Environmental, Social and Governance Insights: Retail
In 2022, new Environmental, Social and Governance (ESG) regulations are being designed or coming into effect in a number of jurisdictions.
The focus is on working towards uniform, transparent and comparable ESG reporting and disclosure, as well as the expectation for companies to present action plans designed to deliver on targets and vision statements.
Global ESG Leadership
The latest report from the Intergovernmental Panel on Climate Change (IPCC) looks at the causes, impacts and solutions to climate change.
In the clearest indication to date, the report highlights how a warmer world is affecting all living things on Earth.
The next and final instalment of the IPCC assessment, due to be released in April, will examine options for curbing carbon emissions and removing carbon from the atmosphere.
Expectations for companies to mitigate ESG risks within their supply chains continue to increase. Research from CDP highlights that companies are failing to engage with suppliers on setting emissions targets.
Less than 3% of suppliers to large corporates have Science-Based Targets initiative (SBTi) approved targets in place, with over half having no climate targets at all.
Action in the value chain – or Scope 3 Greenhouse Gas (GHG) emissions – is critical to corporates as these emissions can be over 11 times greater than emissions resulting from direct operations.
There is growing scrutiny towards companies’ ability to effectively tackle concerns around the ‘S’ in ESG, particularly when it comes to tackling human rights issues.
In December, President Biden signed the Uyghur Forced Labor Prevention Act into law, banning imports from Xinjiang and imposing sanctions on individuals responsible for forced labour in the region.
In the US, it is suggested that companies sourcing goods from China should immediately undertake a comprehensive review of their supply chains to ensure they comply with the new law.
In its newly released Sustainable Finance Roadmap, the European Securities and Markets Authority (ESMA) – the bloc’s securities watchdog – identified tackling greenwashing and promoting
transparency as one of its top three priorities.
With regards to greenwashing specifically, the Roadmap details the approach ESMA is likely to adopt to combat the issue, stating that it would be “based on a complete and fully applicable legislative regime setting the boundaries of the type of market behaviour and practices that are and are not permissible.”
It also acknowledged that there was “a real need to address greenwashing without delay, even if all the legislative steppingstones are not fully in place yet.”
ESG in Australia
Energy and Emissions Reductions Minister, Angus Taylor, tasked the Climate Change Authority (CCA) with reviewing imports of questionable international carbon credits as demand for offsets soars, in turn increasing prices. Australian carbon prices are roughly $54 per tonne, while some international credits stand at $10 a tonne.
Corporate buyers face pressure from shareholders, investors and customers to purchase “good quality” offsets.
From next year most Climate Active participants will require a minimum of 20 per cent of carbon credits to be approved by the Australian regulator – a move to deter businesses that might be tempted to take shortcuts.
ESG in Retail
A major review of compliance with the Modern Slavery Act conducted by the Human Rights Law Centre alongside leading universities, charity and campaign groups, revealed that 77 per cent of companies failed to comply with basic reporting standards mandated by the law, while more than half had failed to identify obvious modern slavery risks in their operations or supply chains.
Retailers scored well. At the bottom of the list were health care providers, from hospital operators to supplement manufacturers.
Kate Warwick, Head of Retail and Consumer Products Australia, FTI Consulting
