The term ESG (environmental, social and governance) commitments has now entered the mainstream, and as we head into 2022, we can expect the corporate world to be held to increasingly higher standards as they seek to deliver in these three areas.
Significantly, following COP26 at the end of 2021, there will be a renewed focus on the environmental and social sustainability of businesses and their supply chains, with government and regulators making interventions where they do not believe adequate progress is being made.
Pagefield consultant and ESG specialist Olivia Crawford looks at five areas that businesses should be watching closely – and acting on – in the coming year.
The Green Claims Code for shoppers
In September 2021, the Competition and Markets Authority put out a warning to businesses that they had until the beginning of 2022 to make sure their environmental claims complied with consumer protection law, alongside a commitment to carry out a full review of misleading green claims.
Frustrated with the fact that over 40% of businesses are said to be making misleading green claims online, the regulatory body issued the Green Claims Code to ensure firms making green claims do not omit or hide important information, taking into account the full environmental and social impact of a product over its full life cycle from development through to its end.
Now that we are in 2022, it is vital that consumer-facing businesses, especially those in retail and food and beverage, check their claims against the Code.
The Environment Act 2021
After becoming UK law in November 2021, the relevance of the Environment Act may seem tangential for business at first, but it covers important areas that could impact or inform how a business operates. Issues such as air pollution, biodiversity, waste and circular economies are prominent.
The key tenet of the Act is re-emphasising the role that businesses have to play in tackling climate change, and companies should have a thorough knowledge of the Act to determine how it may affect their operations and existing ESG policies.
For example, FMCG companies will need to up their game on sustainable packaging, whilst water companies are set to experience a crackdown on discharging sewage into rivers, waterways and coastlines.
Getting your finances in order
This one is exclusively for the 1,300 largest UK-registered companies and financial institutions. The Government announced back in October 2021 that the UK would become the first G20 country to enshrine in law mandatory Task Force on Climate-Related Financial Disclosure (TCFD) requirements – a framework to help public companies and other organisations disclose climate-related risks and opportunities. This means that from 6 April 2022, CFOs will need to ensure that their business is disclosing the required climate-related financial information.
It’s also worth noting that further climate reporting requirements for large businesses could come into force in 2023 under proposed Treasury rules, asking them to show how they intend to hit climate change targets in line with the UK’s 2050 net-zero targets.
Plastic taxes
The Government is scaling up plastic-related charges and taxes in April 2022, but this time it will hit the pockets of businesses. They have set out plans to bring in a new tax that applies to plastic packaging produced in, or imported into, the UK, that does not contain at least 30% recycled plastic. The move will affect UK producers of plastic packaging, importers of plastic packaging, business customers of producers and importers of plastic packaging, and consumers who buy goods in plastic packaging in the UK. Businesses affected will need to decide whether to pass these costs onto consumers through price increases, which as the cost-of-living-crisis hits may lead to a consumer backlash.
Green jobs potential
Green jobs never seem to be far from the Government’s climate-based announcements at the moment. Expect to see even more talk about green jobs in 2022 after the Skills for Jobs White Paper, which was published in January 2021, was criticised for lacking detail across the green economy and MPs on the Environmental Audit Committee (EAC) criticised the publication of the Net-Zero Strategy for lacking an official definition of what makes a role “green”.
Although environmental journalists were hoping to see more clarity on this topic from the Government this year, just this week the Government failed to confirm any additional actions to be taken in the short term to deliver two million green jobs by 2030 in response to the EAC’s report. That being said, it will still be important for businesses to keep a close eye out for updates on green jobs to help inform their own ESG strategies and policies.
