Don’t look now, but we’re heading towards impact

Senate Bill S-211: An Act to enact the Fighting Against Forced Labour and Child Labour in Supply Chains Act and to amend the Customs Tariff

In Canada, members of Parliament unanimously voted to back a private member’s bill requiring Canadian companies to ensure they are not using forced labour or exploiting child workers overseas. This is positive news for moving Canadian companies towards managing their human rights issues in their value chain. The law would apply to publicly listed or private (if we read correctly) companies meeting certain size criteria (incidentally, the same as those of the European Corporate Sustainability Reporting Directive (CSRD)). Such regulation echoes the European Commission’s proposed Directive on corporate sustainability due diligence. The Canadian legislation focuses more narrowly on corporate disclosures of steps “taken to prevent and reduce the risk that forced labour or child labour is used at any step of the production of goods”, whereas its European counterpart is more far reaching, including requirements to “identify and, where necessary, prevent, end or mitigate adverse impacts of their activities on human rights, such as child labour and exploitation of workers, and on the environment”. Another difference will likely be the steepness of the penalties for non-compliance – a modest fine in Canada, compared with liability for damages in Europe. However, it’s worth noting that both explicitly assign oversight responsibility to the governance body. Of course, human rights issues are not new for companies, having already been articulated in the UN Guiding Principles on Business and Human Rights and the Organization for Economic Co-operation and Development (OECD)’s Guidelines for Multinational Enterprises and Due Diligence Guidance for Responsible Business Conduct. Nevertheless, proposed legislations serve to illustrate that human rights and the integration of sustainability-related issues into supply chain management are gaining momentum across the globe. And each one comes with more stringent corporate disclosure obligations. Food for thought.

Read Bill S-211

Davos 2022 - what just happened? 9 things to know

This article provides a good summary of the World Economic Forum (WEF)’s annual meeting at Davos that took place from May 22 to 26. In recent years, sustainability has found its way onto the agenda, most notably in relation to global systemic risks we collectively face, and which the WEF does an outstanding job of articulating in its annual Global Risks Report. It would seem that the tone this year was more somber, as participants grappled with the very clear and present crises of war, food shortages, and energy access, as well as – also very clear and present – systemic risks of climate change, biodiversity loss, and rising inequalities. There are signs of the conversation hinting at the need for new economic models (“regional globalization”??). It may be worth noting that as we approach the midway mark (2015-2030) of our quest to achieve the global Sustainability Development Goals (SDGs), we are nowhere near reaching them. Of course, they remain aspirational. However, that doesn’t mean we shouldn’t keep trying to achieve them. Much like climate change, the only option not on the table is doing nothing. Perhaps the multiplication of crises will spur more action.

Read the summary and access the links

Circular Transition Indicators v3.0 – Metrics for business, by business

Speaking of growing calls for a new economic model, there is a lot of work being done to promote the transition of the economy, and therefore businesses, from a linear to a circular model. To help companies embark on such a transition, the World Business Council on Sustainable Development (WBCSD) has published an insightful framework and associated Circular Transition Indicators. This framework is based on an assessment of material flows within company boundaries, combined with additional indicators on resource efficiency and efficacy, as well as the value added by circular business. There is also an online tool to help companies collect data and calculate the indicators. Anything that can help companies with this necessary, albeit difficult, transition is welcome!

Access the framework

Access the online ctitool.com

Impact Weighted Accounts Framework open for consultation

As the Impact Economy Foundation puts it so well, “in order to reduce global emissions and make the Paris agreements, in order to reduce poverty and in order to achieve the (other) SDGs, the way we look at our economy should change. One of the pathways to do so, is for companies to understand, report and manage their impact better.” Last week it launched the public consultation of the Impact-Weighted Accounts Framework (IWAF), a framework to quantify (in dollar terms) an organization’s non-financial impact, i.e., the value it creates or destroys for all its stakeholders, including employees, customers, the environment, and the broader society. The framework is the result of a partnership with Harvard Business School, Singapore Management University, Rotterdam School of Management, and Impact Institute. It provides guidelines and definitions for companies to include impact information in their annual reports. I would encourage taking a closer look at the very insightful research from Harvard Business School’s Impact-Weighted Accounts Project, which contributed to the framework currently in consultation. As companies are tasked with addressing environmental and social issues that they impact through the conduct of their business activities – for example, reducing emissions, eliminating and preventing human rights abuses, creating fair and inclusive employment opportunities, reversing the depletion of finite natural resources – they will be called upon to manage, measure, and disclose their impacts. The tools are coming.

Access the framework and related documents

On cybersecurity breach disclosures

This is an interesting article summarizing Audit Analytics’ fourth annual Trends in Cybersecurity Breaches report, which highlights the significant growth in cybersecurity breach disclosures over the last ten years… No doubt reflecting an increase in incidents, and most definitely reflecting an increase in disclosures. Perhaps most noteworthy is the fact that almost half (43%) were disclosed in a US Securities and Exchange Commission (SEC) filing. More importantly, the article points back to proposed new disclosure rules announced by the SEC last March (link in the article), and which would require companies to report: (i) material cybersecurity incidents in a Form 8-K; (ii) cybersecurity policies, procedures, and risk, the oversight role of the Board of Directors in regards to cybersecurity risks, and management’s role and expertise with cybersecurity matters; and (iii) cybersecurity disclosures made using inline XBRL. Sound familiar? The comment period for these proposed new disclosure rules closed on May 9. Stay tuned for next steps.

Read the article