The growing challenges with supplier ESG management

With the recent introduction of the Corporate Sustainability Due Diligence Directive (CSDDD), supply chain due diligence is now directly in the spotlight. However, with supply chains becoming increasingly complex, the management of these is far from straightforward. As a result, many companies are using in-house expertise to help with supply chain assessment in order to keep up with ever-changing and increasingly more demanding requirements.

The rise in the importance of supplier due diligence and sustainable supply chains

In-house lawyers are increasingly playing a crucial role in ESG issues, with a particular focus more recently on supply chain assessment. Principally, key responsibilities revolve around risk management, compliance and governance, as well as helping to mitigate potential legal liabilities related to ESG factors in the supply chain. As ESG issues have become increasingly prominent on the business agenda, the shift from best practice and voluntary ESG standards towards regulatory compliance and legal requirements is a complex area for organisations to navigate.

Depending on the nature of your business operations, your geographical footprint and the size, structure and turnover of your organisation, you may now be required to undertake enhanced due diligence on suppliers relating to specific environmental and social issues. With increasing scrutiny now directed upon supply chains, where most of a business’ ethical risk and carbon footprint lies, it is no longer an option to disregard the importance of sourcing and your suppliers’ ESG credentials and performance.

CSDDD focuses on the performance of companies throughout their value chain and underlines the wider shift in focus beyond a business’ own activities, with enhanced human rights and environmental due diligence now essential for large companies operating in the EU.

However, ESG is a much broader topic than compliance or box ticking exercises, and entities that treat it as such have undoubtedly underestimated expectations of consumers, investors and other stakeholders on corporate responsibility. From a reputational standpoint, in-house legal teams are on the front line of defending the business and its reputation in the face of greenwashing, negative press, and poor ethical practices.

Deforestation

Deforestation links with supply chains have been well reported in recent years. Biodiversity loss has now reached unprecedent levels, and strongly correlates with deforestation rates from the world’s primary tropical forest regions of the Amazon and Congo River basins, as well as the forest systems of Malaysia and Indonesia. Biodiversity loss is increasingly being viewed as urgent as the climate crisis, and with clear links between climate change and biodiversity loss, the two are often discussed as ‘two sides of the same coin’.

Governments and policy-makers have begun to act to help reduce and, in some cases, reverse biodiversity loss in the world’s most at-risk ecosystems. The EU Deforestation Regulation (EUDR) aims to ensure that the products consumed by or created for EU citizens do not contribute to deforestation or forest degradation worldwide, and covers a range of commodities from cattle to wood to rubber, as well as some of their derived products. Any trader that places these commodities on the EU market, or exports from it, must prove that the products have not been sourced from recently deforested land or have contributed to forest degradation. It is anticipated this will create, and is already creating, enormous challenges for organisations to fulfil traceability requirements, mapping multiple forest sources and standardising data collection from suppliers.

Forced labour

Human rights issues have featured heavily in existing and developing global corporate due diligence laws in recent years, particularly modern slavery considerations surrounding forced and child labour. However, while some jurisdictions have had associated laws for some time, such as the UK’s Modern Slavery Act 2015, similar enhanced national requirements are now only just coming into force. Recent supply chain transparency acts, such as those of Germany and Norway, renew the focus on entities selling products and services in their respective markets, with many new obligations now extending to include entities such as sub-contractors throughout the value chain.

A key example is the Uyghur Forced Labour Prevention Act (UFLPA), which came into force in 2022 in the United States and was brought in to scrutinise supply chain links to Xinjiang Uyghur Autonomous Region (XUAR) and associated forced labour practices. With recent studies estimating that around 20% of the world’s cotton is produced in the region, it is essential that steps to ensure good labour practices are taken at this scale to address this significant supply chain risk for any entities that source materials from this area.

How can in-house counsel mitigate and support on supply chain risks?

As compliance with regulations becomes more challenging following the introduction of new legal requirements, this presents opportunities for in-house counsel to take on supply chain risk mitigation and advisory services. Companies with in-house counsel are far better positioned to address risks directly through advising on the creation of ESG strategies, and will be at an immediate advantage when assessing their operating footprint. Many companies have already started this process, with larger corporations often offering assistance to their suppliers through collaborations with in-house teams, or setting supplier sustainability targets.

However, compliance with regulations is built around more than just reactive regulatory compliance; it also provides business opportunities to add value to an organisation. This is not only from a risk management perspective, but also commercially with potential for added service offerings. For example, it is expected that companies without in-house legal or sustainability teams will soon be urgently seeking assistance in this area, and based on recent ESG trends, this need for help is only likely to increase over time.

