As we rebuild in the aftermath of the COVID-19 pandemic, new legislation and changing political priorities will make sustainability central to economic development. On Thursday 25th February we hosted our Webinar ‘The Great Reset: New legislation that will drive sustainable recovery’ with two guests from the globally leading law firm Baker McKenzie, Alyssa Auberger, Chief Sustainability Officer and Reagan Demas, Partner, International Commercial & Trade Practice to explore this essential topic in detail.
For those of you that could not make it, we have pulled together the three key themes from that webinar here:
- You are responsible for your entire supply chain
Just knowing what is happening in your tier 1 suppliers is no longer enough for businesses that are looking to stay ahead of the curve. A key part of the transition to a more sustainable future will be taking responsibility for your entire supply chain and being able to prove that you understand what is happening at each of your suppliers.
An example of legislation that will force businesses to take a detailed look at their supply chains is the inbound draft law pursuing modern slavery. One of the few bipartisan issues left in the United States, this law has support from across the aisle and it will hold businesses accountable if modern slavery in any form is detected at any point in the supply chain. Similar laws are also being pursued in the United Kingdom, Australia, and the European Union.
Although this law focuses on only one of many possible sustainability issues, it is a sign of things to come. Visibility of the entire process of how your products are made will be essential in the coming years because, although it may be modern slavery today, it is likely that in the future businesses will be responsible for all Environmental, Social, and Governance (ESG) issues in their supply chain.
- Expect soft law to become hard law soon
After being officially sworn in on January 20th, President Biden quickly acted to either pause or reverse much of the environmental policy created by his predecessor. On his first day in office he signed an executive order re-joining the Paris Climate Accord, revoked the presidential permit for the Keystone XL Pipeline, and required all federal agencies to reconsider regulations that conflict with creating a healthy environment or addressing climate change. This is a statement of intent: Climate Change is a key concern for the Biden Administration.
A cornerstone of the approach is set to be the Executive Order on Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis. It establishes a series of clear goals that include but are not limited to listening to science, ensuring access to clean air and water, limiting exposure to dangerous chemicals and pesticides, holding polluters accountable, reducing greenhouse gas emissions, and prioritizing environmental justice and the creation of the union jobs necessary to deliver on those goals. The last point is especially important – the expansion of renewable energy will be a key driver of the transition to a new energy economy.
The Executive Order on Tackling the Climate Crisis at Home and Abroad will be equally important. Its domestic policies will be wide ranging but importantly its focus on ‘economic growth… through innovation, commercialization, and deployment of clean energy technologies and infrastructure’ signal a huge shift in American attitudes towards sustainability.
These swift moves by the Biden Administration to undo decisions by the Trump Administration and put new laws into place is a sign of environmental legislation transitioning from soft to hard law. Whilst there may have been questions as to whether President Biden was pandering to his base with his hard stance on climate change when he was campaigning, it is clear from his first month in office that this was not the case. Businesses should expect and prepare for additional progressive climate legislation in the next 4-8 years.
- Businesses need to start tracking and recording everything
Baker McKenzie Chief Sustainability Officer Alyssa Auberger put the future of sustainability very succinctly: ‘It’s all about data’. If businesses want to get ahead of the incoming legislation in the United Kingdom, United States, and European Union, they need to put systems in place to accurately measure themselves across every Environmental, Social, Governance, and Innovation (ESG+) issue. This will mean thinking about their entire operational set up and how they can measure what they are doing throughout their supply chain. When these sustainability proposals become laws, businesses will need to be able to substantiate what they are doing and where, exactly, they are doing it.
A clear example of this is the recent order issued by U.S. Securities and Exchange Commission Chair Lee for the SEC to focus on climate related disclosure for public companies. This made clear that if you’re a listed company and you want to take advantage of the ability to publicly list shares and raise funds on a US exchange there will be significant sustainability disclosures to investors. This makes clear the trade-off that many businesses will be forced to make in the coming years: if you aren’t prepared to take sustainability seriously, you cannot expect to attract investment.
To watch the webinar in full, find it here.