Originally posted on 05/01/2017 by LexisNexis
What’s on the horizon for 2017?
When I was asked to think about how the practice of business sustainability law and ethical procurement is going to develop in 2017 and the key challenges, I thought I would refer back to my blog on trends for 2016—to see whether any of the predictions for last year were right and would inform my thinking for 2017. The issues that were raised as key for 2016 are not dissimilar for this year, particularly in relation to supply chains. While often dealt with separately by lawyers, the issues around climate change, sustainability, human rights and procurement are increasingly interlinked. In the business world, companies are being forced to be more transparent by an increase in mandatory disclosure regulation and by demands from consumers and the third sector. Supply chain challenges do not appear to be diminishing. For lawyers the challenge is going to be to become better educated about the soft principles in law and not advising exclusively on the law itself in these areas. This is particularly true of issues around modern slavery.
I also think that law firms are going to have to become smarter about their own business models and consider how these might need to be adapted to ensure that they are credible when advising clients about adopting policies and building procedures to reflect good practice in environmental and human rights issues. As sustainable procurement requirements and ongoing monitoring of contracts are becoming more commonplace in tenders and post-award stages, it is important that lawyers consider these issues more broadly—not only for their own business models—but also for their clients.
There is also the issue of diversity at board level which for the profession and for many clients is an ongoing challenge.
2016 was a seminal year in sustainable development (SD)—we saw the adoption of the Paris Agreement and the UN Sustainable Development Goals (SDGs). While these agreements set out the goals to be achieved, the next five years will involve governments and businesses working out how to practically embed the principles. Now, more than ever, CEOs are going to have to stand back and consider the bigger picture.
The nexus between climate change and human rights will, as mentioned above, become a growing area of action on social sustainability, particularly with the increase in the refugee crises in the Middle East and Europe. The SDGs will provide companies with an opportunity to manage their environmental and human rights issues in a more integrated fashion. Lawyers need to consider how to advise their clients on these issues as many of these challenges go beyond pure legal risk. They will also need to consider whether their due diligence models are sufficiently strong enough to deal with emerging sustainability risks.
There is also going to be emphasis on reporting. The EU Non-Financial Reporting Directive 2014/95/EU applies to EU Member States from 1 January 2017. Companies that are Public interest entities and have over 500 employees are going to have to provide information on their environmental, human rights and furthermore diversity, and anti-bribery policies, and the procedures that underpin these policies. The Modern Slavery Act 2015 requires companies with a turnover of £36m to disclose an annual anti-slavery statement.
Statements should also be underpinned by robust policies and procedures. In the light of the VW scandal investors and consumers are calling for a more transparent and accountable approach to reporting.
In the US, the California Transparency in Supply Chains Act also requires disclosures from companies on tackling modern slavery in supply chains.
While not setting a legal requirement on disclosure of human rights impacts for companies the benchmark is the first-ever ranking of the world’s largest publically listed companies on their human rights performance. We are likely to see a continued growth in mandatory reporting requirements for companies on non-financial issues.
Finally, the continued growth in development of internet applications and the automation of many processes will challenge the sustainability and human rights agenda as jobs are put at risk increasing the pressure on both poverty and inequality.
Interviewed by Tracey Clarkson-Donnelly.