How Landmark Information can help

Landmark Information has been assisting lawyers, investors and advisory firms with ESG due diligence services since 2021 through our proprietary Risk Horizon software platform. Managed-service ESG screen reports provide an ideal starting point for understanding ESG risks and opportunities by providing balanced analysis of a company’s ESG profile. Our expert consultants utilise a vast range of data, from regulatory databases and media to company disclosures and annual reports, which all measure against the IFRS’s SASB industry standards framework to identify risk and recommend appropriate next steps.

If you would like to arrange a demo to see how Landmark Information can help with your due diligence obligations, please get in touch.

Navigating the Corporate Sustainability Due Diligence Directive: a new era of global corporate responsibility for business

DWF’s True Diligence thought leadership report reveals the complexities of compliance with the EU Corporate Sustainability Diligence Directive (‘CS3D or the Directive’).

The report compiled opinion research amongst 1,200 C-suite leaders from companies with a minimum global turnover of at least €150m based in France, Germany, Italy, Poland, Spain, and the UK, covering private equity, transport and logistics, insurance, energy, real estate and consumer and retail sectors.

Continue reading “Navigating the Corporate Sustainability Due Diligence Directive: a new era of global corporate responsibility for business”

Are you being greenwashed?

Dan Smith and Ben Stansfield, partners at international law firm, Gowling WLG, examine CSRD, CSDDD, and the Green Claims Directive, while highlighting ways to avoid greenwashing as well as providing valuable insights for businesses seeking to maintain credibility and transparency in their sustainability efforts.

Continue reading “Are you being greenwashed?”

Significant matters – Spring 2024

BT Group confirms new legal panel

BT Group has finalised its latest legal panel, appointing 11 firms to a roster that will be in place for the next three years. Firms on the panel will be able to bid for all of the telelcoms company’s external legal work over the period.

The roster has been scaled back from 15 firms as part of the latest review in a bid to enable firms to gain a deeper understanding of BT Group and for the organisation to have better alignment across different projects.

The firms appointed are: Addleshaw Goddard, Allen & Overy, BCLP, Bird & Bird, Clifford Chance, CMS, DWF, Freshfields Bruckhaus Deringer, Osborne Clarke, Simmons & Simmons and TLT.

These firms were selected based on various criteria including experience, cost, and ability to contribute to the development of BT Group’s in-house legal talent. An essential consideration was the demonstration of inclusion, equity, and diversity in their practices, with Addleshaw Goddard securing an early spot on the panel due to its achievements in this space.

Additionally, BT Group has announced that the firm demonstrating the most significant efficiencies through AI and other technologies over the next three years will secure an automatic place on the subsequent panel (2027-30).

Sabine Chalmers (pictured), BT Group’s general counsel, director of regulatory affairs, and company secretary emphasised the rigorous selection process and the firms’ demonstration of best-in-class capabilities across diverse fields.

In addition to the core panel, BT Group revealed six additional law firms eligible to bid for specific categories of legal work going forward: Cleaver Fulton Rankin, Covington & Burling, DACB, Shepherd and Wedderburn, Trowers & Hamlins, and Winckworth Sherwood.

2024 ACC Chief Legal Officers Survey

The 2024 ACC Chief Legal Officers Survey has been released, offering insight into the evolving role of chief legal officers (CLOs) and how legal departments worldwide are adapting to the changing business environment. The report draws on responses from 669 CLOs representing various sectors across 31 countries.

The survey found financial constraints are viewed as a significant concern, with nearly half of CLOs facing cost-cutting mandates and 58% grappling with law firm rate hikes, posing challenges for 23% of respondents. Regulatory worries are the biggest concern, with 53% of respondents putting it top of their list of worries. Other concerns for in-house leaders include talent retention (42%), followed closely by concerns about privacy and data security (41%) and cybersecurity threats (37%).

Given the concerns around data security 34% of respondents are prioritising data breach mitigation efforts. At present, only 9% say they are ‘very confident’ in their organisation’s ability to address emerging data risks. Improving operational efficiency is a key priority for 40% of CLOs, with two-thirds expecting to see a positive impact from AI adoption.

Significantly, CLOs are feeling more over-burdened by workloads, meaning that some feel their work-life balance is now under pressure. Some 59% of CLOs said that their workloads had increased, with only 20% of of those seeing significant spikes in their work levels now happy with their work-life balance. Across all respondents more than half say they are happy with work/life balance.

CLOs are actively seeking to enhance their teams’ skills, particularly in business acumen and communication and are also keen to get more involved in environmental, social, and governance (ESG) efforts. While 77% are involved in their organisation’s ESG strategy, only 29% report being ‘very involved,’ indicating room for improvement in ESG integration.

SRA issues new in-house guidance on professional obligations

The Solicitors Regulation Authority (SRA) has released new guidance on the professional obligations of all solicitors, including those working in-house. The guidance highlights the importance of upholding professional standards to uphold public trust in the legal profession and ensure the fair administration of justice.

