In the world of environmental law and policy, 2021 has brought many notable developments, from the policy changes of the Biden administration at the start of the year to the deliberations and diplomacy of COP26 regarding climate change towards the end. . At the same time, environmental, social and governance (ESG) issues have been brought to the fore in popular discourse like never before.
And let’s not forget the continuing Covid-19 pandemic, which adds a layer of complication to everything. As 2022 approaches, taking stock of what happened in 2021 helps shape expectations for the new year.
In addition to executive, legislative and legal news in the United States and abroad, our analysis is based on the results of a recent Crowell & Moring survey of in-house legal counsel, sustainability professionals, and compliance professionals. and others on how their companies navigate ESG. and environmental performance.
Interestingly, only about two-thirds of in-house legal advisers said they were aware of environmental issues and understood their impact on the future of their business operations.
In the rapidly changing ESG landscape, the only certainty is that things will get more complex. The following five developments, which encompass litigation, regulation, policy, disclosure and supply chain, by no means represent the sum total of the myriad of environmental issues that require attention, but they do capture several emerging themes. important.
Litigation: watch out for the environmental monster
More than half of survey respondents said their companies publicly share information such as the environmental issues they focus on, measures identified by a recognized ESG framework, environmental performance data, and environmental goals and targets. prospective.
At the same time, false advertising claims are on the increase, with the plaintiff bar bringing a relentless stream of lawsuits claiming that companies are engaging in “green laundering” – too promising and underperforming when it comes to their environmental efforts.
Emboldened by new and sophisticated test methods, these cases challenge past assumptions and environmental performance standards as they are no longer sufficient. As the Federal Trade Commission prepares to review its “green guides” in 2022 – for the first time in a decade – we expect the pressure to continue on companies to be able to justify what they need. ‘they offer to the public.
Regulation: Can Governments “Keep 1.5 Alive”?
COP26 was a disappointment for many who saw it as the last best chance to achieve firm and responsible emission reduction commitments that would limit global warming to 1.5 ° C. But this was no surprise to those who have watched countries struggle for decades to reconcile the need to contain greenhouse gas emissions with the moral imperative of economic development in the Global South.
And with the United States Supreme Court considering the extent of the Environmental Protection Agency’s ability to regulate carbon dioxide emissions under the Clean Air Act this spring, the ability of the United States to meet all of its goals is uncertain.
Nonetheless, a significant change looms on the horizon, as the Biden administration targets reductions in methane and HFCs, greenhouse gases with higher global warming potential than carbon dioxide. According to the survey results, less than half of companies monitor greenhouse gas emissions. The events of the coming year may force a reassessment of this approach.
Policy: Environmental justice influences the regulatory agenda
The Biden administration has been more intentional than perhaps any other administration before it in acknowledging the overwhelming impact of environmental stressors on traditionally underserved communities. As such, the administration is committed to integrating considerations of social justice and economic opportunity with environmental permits and their application.
Many companies have indicated in the survey that they are aware of their impacts on minority communities, but far fewer actually measure this impact. In the coming year, companies may need to collect additional data in anticipation of increased interest in the local impacts of their operations, especially when operating in a more concentrated area of business activity.
ESG disclosures are here: are companies ready?
Voluntary disclosure regimes under which companies can choose to disclose ESG measures – and lately, in particular climate-related financial risks – are not new. But ESG and climate disclosures are moving more and more from voluntary to mandatory, as the European Union and the United Kingdom have taken important steps over the past two years to require companies to disclose information useful for the decision. .
The United States is currently catching up, but many expect to see a proposed rule from the Securities and Exchange Commission in early 2022 to require climate disclosures. The United States also uses its purchasing power to impose demands on companies, regardless of their public declaration status.
The majority of survey respondents indicated that they are already disclosing more than what current law requires, but it remains to be seen whether the type and amount of data disclosed will match what may soon be required.
Supply chain sustainability: monitoring and measurement
Recent events, notably the Covid-19 pandemic, have entrenched supply chain issues firmly in public consciousness, with the scrutiny that this inevitably brings. A majority of survey respondents identified environmental goals for their supply chains; at the same time, many face difficulties in implementing these goals, whether due to cost, difficulty in tracking, or reluctance from suppliers, among other reasons.
Businesses with international suppliers and operations may find these issues particularly difficult, and may turn to new tools such as AI-based business software for help. And, with the aforementioned disclosure requirements coming into effect, these tools will be more vital than ever.
As a worrying new variant of Covid-19 once again emerges, predictions for 2022 may be premature. But no matter what the New Year brings, these five environmental issues will be at the forefront as businesses navigate and adapt to these changing times.
This column does not necessarily reflect the opinion of the Bureau of National Affairs, Inc. or its owners.
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Thomas A. Lorenzen is a partner in Crowell & Moring’s Washington, DC office and co-chair of the company’s Environment and Natural Resources group. He advises his clients on a multitude of issues related to climate, sustainability and environmental compliance. Previously, he was Deputy Section Chief at the Department of Justice and oversaw the defense of all EPA regulations.
Elizabeth B. Dawson is one of the leaders of Crowell & Moring’s Global ESG Advisory Team and brings her experience as a former Trial Lawyer in the Environmental Defense Section of the Department of Justice to assist clients with their issues performance and advising them on emerging environmental issues.