Investors are increasingly focussed on how companies address modern slavery and wider human rights issues when making investment decisions.  Despite this, many UK companies are failing to adequately report on, and take sufficient steps to eradicate, modern slavery within their businesses and supply chains, according to the Financial Reporting Council’s (the “FRC“) recently published Modern Slavery Reporting Practices in the UK Report (the “Report”).

The Report, which analysed the reporting practices of 100 companies listed on the London Stock Exchange’s Main Market, highlighted that the majority of companies are failing to disclose sufficient information to enable stakeholders to make informed decisions about companies’ compliance with modern slavery legislation.  Such shortcomings in the quality of companies’ modern slavery reporting presents a number of compliance, reputational and financial risks to companies.

Continue Reading Business and Human Rights: the Financial Reporting Council identifies failings in UK companies’ modern slavery reporting

“Greenwashing” – that is, environmental claims that are not fully or properly substantiated, or that contain false information, omit critical information, are exaggerated or are presented in an unclear, ambiguous and/or inaccurate manner – continues to be a major focus of scrutiny across all sectors, and the advertising industry is no exception.  The volume of statements and claims regarding the sustainability credentials of businesses’ goods and services, often made in the context of advertising and marketing, is increasing rapidly.

At the same time, the interests of regulators, consumers, and other stakeholders, in combatting misleading, “greenwashed” environmental claims has grown commensurately.  According to analysis conducted by the Independent, over the past 12 months alone, the UK’s Advertising Standards Agency (“ASA“) has found 16 advertising campaigns to have exaggerated the green credentials of, or made unsubstantiated environmental claims about, the advertised brands.

As a consequence of this growing interest, the World Federation of Advertisers (“WFA“) – a global organisation that represents the common interests of advertisers and marketers – has issued landmark guidance on how brands can ensure that any environmental claims featured in their marketing communications are credible for both consumers and regulators (the “Guidance“).  The Guidance, produced with the support of the International Council for Advertising Self-Regulation, the European Advertising Standards Alliance and the UK’s ASA (amongst others), is the first guidance that has been issued at an international level with regard to making environmental claims, and represents a highly significant development in the context of growing efforts to combat greenwashing.

Continue Reading World Federation of Advertisers issues guidance on making credible environmental claims

The sustainable investing market has witnessed remarkable growth. At the same time, the field has been challenged by a lack of consistency in identifying what, exactly, makes an investment “sustainable”.  Sustainability taxonomies (or classification systems) have been developed by governments, international bodies and non-governmental organizations to help identify specific assets, activities or projects that meet defined thresholds and metrics that quantify sustainability.  Many of these taxonomies refer to or emulate the EU Taxonomy, widely regarded as the most developed system for sustainable finance investment classification and measurement.

Continue Reading ICMA Identifies Usability Challenges – and Recommends Action – for Implementing the EU Taxonomy

On March 21, 2022, the U.S. Securities and Exchange Commission (SEC) voted 3:1, with only Commissioner Hester Peirce dissenting, to propose long-awaited rules that, if adopted, would require extensive reporting by public companies of climate change-related disclosure and related attestation (the “Proposal”). Comments on the Proposal are due 30 days after

The recent publication, on 27 February 2022, of the second instalment to the Sixth Assessment Report of the UN’s Intergovernmental Panel on Climate Change (“IPCC“) did not receive the same degree of attention as the first instalment in August 2021.  The findings, and message, of the second instalment, are no less severe, or potentially consequential, however, delivering as it does, the “bleakest warning yet” of the impacts of climate change.

The first instalment, developed by the IPCC’s Working Group I, focused on the physical science basis of climate change.  The second instalment, developed by the IPCC’s Working Group II, assesses the impacts of climate change, looking at ecosystems, biodiversity and human communities at global and regional levels.

The findings of the IPCC are, of course, deeply troubling in many respects, and the implications of those findings are likely to be extensive.  One area in which those implications are likely to be felt is that of climate litigation.  As explored in our previous article, the science based findings of the IPCC have played a role in affirming international legal standards on climate change and establishing the link between emissions and climate change, thereby – in some respects – strengthening the cases of climate litigants who may previously have encountered difficulties in establishing causation.  The ever-increasing urgency of the climate crisis, and the willingness – and ability – of stakeholders to use litigation to compel action to address that crisis, will continue to be features of the landscape as attention focuses on the IPCC’s findings.

Continue Reading Climate Change Litigation: the IPCC’s latest Report links climate change to loss and damage

In a recent Legal Update[1], we discussed the emerging intersection between Tax and ESG and highlighted the various external stakeholders pressuring for greater visibility into the global tax positions of multinational companies (MNEs).  One increasingly vocal stakeholder group is activist shareholders.  Recently, a group of institutional investors of a Fortune 50 company initiated a shareholder proposal calling for the company to publicly disclose where and how much tax it pays around the world.  This is only the latest in what is becoming a regular request by activist shareholders.

Continue Reading Tax Meets ESG: Shareholder Activism Expanding to Tax Transparency

In a recent Legal Update[1], we discussed the intersection between Tax and ESG and the challenges companies will face responding to external pressures for greater transparency into a company’s global tax position.  We predicted that once the SEC reporting season began this month, the press would focus on the effective tax rates of high-profile companies.  That is exactly what happened recently when a leading national news outlet reported on the tax position of a well-known multinational.  The article paints an unflattering picture of the multinational’s global tax position and makes generalized observations on structures it might have used to achieve its tax results.  In this blog post, we discuss how companies can prepare for similar reporting.

Continue Reading Tax Meets ESG: Preparing for Bad Press

On 23 February 2022, the European Commission published its much-anticipated draft corporate sustainability and due diligence directive (the Draft Directive), after a number of delays (see our Previous Blog).  The Draft Directive sets out a proposed EU standard for human rights and environmental due diligence (HREDD). This includes an obligation for companies to take appropriate measures to identify actual and potential adverse human rights and environmental impacts arising from their own operations or those of their subsidiaries and, where related to their value chains, from their “established business relationships”.  The Draft Directive also provides a mechanism for sanctions to be imposed for non-compliance with the due diligence obligations and provides for director responsibility and accountability in relation to a company’s HREDD programme.

Whilst the Draft Directive remains subject to further legislative scrutiny and approval, it provides the most detailed insight yet as to the scope and form of the prospective EU HREDD obligations, and it provides a helpful template for corporates to continue developing their due diligence policies and procedures designed to identify, assess and mitigate adverse human rights and environmental impacts – both in their operations and in their supply chains.

Continue Reading Human Rights and the Environment – EU publishes draft Corporate Sustainability Due Diligence Directive

This Lexis practice note discusses market trends in 2021 relating to disclosures of climate change risks and mitigation by public companies, which are intertwined with ESG issues. It also provides illustrative disclosures by public companies regarding how climate change has affected or may affect their operations, both directly (e.g., through disruption of supply chains)

The fashion industry often faces scrutiny from stakeholders to improve due diligence in supply chains.  A landmark proposed bill in New York, drafted last October and presented for the first time to a legislative committee on January 5 2022, is seeking to drive accountability and transparency in the supply chains of fashion companies. The Fashion Sustainability and Social Accountability Act (the “Act“) historic in its scope and nature, would require fashion retail sellers and manufacturers to disclose their environmental and social impacts, and to set out targets to reduce those impacts.

Continue Reading ESG: Fashion in Focus – The Fashion Sustainability and Social Accountability Act