Together with Grant Thornton and Brick Court Chambers, we recently hosted the joint webinar “ESG: The good, the bad and the ugly”, where we discussed the need for corporates to listen to the call from consumers, investors and regulators for transparency in business activities and the growing expectation for corporates to conduct better human rights due diligence.
The panel included members of our own ESG team: Tim Elliss, a partner specialising in international litigation and arbitration and Anna Brownrigg, a senior associate who regularly advises multinationals on ESG disputes and risks. We were joined by Grant Thornton partners Schellion Horn, co-head of economic consulting and Steve Holt, head of investigations. Robert McCorquodale of Brick Court Chambers also joined the panel, a professor of international law and human rights who was recently appointed by the United Nations Human Rights Council as one of 5 members of the UN Working Group on Business and Human Rights.
The discussion centred around four main areas, followed by a Q&A:
- The returns on investment from focusing on ESG
- Risks that accompany implementing an ESG strategy and reporting progress
- Investigating when ESG goes wrong
- Updates on the reporting requirements and what this means for UK companies and the evolving legal and regulatory landscape on ESG, in particular, human rights due diligence
Schellion Horn began by noting that, though the elements of ESG that matter vary will between businesses and sectors, the objectives of ESG strategy are the same: make a material positive impact delivering long term economic value. Schellion discussed why businesses should focus on ESG and report on ESG metrics; how the economic value of ESG is determined by what is material to stakeholders; and how to estimate the change in value from ESG using economic techniques.
Anna Brownrigg then considered the pressure that businesses are under to publish their ESG credentials (generated by changing investor attitudes and regulation) and the risks that come with articulating ESG credentials and strategies, namely reporting. Anna discussed how businesses can mitigate these risks and try to avoid regulatory enforcement action, reputational damage and/or costly litigation. Anna explained that statements must be accurate, complete and not misleading. Where they make statements, businesses should be mindful to check whether they can:
- stand behind these statements, metrics or targets;
- show a document trail and strategy, demonstrating the legitimacy of the commitments; and
- make sure circumstances have not changed such that these statements are no longer accurate and need to be withdrawn.
Steve Holt then looked at how to investigate ESG when it goes wrong. This can be done by contracting independent investigators to practically engage with the problem, whilst adopting increased transparency. The situation should be properly assessed and emphasis was placed on gathering high quality evidence.
Finally, Robert McCorquodale concluded that a core element of ESG is human rights due diligence and gave an overview of the global legal and regulatory landscape. Robert explained that companies must have policies on how they will implement human rights due diligence. The policy should look at whether there are any adverse human rights impacts that the business enterprise may cause or contribute to, or which may be linked to its operations, products or services by its business relationships. The business should conduct due diligence on an ongoing basis, as well as consult with stakeholders.
The Q&A section of the webinar focused on how multinationals may ensure uniformity in implementing such policies across multiple jurisdictions and Robert offered his expertise as to how this could best be done. Robert also discussed the challenges multinationals might face when their policies clash with local laws.