ESG And DEI: Managing Competing Reporting Obligations In The U.S. And Internationally (Video) – Diversity, Equity & Inclusion

President Trump’s recent executive orders call for the
elimination and, in some cases, requisite penalties for certain DEI
initiatives and the data collection and reporting that accompanies
them. In addition to raising questions about company culture, these
orders may conflict with the mandates of the EU’s Corporate
Sustainability Reporting Directive (CSRD), creating compliance
issues for global employers.

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Transcript

INTRO

President Trump’s recent executive orders call for the
elimination and, in some cases, requisite penalties for certain DEI
initiatives and the data collection and reporting that accompanies
them. In addition to raising questions about company culture, these
orders may conflict with the mandates of the EU’s Corporate
Sustainability Reporting Directive (CSRD), creating compliance
issues for global employers.

On this episode of We get work®, we explain how
cross-border employers should approach these opposing policies and
what questions should guide their next steps.

Our hosts today are Laura Mitchell and Jean Kim, principals,
respectively, in Jackson Lewis’ Denver and Atlanta offices.
Laura co-leads the firm’s ESG group, and Jean focuses her
practice on cross-border employment work.

Laura and Jean, the question on everyone’s mind today
is: how can I remain compliant with contrary policies across
borders, and how does that impact my business?

CONTENT

Laura A. Mitchell

Principal, Denver

This is Laura Mitchell, and I am thrilled to be here today
speaking with a new addition to our JL team, Jean Kim. Jean is a
member of our International Group and sits in Atlanta. Welcome,
Jean, to JL and to the We Get Work podcast series.

Jean Kim

Principal, Atlanta

Thanks, Laura. Nice to be here. Just to give a little background
of myself, I’m Jean Kim, and I’m one of the principals with
the International Employment Group here at Jackson Lewis. I
regularly advise clients that have both U.S. and international
operations. In other words, when a client crosses at least one
country’s border in relation to their workforce, I’m here
for it.

So, in that vein, we’ve had questions pop up about what
clients should be thinking about in the global space in relation to
what you’re about to talk about here and what we’re going
to discuss. I was hoping that we could share some thoughts on that
point.

Mitchell

We’re going to talk today about global reporting
requirements for companies around ESG, diversity and pay
transparency. The last time that I had a conversation about this
was in December; it feels like a lifetime ago. However, I was
speaking with your colleagues, Chris Anderson and Pieter Pecinovsky
from our L & E Global Consortium. We knew we were going to come
back and talk about this some more, but I don’t think we knew
we would be back this soon or have this much to talk about.

So, there’s been a lot going on since December. In fact,
there’s been a lot happening in the last 30 days. I just want
to recap what’s going on in the U.S. before I kick it over to
Jean to give us a synopsis of new updates from the global
perspective. President Trump has issued a number of executive
orders impacting all areas of workplace law, but a few have
centered on diversity specifically.

We have, in particular, Executive Order 14173 ‘Ending
Illegal Discrimination and Restoring Merit-Based Opportunity.’
This executive order really has employers in the U.S. in a
tailspin. There are specific requirements for federal contractors
and implications for private employers. It’s being touted by
the administration as the most important federal civil rights
measure in decades. It seeks to end ‘illegal DEI
discrimination.’ It doesn’t define what those terms are, so
that’s part of the tailspin that employers are dealing with.
But it’s really focused on rooting out employers and employer
DEI programs that constitute illegal discrimination or provide
preferences. But it goes hand in hand with this notion of diversity
demographic data, analytics and reporting.

For companies that do business with the federal U.S. government,
it means the end of affirmative action planning, reporting
requirements in that space and even a forthcoming contract term
that they are going to have to certify under the threat of False
Claims Act action that they are not engaging in any unlawful DEI
programs or discrimination.

Then, for private employers or those that don’t do business
with the federal government, the executive order involves
heightened scrutiny and possible investigation by the Department of
Justice into diversity and inclusion practices. So, that is the
landscape that we’re here dealing with in the U.S. We knew
there was going to be some change when we talked in December, but I
don’t think that we appreciated the magnitude or the swiftness
with which this came.

What are you all seeing internationally with respect to
diversity initiatives and even some implications of what’s
going on here in the U.S.?

