposure to risk from employees or regulators. We're entering a new era where efforts of deliberate equity and inclusion will have to be more explicit instead of vague. Don't take it from me, take it from the lawyer who helped develop DEI, Dawn D Bennett-Alexander, who, in an article I co-authored, writes that "organizations do not need to abandon DEI" and should continue "evidence-based DEI strategies." Forbes Business Council is the foremost growth and networking organization for business owners and leaders. Do I qualify?
