Richard Allen, a principal in Baker McKenzie’s Dispute Resolution and International Arbitration Practice Group based in Singapore, recently co-wrote an article with Roohi Ghelani of Ndevr Environmental.
Please find an excerpt of the article below.
ESG Trends and the Big Picture
The risk environment globally is shifting, and organizations around the world are facing increased pressure on all fronts to integrate Environmental, Social, and Governance (ESG) measures into their core business strategies and improve ESG transparency and performance. This shift has been exacerbated by factors such as continued supply chain disruptions, ongoing impacts from the COVID-19 pandemic, challenges arising from digital transformation, climate risk, evolving ESG considerations/standards and litigation.
Businesses in today’s world require both a broad and deep understanding of key international trends and the local landscapes in which they operate. Managing complex and multijurisdictional considerations in particular, while keeping ahead of evolving ESG trends and the broader landscape, has been a challenge to many with the risk of cross-border litigation increasing and the location and availability of witnesses and evidence being a commonly discussed topic.
ESG Disputes Around the World
Baker McKenzie’s The Year Ahead report for 2022, which forecasts emerging trends in dispute resolution and collated data from 600 in-house lawyers from large companies around the world, found that COVID remains the biggest external factor driving disputes, while cybersecurity and ESG disputes present the greatest risks to business.
Within the ESG space, climate change disputes in particular have seen an unprecedented rise, with over 2,000 ongoing or concluded climate change cases around the world (more than double the number in 2015), according to the Grantham Research Institute on Climate Change and the Environment. Increasingly, these are brought against corporations in addition to government entities. Key areas being contested include emissions reduction commitments, greenwashing, and attribution of responsibility for adverse climate impacts.
On the social front, there is increasing focus on discrimination issues in employment disputes. Recent years have also seen the introduction and implementation of modern slavery, human rights and supply chain due diligence legislation around the world, which present a legal requirement for companies to assess the risk of modern slavery across their supply chains. Governance-related disputes also remain a high priority, particularly around the ethical practices of companies, which have a significant overlap with the social dimension of ESG.
ESG Trends in Asia Pacific
Baker McKenzie’s Asia Pacific Business Renewal Series recently explored Advancing ESG in Asia Pacific, and found that ESG and environmental issues rank seventh out of the top 14 concerns facing businesses in APAC. A number of regulators across APAC are introducing more stringent ESG related requirements. The top three ESG risks in APAC were found to be:
- Regulatory enforcement and investigation
- New regulations
- Changing buyer behavior
ESG – Looking Forward
We foresee an increased focus on ESG issues across APAC and expect this trend to accelerate in coming years, including for ESG-related litigation, liability, regulations, disclosures, and corporate strategies. In response, future-forward organizations across the region will increasingly embed ESG considerations into their risk frameworks and corporate strategies. Risk mitigation will not be the only driving force, but also the pursuit of opportunity in a still-nascent ESG market. There is likely to be an early-mover advantage for sustainability-focused organizations across the region and we recommend beginning the ESG journey now.
Other key content in the article include:
- Key ESG trends and developments in the Asia Pacific Region
- Influence of Global ESG Trends on Asia Pacific
- Sector-specific ESG Trends
- Focus on ESG in Supply Chain Visibility and Transparency
- Voluntary ESG Action
Benchmarking and Best Practices