A worthwhile journey: Exploring the legal landscape of sustainability and the wider terrain of ESG

ESG (Environmental, Social, and Governance) considerations matter to consumers, regulators and therefore businesses.

Freeths experts Shraiya Thapa, Kirstin Roberts and Iona Silverman explain how to support your business as it seeks to minimise its environmental impact and address social and governance issues. 

Responsible business

Regulators are increasingly looking at how businesses affect people and planet – environmental, social and governance (ESG) considerations. Sustainability is an important part of the E of ESG – on the environmental side alone, every business will face elements of both physical and legal climate risk over the next few decades.We're increasingly seeing that a well-managed business in 2024 is one that, as a minimum, has evaluated how it's doing in terms of sustainability and is looking to improve. Sustainability is about taking a longer term view – at Freeths we call it being a responsible business.

Mind the gaps

Check what issues apply to your business.

• The SASB Materiality Finder allows you to search for the material areas of disclosure by industry and Freeths Quarterly Update on ESG reporting requirements tells you what's relevant for UK businesses. Identify gaps in terms of compliance and potential future ones.
• The new Freeths ESG health check [IS1] [KR2] asks questions about your business’s overall ESG health, to produce a results document showing where you’re doing well and where there might be gaps. This will then enable you to take the next step of thinking about the resource needed to address these gaps.

Eye on the horizon

As well as keeping on top of existing legislation, being aware of what is coming is vital. Lots of law firms, including Freeths, provide horizon scanners – sign up to the mailing list. Examples of changes to be aware of include the requirement from March next year for all businesses to fully segregate their waste, fees under Extended Producer Responsibility for packaging from 2025, and the importance of natural capital if you’re involved in an construction project such as building houses, warehouses, factories or opening new stores.

Data, data, data

Data collection is essential to all aspects of ESG including sustainability. You need to make sure that you're getting the data you need from your supply chain, whether that's landlords, your energy provider, your product supply chain or the people you buy desks and chairs from. If you’re talking to the public about what you’re doing in terms of sustainability – whether it’s in advertising and marketing, on social media, on your website, in your annual report or any public statement – you need to have the data to back up what you say. Any discrepancy between what you say you’re doing, and what you actually are doing, in constitutes greenwashing.

Transparency and substantiation

The best way to avoid greenwashing is to be transparent and to substantiate your claims. Brands often think they’re being transparent when they're not. Take a step back. Are you conveying the message that you want to convey correctly? Are you confusing things? By highlighting something positive in one part of your business, be careful not to give a false impression about the business overall. Avoid buzzwords like sustainable, eco-friendly and green. Avoid assumptions, including that vegan or electric are better for the environment, and avoid comparative claims that don't compare. Train your marketing team and make sure they know when to check claims with legal.

Whatever the claim, you need to have the data to substantiate it. If the claim comes from a supplier, you need to get the data from them and be comfortable that that data is correct. Explain your claims on your website – the more information the better.

Right now, the biggest risk of getting it wrong is damage to your reputation. Advertising Standards Association (ASA) complaints can sometimes be resolved confidentially so address them head on and get advice. The Competition and Markets Authority will soon have the power to impose fines of up to 10% of global turnover in relation to breaches of certain types of consumer law, including irresponsible or misleading  marketing.