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EQS Group
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== The whistleblowing opportunity == EU regulation regarding the provision of secure procedures for corporate whistleblowing was put in place in 2019, with a requirement for it to be incorporated into the legislative framework of member states by the end of 2021. Since then, the timeframe has slipped, with eight countries having adopted the relevant laws (although none has yet transposed the provisions into their national legal and institutional systems), 17 countries are listed as ‘delayed’ and one, Hungary, has yet to start the legislative process. Denmark was the earliest country to adopt the law, passing the necessary legislation in June 2021 with implementation on 17 December 2021. Due to the delays, the EU served a notice of infringement on Denmark in January 2022. '''Exhibit 4: Current status of whistleblowing legislation as at April 2022'''<ref name=":1" /> [[File:Image6-c6dd0fbb760921c68274a02aac6607ec.png|514x514px]] This whistleblowing regulation applies to organisations with more than 50 employees. Those with over 250 employees must comply within two years; those with 50 to 250 have a maximum of a further two years. Reporting can be via an online system or via more traditional communications, with obvious major advantages to the former in terms of process and confidentiality. '''Exhibit 5: Whistleblowing market and conversion targets'''<ref>Source: EQS Group, Edison Investment Research.</ref> [[File:Image7-5c82f9d4103405c86b2901b357f8d53e.png|600x600px]] The acquisitions first of Integrity Line and subsequently of Got Ethics and then Business Keeper have given EQS a highly credible proposition in this burgeoning market. Management estimates that there are 50k companies within the EU that will need to address their systems, with the likely conversion rates as shown in Exhibit 5. The timeframe is dictated by the regulation, so this is an inherently time-limited opportunity. Management made a strategic call to go after this market and then use sales as a bridgehead to sell in a wider range of products and services. It quantified the FY21 investment in additional sales and marketing at €5.6m, with €0.83m having been spent on this effort in FY20. === Competitive positioning === EQS is well-placed to achieve its targeted penetration in Europe, being the largest continental provider. In Germany, Business Keeper was the main competitor (with around half the number of customers of EQS), with a smaller Dutch operator also in the EU market. The largest player in the market is US-based NavexGlobal, with another US company OneTrust also targeting European corporates. Tackling the European market is obviously complicated for US companies by the requirements to operate in a variety of languages and to guarantee that data will be retained within the EU. Smaller companies and start-ups looking to enter this market are unlikely to be able to obtain the correct certifications or have built a reputation for data security and integrity. === The ESG opportunity === The EU has existing regulation on non-financial disclosures, whereby large companies (defined as having over 500 employees) must report information on * Environmental matters * Social matters and treatment of employees * Respect for human rights * Anti-corruption and bribery * Diversity on company boards (in terms of age, gender, educational and professional background) In April 2021, the EU Commission moved forward with a proposal for a Corporate Sustainability Reporting Directive (CSRD). This adds the following components: * Extension of the scope to all large companies and all companies listed on regulated markets (except listed micro-enterprises). * Requirement for the audit (assurance) of reported information. * Introduction of more detailed reporting requirements, and a requirement to report according to mandatory EU sustainability reporting standards. * Requirement for companies to digitally ‘tag’ the reported information, so it is machine readable and feeds into a European single access point. It is anticipated that the first set of standards would be adopted by October 2022, with the intention to translate into national legislative frameworks by mid-2023. However, as has been the case for the whistleblowing regulation, it would be wise to treat this timetable with a degree of scepticism. === ESG COCKPIT to come? === The programme referred to above is clearly compatible with the corporate COCKPIT approach adopted in EQS’s existing business model. Standardised data entry with dashboards to build into a company’s workflow and ensure that deadlines are met, and that the information is compliant with regulatory requirements – this is all very familiar territory. However, the working expertise to design and build the required elements is not a resource currently available in-house. Hence, EQS was in discussions to acquire a pioneering sustainability consultancy, DFGE, as announced in February 2022. Both parties were unable to meet on price but are still open to collaboration in future. EQS is now set on building a software solution internally and has recruited an MD, Tomas Krick, who had previously built up the ESG offering at Deloitte, Germany.
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