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Companies are increasingly recognising that climate risk poses “strategic and operational risk” that could severely impact business operations. On 3 August 2023, United Nations Global Compact released Just Transition in Supply Chains: A Business Brief (the “Brief”).  At the heart of the Brief is a call for businesses to embed the concept of ‘just transition’ into supply chain risk management, taking into account both the environmental and social impacts of their supply chains. There is real concern that as companies increase their climate mitigation and adaptation activities, such actions may have unintended consequences that negatively affect workers, small businesses and local communities that drive global supply chains. On the other hand, integrating climate and social risks into a business’ core business and risk management could be “mutually reinforcing” and could “deliver valuable co-benefits”.…

Continue Reading UN Global Compact Publishes Business Brief on Just Transition in Supply Chains

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On 8 June 2023, during their Ministerial Council Meeting in Paris, the Organisation for Economic Co-operation and Development (“OECD”) launched an updated version of its Guidelines for Multinational Enterprises (the “Guidelines”). This is the first update to the Guidelines since 2011 and the changes represent substantial and far reaching new expectations for multinationals, particularly in relation to areas of their operations or business which may have human rights or environmental implications. This update sets out a brief overview of the OECD Guidelines and some of the key updates since the 2011 Guidelines.…

Continue Reading A new era for human rights and environmental due diligence: the OECD launches updated Guidelines for Multinational Enterprises

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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

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

Governance

On 28 February 2023, the Judicial Court of Paris (the “Court”) issued an interim order (the “Order”) in the context of a judicial dispute concerning compliance with the French Law n°2017-399 of 27 March on the Duty of Vigilance (the “French Vigilance Law”). This decision is the result of a lengthy judicial process that started back in 2019 when the defendant was summoned by several NGOs before the Court for an alleged lack of compliance with its obligation of vigilance.…

Continue Reading Business and Human Rights: first French case-law on the Duty of Vigilance – judges adopt a cautious approach to avoid judicial interference in corporate management

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

Both the financial sector and the real economy are faced with increased regulatory requirements and expectations of various stakeholders to meet ESG criteria, which are a benchmark for sustainability and sustainable investments. A high ESG rating not only promotes corporate policy, but also serves the profit interest of investors.

Currently, in the EU only capital…

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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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On 21 November 2022, the World Benchmarking Alliance – a non-profit organisation that develops benchmarks to hold companies to account for their part in achieving the United Nations Sustainable Development Goals – published its 2022 Corporate Human Rights Benchmark Insights Report (the “2022 Report“).

Compared to previous iterations (which we have discussed in a previous blog post here), the 2022 Report devotes more attention to companies’ efforts to ensure that human rights are respected within their operations and supply chains, rather than simply focussing on the human rights-related commitments that companies have made. The 2022 Report also focusses on companies’ stakeholder engagement, their business models, strategies and risks, and whether they prohibit forms of forced labour.

In applying this revised methodology, the 2022 Report concludes that companies are better recognising their human rights-related responsibilities and have improved their human rights-related risk management strategies. However, the 2022 Report also highlights that the pace of this improvement has been very slow.…

Continue Reading Business and Human Rights: Corporate Human Rights Benchmark 2022 shows that corporate respect for human rights has gained momentum

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The 27th Conference of the Parties of the United Nations Framework Convention on Climate Change (COP27) has opened in Sharm El-Sheikh, Egypt, against a global backdrop of massive hikes in energy prices, inflation, increases in interest rates and uncertainty about the robustness of the implementation of the ESG regulatory agenda (particularly in the US). In 2022, heat waves in Europe killed more than 15,000 people and nearly 1,700 died as a result of flooding in Pakistan. Hurricane Ian caused widespread devastation. A recent report by economist Nicholas Stern stated that $2 trillion (£1.75 trillion) per year will be needed by 2030 to help developing countries cut their greenhouse gas emissions and cope with the effects of climate breakdown —switching away from fossil fuels, investing in renewable energy and other low-carbon technology, and coping with the impacts of extreme weather.

With existing commitments to climate finance yet to be met and national policies not yet consistent with the objective of limiting global temperature increases to 1.5 degrees Celsius, this year’s COP has its work cut out. What can realistically be hoped for as outcomes of COP27?…

Continue Reading COP27: From Grey Glasgow to Sunny Sharm