Kim

At this time, companies are mainly asking how the executive
orders impact reporting obligations in the EU, which makes sense
since the EU directives that you discussed on the previous podcast
likely apply to a majority of clients with global operations.

While that’s a great start, the questions we should start
asking largely fall into three buckets. One with that question
being the first bucket, more generally put, the first bucket is
what is the EO’s impact on the new regulatory environment for
international reporting rules such as the EU’s Corporate
Sustainability Reporting Directive (CSRD)? The second bucket would
be how international reporting rules, such as the EU’s CSRD,
impact U.S. obligations. Lastly, the third one would be DEI, in
general, as a global company.

Mitchell

So, just to summarize, there is not really a legal implication
yet for the global reporting requirements as implicated by this
executive order if I’m understanding.

Kim

Correct. Strictly speaking, the anti-DEI EOs do not apply
outside the U.S., but we should be recognizing that those same EOs
may have an impact on a company’s reporting requirements
outside the U.S. and vice versa, and also a company’s global
DEI space, in general. When you’re being told that your DEI
programs and initiatives are illegal in one country but in other
countries you operate in, you are subject to laws that essentially
require you to have those DEI initiatives. You can high-level take
the position that only in scope operations will report and comply,
if applicable. You can’t and shouldn’t ignore what that
means for your company’s reputation, whether that’s
internally and externally, or how that is going to shape your
company culture, the employee experience and so forth. Again, those
are the questions we should be asking ourselves at this time.

Mitchell

That is consistent with what we’ve been talking about in the
ESG space for a while now. This notion of values-based governance
and organizations understanding who they are, what they stand for
and how they are going to communicate that in the face of various
different pressures from shareholders, employees and
regulators.

So, it feels like that conversation now is just elevated. We are
talking about this on steroids, and companies really need to decide
what they are going to talk about and how they are going to talk
about diversity. How are they going to reassure their employees
that they are still an organization that has values, cultures and
core beliefs and upholds the law while also not drawing the
attention or the ire of the administration?

Do you think that this is a conversation that is happening
globally as well?

Kim

Of course, companies have been having these types of discussions
for a very long time and will most likely continue to do so. In my
opinion, these EOs and international reporting or disclosure
obligations don’t and shouldn’t change that as a fact.
Instead, it should change how we talk about it and what direction
the discussion goes in. When there is a push for enhanced DEI or
ESG-related considerations, we’re going to talk about them.
When there’s the opposite, we are still going to talk. We
expect that organizations will need to navigate these conflicting
requirements and figure out what to prioritize, what they’re
legally required and obligated to do and ultimately, figure out
what they want to do as an organization.

Mitchell

Is this a discussion or a consideration that’s happening
globally as to where are a company’s values and cultures, and
what they’re communicating to employees in the positions that
they’re taking publicly?

Kim

I do believe that it’s a discussion that’s happening in
the global space. Not only is this a matter of addressing
regulatory requirements, whether it’s from a reporting
standpoint or a disclosure standpoint, but like you said, it’s
a matter of how you’re going to frame your internal culture and
your company’s reputation internally or externally. So, at that
point, we need to start talking about how we comply with these
non-U.S. requirements along with the “anti-DEI
requirements” that are newly developing here in the U.S. while
still maintaining what we as a company would be prioritizing
whether that’s your culture, your reputation, your PR matters
and so forth.

Mitchell

One of the things that we talked about with Peter and Chris was
the fact that globally, and the EU especially, are just pushing
forward with these initiatives. We’re not seeing a retraction
or a pullback on these like we have seen in the U.S. over the last
year or so. The schism between the two is going to become greater.
So, I’m curious about the practical implications of that for
global organizations. It may vary depending on, the point that you
made before, whether you’re a U.S.-based company with global
operations or you’re a global company with U.S. operations. How
do you see organizations starting to think about their reporting
requirements, and again, practically speaking, what are some
tactics that they can employ to comply in both spaces?

Kim

I’m going to have to take us back to the three buckets,
Laura, that I mentioned earlier. I believe we first need to look at
it separately from each bucket’s vantage point. Once we
identify the overlap, take a position that aligns with the
company’s risk tolerance level. If you have a company culture
that focuses on messaging from the top down or leads by example at
headquarters, this may result in giving more autonomy to your U.S.
entity or your non-U.S. entity to set forth certain initiatives in
the DEI space. It could also result in finding a creative solution
to maintain company initiatives by reframing them one way or
another.

