We were proud sponsors of the recent FT Moral Money Summit Europe which took place in London. ESG is at the top of the boardroom agenda, and I was lucky enough to be invited to discuss greenwashing and litigation risks and what I'm seeing in the market.
Firstly, what are the top ESG issues keeping my clients up at night?
- TCFD reporting
- Scope 3 emissions
- Downstream impact of products
- Social governance
Greenwashing risk is an emerging key corporate issue. Some companies released unsubstantiated and optimistic sustainability statements, promoting their "green" credentials, but without the necessary supporting evidence or fully understanding their business impacts, their supply chains and their ESG data. This has led to the opportunity for challenge by means of litigation, NGO challenge and shareholder activism.
Companies need to assume that all their sustainability disclosures will be scrutinised by employees, stakeholders and suppliers and possibly subject to challenge.
We have emerging regulatory frameworks, guidance, standards, policies and emergent taxonomies, so there are more levers and drivers to help companies understand how to assimilate their risks and look at their impacts, and enable them to report in context, and truthfully, where they are on that journey.
I've recently heard the expression "Green-bleaching" which is where companies choose to say nothing about their sustainability credentials in order to avoid challenge, and I don't think that's where most corporates want to be, nor is it helpful to their governance. Sustainability reporting is an essential business tool, it's a competitive tool to know your impacts and be able to disclose properly using the correct standards and taxonomies and policy drivers that are now available.
One of the biggest challenges that clients report to me is the difficulty of keeping on top of all the new developments – it's quite a confusing picture when you look at the regulation and policy initiatives – and General Counsel and sustainability managers have to understand the impacts and the effects of their businesses.
For example, take the EU Corporate Sustainability Reporting Directive (CSRD) which will affect larger corporates based outside of Europe, where your primary markets are in Europe. They will soon be required to disclose under the requirements of the CSRD.
So this really is a global issue and a global picture to stay on top of – disclosures will be scrutinised on a global basis.
Are global standards on the way?
You can watch highlights from my discussion below:
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