It emphasises the delicate balance between commercial interests and ethical responsibilities, underscoring the need for solicitors to maintain independence and transparency in decision-making. Employers should understand the expectations placed on in-house solicitors, including their requirement to provide independent and impartial advice, maintain competence, and supervise work effectively.

However, employers should not expect in-house solicitors to condone dishonest or illegal actions, compromise their independence, mislead the court, act dishonestly, breach confidentiality, or exceed their competence. Instead, employers should support in-house solicitors in meeting regulatory obligations by providing necessary systems, processes, and support.

By promoting transparency and ethical behaviour, the guidance suggests organisations can strengthen governance frameworks, enhance risk management practices, and uphold the reputation of the legal profession.

Moves that matter

  • Aniela Foster-Turner, who has more than two decades of international legal and compliance experience, has joined energy tech company ENODA as its new general counsel. Formerly the principal legal counsel at Siemens for over 11 years, her experience includes high-profile transactions within the renewable energy sector. Based between Edinburgh and London, she now leads ENODA’s legal team, overseeing all internal legal matters.
  • Hope Jarkowski, former general counsel at the New York Stock Exchange (NYSE), has been named the chief legal officer of Broadridge Financial Solutions. In her new role at Broadridge, Jarkowski will oversee legal, compliance, regulatory, and government affairs functions, assuming the role of primary legal adviser to senior management. Additionally, she will lead internal policy initiatives and take on roles within the company’s foundation board, risk committee, and environmental, social, and governance committee.
  • Chicago Bears have named Krista Whitaker as their new chief legal officer, taking over from Cliff Stein, who left the franchise in January. Whitaker joins from the Miami Heat NBA team, where she held the position of associate general counsel. Prior to her time with the Miami Heat, she worked as a corporate associate at Proskauer Rose for five years. In her new capacity, Whitaker will offer legal counsel and assistance across a range of areas, including strategic guidance, daily operations, and negotiations related to sponsorship and media rights.
  • Anne Robinson has been named the new chief legal officer at IBM, with her tenure set to commence on 1 July Robinson, transitioning from her current role as general counsel and corporate secretary at Vanguard, will take over from Michelle Browdy, who is stepping down as general counsel and senior vice president of legal and regulatory affairs. In her new position, Robinson will oversee all legal, regulatory, and compliance concerns, in addition
    to addressing other strategic matters within IBM.
  • Garmin has named Josh Maxfield as its new vice president, general counsel, succeeding Andrew Etkind, who has held the GC position for over 25 years. Maxfield, who has been part of the Garmin team since 2006 and currently serves as associate general counsel and assistant secretary, will assume his new role as general counsel and vice president in July. Stationed at Garmin’s US headquarters in Kansas, Maxfield will take charge of various legal facets, including intellectual property, litigation, compliance, contract negotiation, mergers and acquisitions, and corporate governance.
  • Adrian Morris is set to join Haleon, the consumer healthcare business, as general counsel, after an 11-year tenure at Tesco. He will maintain his leadership role at Tesco during the interim period while a replacement is sought. Prior to Tesco, Morris held notable positions at BP, British Gas, Centrica Europe, and BBA Group, with his legal career commencing in private practice at Addleshaw Goddard.
  • Thunderbird Entertainment, a Canadian media and production company, has promoted Lori Massini to the position of general counsel, succeeding Sarah Nathanson. Massini has been serving as senior vice president of legal and business affairs within the company. In her new capacity, she will provide legal and compliance support across all business units while continuing to oversee the legal and business affairs team.

‘Ditch the external counsel mindset’: how in-house lawyers can take their careers to the next step

In-house lawyers can sometimes find themselves stuck in a rut professionally, playing the narrow role of technical expert within their organisations. Others struggle to make a complete transition from their previous roles in private practice to being an equal part of a broader team that shares responsibility for their organisation’s overall objectives. Yet there is no reason why they should not have a strategic input. Indeed, in-house counsel can offer a unique perspective, understanding how the legal landscape and business environment interact to help the organisation manage risk and set its strategic path. Susan Wojcicki at YouTube and Jeffrey Bewkes at Time Warner Inc are just two examples of in-house counsel whose strategic input propelled them to the role of CEO. Continue reading “‘Ditch the external counsel mindset’: how in-house lawyers can take their careers to the next step”

Recent amendments impacting the online gaming industry in India

The online gaming industry has witnessed a 39% increase in revenue during financial year 2022 with 77% of the revenues being derived from online real money games where users deposit a sum with the hope of earning winnings. At present, revenues are projected to increase by 20% by financial year 2025. However, increased instances of online scams, fraud, and gambling addiction, have led to the central government effecting a slew of regulatory changes with the intention of encouraging responsible gaming and protecting citizens. These amendments may discourage new entrants and potential investments in the sector and, consequently, affect future revenues.

Continue reading “Recent amendments impacting the online gaming industry in India”