Mitchell

That makes a lot of sense. I know the EU’s CSRD is probably
the most notable or most well-known of these requirements, but
there are other countries that have obligations as well. It’s
akin to how pay transparency has developed in the U.S. Each state
has come out with its own laws that may be similar and may borrow
some language from other states, but they really are an
amalgamation and unique in their own jurisdiction. Organizations,
just multi-state organizations, have had to decide whether to take
a centralized approach to addressing pay transparency or to take it
on a case-by-case, jurisdiction-by-jurisdiction basis.

What is the suggestion with respect to global requirements and
reporting? Is it practical to take this piecemeal patchwork
approach to it? Or do you really think that in the global space, a
more unified, harmonized approach is the better way to go?

Kim

I’m usually a proponent of harmonizing employee relations
and experience matters. That being said, that may be a more
risk-tolerant approach for some companies. At the end of the day,
you know what is more important to you as a company; you know how
you’ve been operating. I’m not advising that all of a
sudden, all the companies listening today that have been taking
piecemeal approaches, country-by-country approaches, whatever that
may be, to suddenly start taking a harmonized approach to this one
issue. It’s not something that’s going to change overnight,
and you know what works best for you. But if you are a company that
harmonizes, for example, your employment practices, your policies,
your trainings and so forth, that’s something we may want to
talk about.

Mitchell

That makes a lot of sense. Here, too, in the U.S., as we see
more states come online with pay transparency requirements and as
we see individual states respond to what we’re seeing coming
from the administration in this DEI space, it’s going to have
to be a company-by-company determination of what makes the most
sense for them as an organization.

But I really do think that this harmonization of responses is
going to be important because, at the end of the day, the
organization does need to have a voice as to who they are. Whether
that is a unified voice across borders or if it’s a voice for
the U.S. and a little more of a vocal and diverse voice across the
border, it’ll be important for them to understand what those
risks are for either approach.

So, with that, what would you say would be the number one
takeaway that you would want folks listening to us today to think
about and to take back to their organizations?

Kim

Understanding your current DEI programs and initiatives and then
carefully assessing the legality and impact of those practices
going forward against local requirements is something that we need
to prioritize. The EU reporting requirements are, of course, at the
forefront of most minds, but I mean local requirements in a broader
sense than that. For example, in the UK, the government is
proposing new diversity laws, which include mandatory ethnicity pay
gap reporting on employers. If that becomes an obligation, when
reporting on those, you’ll likely need to show what the
organization did to address any disparities or what you plan on
doing to that extent. Arguably, that could fall under a DEI program
that conflicts with the U.S.’s recent EOs.

Another thing to think about are your HR trainings.
Anti-harassment or anti-sex harassment specifically are required in
many jurisdictions outside the US. Those types of trainings are
often categorized under an umbrella of DEI-related mandatory
trainings for employees. U.S. companies also typically subject
their non-U.S. employees to these types of trainings from a global
standard, even though they’re put together from a U.S. mindset.
So, what happens when you stop offering those to comply with U.S.
requirements? How will that impact your non-U.S. operations and
compliance matters? Those are all things that we should be thinking
about today coming off of this podcast for sure.

Mitchell

That is such sage advice. It’s a good reminder that at the
end of the day, U.S. employers are still bound by the
non-discrimination, non-harassment requirements of Title VII and
our other anti-non-discrimination laws. So, that still should be
our guiding principle. It should have always been our guiding
principle, but it still is our guiding principle today.

You recommended taking a measured and thoughtful approach. I
know a lot of organizations were really blindsided by these
executive orders here in the U.S. There was this rush to respond,
to ensure that we weren’t putting our reputation at risk and
that we weren’t kind of ending up on a watch list for the
government. But quick knee-jerk reactions may ultimately come back
and create more risk than, as you mentioned, having a really
comprehensive, thoughtful approach of how we’re going to
address all of these in a compliant way to ensure that we
aren’t running afoul of any of our obligations, whether they be
in the U.S. or globally.

With that, thank you so much, Jean, for joining me today. This
was another great conversation. As I ended our last podcast,
I’m sure we will be talking about this again in the future,
probably in the near future. I look forward to chatting with you
again.

OUTRO

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