Environmental Social & Governance policies - Net Zero Targets

Sustainability and sustainability plans form a large part of the “E” part of ESG. However, the majority of businesses are still at the start of their ESG “journey” and are learning how to make sense of these requirements.

So, firstly if your customers are demanding to be told your Net Zero Target and to see your Net Zero Plan and your wider, ESG Policy, you are not alone and you haven’t missed the boat. Secondly, the reason you don’t know how to work out your carbon footprint and come up with Scientific Based Targets is not because you don’t know something that everyone else magically knows – those that have these in place have all used Sustainability Consultants to collate and map this data and turn it into realistic targets and a Net Zero Plan.

However, it is important that companies that have not yet started their ESG “journey” or have just begun do give this area their attention. This is because customers and regulatory demands in this area are going to (i) increasingly become mandatory and (ii) only get more onerous in the future. For example, the new EU Corporate Sustainability Reporting Directive expands the social and environmental information that certain larger companies and listed SMEs trading in the EU bloc will have to report. This will have knock on effects for UK companies. You therefore need to be prepared.

Once you have your targets, you need lawyers. The sorts of solutions lawyers can help with break down into three areas:

• Getting the information you need from your supply chain – including net zero clauses and clauses contractually obliging your suppliers to give you the data you need and when you need it as part of your supply chain contracts.
• Ensuring that the data you receive is sound and, if it is not sound, that steps can be taken to address this. That means that there are terms in your supply contracts which allow you to seek damages if the information is not robust.
• Making sure that you share information in a way that meets reporting requirements and is transparent without compromising commercially confidential/sensitive information.

For more information about the sorts of terms and conditions which lawyers can assist with, there is an excellent free resource that lawyers have created on a pro bono basis called The Chancery Lane Project. This contains free to use clauses for use in Supply Chain contracts and other Net Zero tools.

If you’re considering investing in a business, then in the same way that you’ll carry out financial and legal due diligence, you need to ask questions about the impact of the business on the environment. This information is important in terms of fully understanding the long-term viability of its customer relationships as well as the impact the business is having on the environment (for example its carbon footprint or the impact it has on biodiversity). Again, lawyers can put together the right questions to ask and help you review responses.

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If you have any queries, get in touch with Kirstin Roberts and Richard Broadbent.