Sancroft Insight: March 2022

Sancroft Insight: March 2022
23rd March 2022 Judy Kuszewski
In Insights

In case any further evidence were needed that global markets have well and truly embraced the need for climate-related financial disclosures, the US Securities and Exchange Commission is the latest major player to publish proposed climate disclosure rules. These will require US listed entities to publish Scope 1 and 2 emissions – those from the company’s own direct emissions as well as those associated with purchased electricity and heat – and Scope 3 (from value chains) where material. The rules will bring the US into closer alignment with other major world economies, but perhaps more importantly, this move signals to companies that their climate-related impacts are a necessary consideration for management and a legitimate matter for companies to be held to account by shareholders and providers of financial capital.

The rules must still clear a public-comment process as well as the likelihood of challenges through the courts. But global businesses have already recognised the necessity of these climate-related disclosures to shore up the confidence of markets and demonstrate their strategic foresight and capability to navigate one of the most pervasive global challenges successfully.

We cannot ignore the fact that these and other actions driving a move away from fossil fuels and inefficient industrial methods is taking place while the people of Ukraine are fighting for their very lives and existence against an aggressive, voluntary war waged by Putin’s Russia. As Director Felix Gummer explores, Putin seemingly calculated that the world’s dependence on Russian exports – not only oil and gas, but also agricultural inputs and other industrial materials – would outweigh any concerns over Ukraine’s sovereignty and territorial integrity. While Putin may have misjudged the world’s resolve in this matter, Felix argues that business has an opportunity and responsibility to break the chains linking our economies, in a vicious cycle of dependency, to the whims of a handful of despotic regimes around the world. The fact that moving away from these dependent relationships would also pay significant dividends in sustainability terms should only strengthen our commitment to transition, urgently and completely, towards more acceptable alternatives.

In other insights this month, Analyst Kwame Taylor dives into the requirements of the latest European proposal for the Corporate Sustainability Due Diligence Directive, which will require companies operating in the EU to identify and take action in relation to environmental and human rights risks in their supply chains. Crucially, the directive will create new obligations that will make the actual and potential risks to people and the environment more visible and more directly in scope of a company’s responsibilities – including directors’ duties and the powers of regulators to investigate and require corrective action. All businesses will want to understand this new directive will before it becomes law.

And finally, Senior Analyst Matt Thorogood has set his sights on sustainability in top-flight football – and for good reason, given the sustainability risks and costs clubs, players and fans alike face. The time has come for more concerted action to face up to these risks. Stay tuned for updates from Matt in the weeks to come, including a deeper look at governance – the G of ESG – as a driver of performance for football clubs.

As ever, we love to hear from you, so do get in touch with your own challenges and inspiration!