Top ESG, Environmental Issues for Business in 2022
In the world of environmental law and policy, 2021 has seen many notable developments, from the Biden administration’s policy shifts earlier in the year to the COP26 deliberations and diplomacy regarding climate change towards the end. . At the same time, environmental, social and governance (ESG) issues have been front and center in popular discourse like never before.
And let’s not forget the ongoing 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 court news from the United States and abroad, our analysis is based on the results of a recent Crowell & Moring survey interviewing in-house attorneys, sustainability professionals, compliance professionals and others on how their companies navigate ESG and environmental performance.
Interestingly, only about two-thirds of in-house lawyers said they were aware of environmental issues and understood their impact on the future of their firm’s business.
In the ever-changing landscape of ESG, the only certainty is that things will get more complex. The following five developments – encompassing litigation, regulation, policy, disclosures and supply chain – are by no means the sum total of the myriad environmental issues that demand attention, but they do capture several important themes and emerging.
Litigation: beware of the greenwashing monster
More than half of respondents indicated that their companies publicly share information such as the environmental issues they focus on, metrics identified by a recognized ESG framework, environmental performance data, and forward-looking environmental targets and objectives.
At the same time, false advertising claims are multiplying, with the Plaintiffs Bar bringing a relentless stream of lawsuits claiming companies engage in “greenwashing” – overpromising and underperforming when it comes to their environmental efforts.
Emboldened by sophisticated new testing methods, these cases challenge past assumptions and environmental performance standards as no longer sufficient. As the Federal Trade Commission prepares to revise its “green guides” in 2022 – for the first time in a decade – we expect continued pressure on companies to be able to justify what they release for public consumption.
Regulation: can governments “keep the 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 it was no surprise to those who have seen countries struggle for decades to reconcile the need to control greenhouse gas emissions with the moral imperative of economic development in the Global South.
And with the United States Supreme Court reviewing the extent of the Environmental Protection Agency‘s ability to regulate carbon dioxide emissions under the Clean Air Act this spring, the United States’ ability to achieve all its goals are in abeyance.
Nevertheless, significant changes are on the horizon, as the Biden administration aims to reduce methane and HFCs, greenhouse gases with greater global warming potential than carbon dioxide. According to the survey results, less than half of companies monitor greenhouse gas emissions. Events in the coming year may force a reassessment of this approach.
Politics: environmental justice influences the regulatory agenda
The Biden administration has been more intentional than perhaps any administration before it in recognizing the outsized 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 permitting and enforcement.
Many companies have indicated in the survey that they are aware of their impacts on minority communities, but far fewer actually measure this impact. Over the coming year, companies may need to collect additional data in anticipation of increased interest in the local impacts of their operations, particularly when operating in an area of more concentrated business activity.
ESG disclosures are here: are companies ready?
Voluntary disclosure regimes under which companies can choose to disclose ESG metrics – and lately, in particular climate-related financial risks – are nothing new. But ESG and climate disclosures are increasingly moving from voluntary to mandatory, with the European Union and the United Kingdom having taken significant steps in the past two years to compel companies to disclose information useful to decision-making. of 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 information. The United States is also leveraging its purchasing power to impose requirements on companies regardless of their public reporting status.
The majority of survey respondents indicated that they are already disclosing more than 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 measuring
Recent events, including the Covid-19 pandemic, have firmly entrenched supply chain issues in the public consciousness, with the heightened scrutiny this inevitably entails. The majority of survey respondents identified environmental objectives for their supply chains; at the same time, many face challenges in implementing these goals, whether due to cost, difficulty in tracking, or vendor reluctance, among other reasons.
Companies with international suppliers and operations may find these issues particularly challenging and may turn to new tools such as AI-based management 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 emerges once again, predictions for 2022 may be premature. But no matter what the new year brings, these five environmental issues will be front and center 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 firm’s Environment and Natural Resources group. He advises his clients on a multitude of issues related to climate, sustainability and environmental compliance. He previously served as Deputy Section Chief of the Department of Justice and oversaw the defense of all EPA rules.
Elizabeth B. Dawson is one of the leaders of Crowell & Moring’s global ESG advisory team and brings her experience as a former litigator to the Environmental Defense Section of the DOJ to help clients address environmental performance issues and advising them on emerging environmental issues.