Sam Eastwood

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On 1 June 2023, the European Parliament (the “EP“) plenary session adopted its proposed amendments to the draft EU Corporate Sustainability Due Diligence Directive (“CSDDD“).

The adopted text largely mirrors the version voted on by the EP’s Legal Affairs Committee in April 2023 (which we discussed in our earlier blog post), in that it confirms that:

  • asset managers and institutional investors will be in-scope;
  • the due diligence requirements will apply to: (i) EU companies with over 250 employees and a global turnover of over €40 million; (ii) parent companies with over 500 employees and a global turnover of over €150 million; and (iii) non-EU companies with a global turnover of over €150 million if at least €40 million of this was generated in the EU; and
  • directors of companies with more than 1,000 employees will be responsible for ensuring the company implements a transition plan that is compatible with the goals of the Paris Agreement.

The adopted text also confirms that non-compliant companies may be liable for damages and could be sanctioned by the national supervisory authorities of EU member states. Sanctions include taking a company’s goods off the market and/or the imposition of fines of at least 5% of a company’s net global turnover. Non-EU companies that fail to comply may also be banned from public procurement in the EU.…

Continue Reading Human Rights and the Environment – European Parliament adopts amendments to draft Corporate Sustainability Due Diligence Directive

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On 24 May 2023, Walk Free, an international human rights group focused on the eradication of modern slavery, published the fifth edition of its Global Slavery Index (the “Index”), which provides a national level analysis of modern slavery across 160 countries.

Modern slavery is a growing global problem against a backdrop of compounding risks.  According to the Index, some 50 million people around the world are living in modern slavery, with a reported 28 million in forced labour, 22 million in forced marriage and 12 million in child labour.  Moreover, the Index estimates that around US$ 468 billion of goods imported by the G20 are at risk of being tainted by modern slavery. This includes products related to: cattle, coal, cocoa, coffee, electronics, fish, garments, gold, palm oil, rice, solar panels, sugar cane, textiles and timber.

The Index includes a heatmap that illustrates where modern slavery risks are more acute.  In practice, this may prove to be a helpful tool for companies seeking to identify and assess human rights (and, in particular, modern slavery risks) in global supply chains in order to respond to: emerging mandatory human rights due diligence (“HRDD“) laws; obligations under established international norms (such as the UN Guiding Principles); and increasing stakeholder expectations.…

Continue Reading Business and Human Rights – Global Slavery Index 2023 highlights global nature and scope of modern slavery risks in supply chains

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On 25 April 2023, the European Parliament’s Legal Affairs Committee voted in favour of a revised version of the EU draft Corporate Sustainability Due Diligence Directive (“the Draft Directive”).

The revised version differs from the versions that we have previously commented on here, here and here in the following key respects:

  • Inclusion
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Risk Management

Companies must recognise that they are subject to increased expectations in terms of effective identification and management of social issues. A failure to do so – and the resulting inequality – is increasingly seen as representing a systemic risk to the resilience of business operations and value chains. Expectations are reinforced by the wave of new due diligence regulations and reporting standards focussed on addressing both the ‘E’ and ‘S’ in ESG (see, for example, our earlier blog posts on the EU’s Corporate Sustainability Reporting Directive here, as well as on the UK Financial Conduct Authority’s Greenwashing rules here).

CFOs have a critical role in communicating how companies are addressing wider social issues linked to their business operations and ensuring companies’ compliance with related regulations and reporting standards. To help CFOs execute this role effectively, the World Business Council for Sustainable Development (the “WBCSD“) and Shift have released a primer for CFOs for advancing the ‘S’ in ESG (the “Report“). The Report aims to provide a starting point for CFOs working to address the demands and challenges associated with the ‘S’ in ESG, covering both an overview of the what, the who and the how of corporate social performance and key recommendations for improving the measurement of that performance.…

Continue Reading Business and Human Rights – a “primer” for CFOs for advancing the ‘S’ in ESG

modern-slavery

In what marks its latest move to tackle modern slavery, on 10 February 2023, the UK Government published its new guide for commercial and procurement professionals, entitled “Tackling Modern Slavery in Government Supply Chains” (the “Guidance”). The Guidance is aimed at helping procurement and commercial practitioners at all levels who are operating in government comply with their statutory obligations in respect of modern slavery. It builds on the UK Government’s “Slavery and human trafficking in supply chains: guidance for businesses” and its modern slavery statement Progress Report.…

Continue Reading Business and Human Rights – the UK Government publishes new guidance on tackling modern slavery in Government Supply Chains

On 26 January 2023, the UK’s Competition and Markets Authority (the “CMA“) announced that it intends to investigate the accuracy of environmental claims made by businesses in the fast-moving consumer goods (“FMCG”) sector. The CMA has stated that it will examine claims made both online and in-store about household products – such as food and drink, cleaning, homecare and self-care products – to determine whether they comply with UK consumer protection law.

The investigation of goods in the FMCG sector will expand the scope of the CMA’s ongoing anti-greenwashing work, which has the ultimate aim of ensuring products and services that claim to be ‘green’ or ‘eco-friendly’ are being marketed to consumers accurately.…

Continue Reading Greenwashing: UK competition watchdog to investigate the FMCG sector

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On 24 January 2023, each of the European Parliament’s trade committee and economic affairs committee reached agreed positions on the financial aspects of the draft Corporate Sustainability Due Diligence Directive (the “Draft Directive”). The agreed positions mark a departure from the European Commission’s and the Council of the European Union’s previous positions on the…

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FTSE Russell – a leading provider of benchmarks that are used extensively by investors across the globe – has removed 34 companies from the FTSE4 Good All-World benchmark (the “FTSE4Good Index”). The companies were removed for failing to meet climate performance standards imposed by the newly introduced ‘Climate Change Score’ system, which is based on parameters created by the Transition Pathway Initiative (“TPI”), an initiative backed by 132 investors with over US$50 trillion in assets under management.…

Continue Reading Climate performance – FTSE4Good Index looks to hold companies to higher environmental standards

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By far the largest focus in recent years in terms of ‘responsible investment’ has been on the ‘Environment’ limb of ESG. The UN Principles of Responsible Investment (“PRI“) – an international organisation working to encourage the integration of ESG factors into investment decision making – is now seeking to change this with the launch of its ‘Advance‘ initiative, which is a “collaborative stewardship initiative where institutional investors work together to take action on human rights and social issues”. This forms part of a renewed effort to reinvigorate the ‘Social’ and ‘Governance’ limbs to ESG and bring social initiatives to the forefront of ‘responsible investing’.…

Continue Reading Business and human rights: investors commit to action on human rights and social issues via the world’s largest human rights stewardship initiative

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In January 2023, the Board of Governors of the Federal Reserve System released a report that reviews the climate action plans of global systemically important banks (“G-SIBs”) and summarizes the progress they are making toward achieving them (“Climate Action Report”).[1] As discussed below, the Climate Action Report can be an useful tool for banks that are developing sustainable financing products and climate risk management processes because it identifies key peer behaviors and widely used resources.…

Continue Reading Climate Action and Banks: Review of Climate Action Plans Released by US Federal Reserve