A company’s ability and commitment to include environmental, social, and governance (ESG) factors in its strategy becomes more and more important to investors, consumers, policy makers, civil society organizations and other stakeholders. There is a fundamental societal shift towards sustainability and responsibility. Managers are held accountable for ESG compliance. While environmental and governance aspects have
On 6 December 2021, the Netherlands became the latest European government to announce plans to introduce mandatory human rights and environmental due diligence (HREDD) legislation at a national level, adding to a growing movement and proliferation of national HREDD laws. This puts the Netherlands in the company of the likes of France, Germany and Norway (which have enacted or adopted such laws) and Austria, Belgium and Switzerland, among others (which are progressing their own national HREDD laws).
This development comes despite further delay on the publication of HREDD legislation at an EU level (see our previous Blog Post). On 6 December 2021, the Dutch Foreign Trade and Development minister said that he was “very disappointed” at the European Commission’s further delay to introduce EU mandatory HREDD legislation and announced the Dutch Government’s plans to develop and introduce a national HREDD law instead.
The European Commission has indefinitely postponed its much-anticipated directive on human rights and environmental due diligence (HREDD) – more than 150 days after it was first expected to be published. While the reason for the delay is unclear, 47 civil society organisations have penned an open letter seeking “full transparency on the reasons for the delay and on the decision-making process going forwards.”
Despite this setback, national HREDD legislation continues afoot: laws have been adopted or are in force in France, Germany and Norway, while proposed national legislation is being progressed in a number of other European countries. Most recently, in December 2021, the Netherlands announced its intent to introduce its own national HREDD law in view of the further delay of the proposed EU law.
Legislative developments aside, investors, civil society and other stakeholders are scrutinising how companies identify and mitigate human rights impacts in their operations and supply chains more closely than ever.
And so the message is clear: companies still need to take steps to develop and reinforce their human rights due diligence programmes, both in anticipation of further mandatory HREDD laws and to respond to stakeholder expectations and demands.
On December 15, 2021, the Singapore Exchange (SGX) responded to two consultations addressing a range of ESG-related topics that could significantly change the ESG reporting landscape for listed companies in Singapore. The consultations address the implementation of (i) mandatory climate-related disclosures for certain sectors aligned with the Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), (ii) mandatory diversity-related disclosures for all issuers and (iii) a list of 27 “Core ESG Metrics” to help listed companies align their ESG disclosures with international standards and best practices on a voluntary basis.
As SGX otherwise requires ESG reporting on a comply-or-explain basis only, these proposals represent a shift toward an increased focus on mandatory climate and diversity disclosures that, in particular, has taken hold among Asian regulators. Just this month, the Stock Exchange of Hong Kong implemented mandatory gender diversity requirements and Hong Kong’s Cross-Agency Steering Group reported “progress towards mandating climate-related disclosures aligned with the TCFD framework by 2025 across relevant sectors”, while a group of Malaysian regulators announced their intention to implement mandatory TCFD disclosures by the end of 2024.
In this Blog Post, we highlight key aspects of the recent SGX announcements and provide guidance on how companies are already implementing ESG frameworks incorporating TCFD and more.
“Delivering effective corporate governance practices and ESG measures is more than a box-ticking exercise. The change needs to begin with a shift of mindset at the top of the organisations.” – SEHK, December 2021
On December 10, 2021, the Stock Exchange of Hong Kong Limited (SEHK) published the conclusions from its April 2021 consultation on amendments to the SEHK’s Corporate Governance Code (the Code) and Listing Rules intended to promote good corporate governance practices among listed companies and IPO applicants. The final amendments address a range of topics that could significantly change the way that the boards of covered entities operate, including with respect to gender diversity, ESG reporting timelines and the role that ESG plays in corporate governance structures and processes.
In this Blog Post, we highlight final amendments to the Code and the Listing Rules addressing the link between ESG and good corporate governance, ESG reporting and gender diversity at both the board and workforce levels.
During the COP26 summit, a coalition of 190 countries and organisations committed to phase out coal energy by 2040 as part of their commitment to transition to a low-carbon economy. The coalition also stated, in their ‘Global Coal To Clean Power Transition Statement’, that they would provide a framework to support affected workers, sectors and communities to make a “just transition” away from unabated coal power. The coalition’s concern is that the transition to a low-carbon economy may leave many coal-dependent economies at risk of economic hardship and social unrest.
The ‘Just Transition Assessment‘ (the Assessment) recently published by the World Benchmarking Alliance (WBA) provides important insight into the metrics that NGOs may lobby for in order to achieve what they view as a “just transition” (for information on some of the WBA’s other initiatives, please see our Corporate Human Rights Benchmark publication). In carrying out the Assessment, the WBA states that it has measured the actions that some of the world’s most influential companies have taken to support workers and communities whilst they transform to low-carbon business models.
The Assessment contends that there is a “systematic lack of action by companies to identify, prepare for and mitigate the social impacts of their low-carbon strategies”. The Assessment goes on to state that these purported inadequacies need to be addressed, as transition risks being adversely affected by social unrest among those whose livelihoods are threatened.
In September 2021, the Business & Human Rights Resource Centre (BHRRC) published a briefing entitled “Social Audit Liability: Hard law strategies to redress weak social assurances” (the “Briefing”).
The Briefing contends that the existing model of social auditing is inadequate and that social auditing is not a substitute for human rights due diligence (see our previous Blog Post). Among other things, the Briefing reflects on the failure of social audits to detect human rights abuse in the past and on the potential flaws in certification schemes. Ultimately, the Briefing argues that companies should not solely rely on social audits and certifications and should instead adopt a “transformative approach” to human rights due diligence which goes beyond social auditing.
“… we renew our call on all governments to develop, implement, and enforce mandatory human rights and environmental due diligence requirements for businesses headquartered or operating within their own jurisdictions or, where appropriate, to further strengthen these regulatory regimes where they already exist.” – a statement from 94 investors representing over $6.3 trillion in AUM
On 7 October 2021, 94 investors representing over $6.3 trillion in assets under management and advisement, sent a statement to European Commissioners and the European Parliament, voicing their support for mandated human rights and environmental due diligence (mHREDD) (the “Statement“). The Statement was sent in light of the upcoming European Commission legislative proposal on Sustainable Corporate Governance. The proposal would require companies to consider their human rights and environmental impacts, allowing them to better manage sustainability related matters in their value chains and overall operations.
On 1 January 2019, the Modern Slavery Act 2018 (Cth) (MSA 2018) came into force in Australia. The MSA 2018 requires entities based or operating in Australia with an annual consolidated revenue of more than 100 million AUS dollars to report annually on the risks of modern slavery in their operations and supply chains, and the actions taken to address those risks. The requirements of the MSA 2018 reflect increasing and strengthening modern slavery obligations around the world (see, for example, our previous Blog Post and earlier Legal Update).
The Australian Council of Superannuation Investors (ACSI) has published a report (the Report) evaluating the quality and compliance of reporting by companies listed on the Australian Securities Exchange (ASX200) during the first reporting cycle under the MSA 2018. The report sets out a number of recommendations, including how companies can improve their disclosures and how investors can exert their influence to encourage best practice in modern slavery reporting. Although the recommendations are focused on the ASX200 and the MSA 2018, the Report’s findings are of broader relevance to best practice reporting beyond Australia – and will be of interest to all stakeholders concerned with modern slavery reporting and emerging mandatory human rights and environmental due diligence legislation.
‘With the most significant change since the GRI Standards launched in 2016, the revised Universal Standards set a new global benchmark for corporate transparency. Fully addressing gaps between the available disclosure frameworks and intergovernmental expectations for responsible business, including human rights reporting, they will enable more effective and comprehensive reporting than ever before.’
– Judy Kuszewski, Chair of GRI’s Independent Global Sustainability Standard’s Board
The Global Reporting Initiative (GRI) have revised their Universal Standards to emphasize and require more transparency in reporting on human rights impacts and due diligence obligations. This is a significant update because all entities reporting in accordance with the GRI standards are required to report on the Universal Standards (now GRI 1, 2 and 3). Previously, human rights-related disclosures were addressed largely in the GRI 400 series on Social topics, on which an organization is required to report only if it determines those topics to be material. Under the revised Universal Standards, all companies reporting in accordance with the GRI Standards will need to be able to identify (and disclose) how they identify severe risks to the economy, environment and people—this now clearly includes impacts on human rights connected with their business, and what they are doing to address these risks.
This development is part of a multi-phase project to update the GRI’s human rights-related disclosures, and the emphasis on “double materiality” brings the GRI standards in line with the UN Guiding Principles on Business and Human Rights (UNGPs) and emerging mandatory human rights and environmental due diligence legislation (see our Previous Blogs here and here). For companies that already adhere to the UNGPs, these revisions may not present a significant new challenge in practice; however, for companies that have not to date sought to explicitly adhere to the UNGPs, this will present a new challenge in terms of meeting the revised GRI standards.
Continue Reading Business and Human Rights: Revised GRI Standards Integrate UN Guiding Principles on Business and Human Rights and Foreshadow Emerging Mandatory Human Rights and Environmental Due Diligence Legislation