Search Results

Reports | Tuesday July 2, 2024

BSR Climate Scenarios

Preview

Climate action has never been more urgent.

BSR’s climate scenario narratives are based on a range of temperature pathways and cross-disciplinary research to capture physical and transition risks. Based on decade-by-decade analysis, scenario planning can inform today’s climate risk disclosures, build resilient business strategies, and present key opportunities for bold action.

People

Koichi Sakaguchi

Preview

Koichi supports BSR member companies across various industries, focusing on human rights and sustainability management.

Prior to joining BSR, Koichi was a global trade consultant at Ernst & Young (EY), working with multinational enterprises in various industries on primarily tariff strategies throughout their global supply chains. He also supported the Tokyo2020 Olympics and Paralympics Committees in realizing their global trade commitments. During his studies, he completed internships at the United Nations High Commissioner for Refugees (UNHCR), the International Labour Organization (ILO), and Norway's Business for Peace Foundation. 

Koichi holds a B.A. in Global Political Economy from Waseda University and is expected to receive an M.Phil. in Theory and Practice of Human Rights from University of Oslo (as of June 2024). 

Blog | Tuesday July 2, 2024

Scaling Investment in Carbon Credits with Integrity

Preview

Nature-based solutions (NbS)—often marketed and financed through the voluntary carbon market (VCM)—are critical in scaling up investments necessary to meeting the goals of both the Paris Agreement and Global Biodiversity Framework. However, credits as a mechanism have come under fire, largely due to the uncertainty in their ability to deliver on their stated promises (e.g., the amount of carbon sequestered), making them the target of scrutiny by both regulators and stakeholders.

A proliferation in guidance and regulations globally related to offsetting claims—such as the EU Green Claims Directive and the US’s VCM Principles—have made companies reticent to continue purchasing credits. Business leads are increasingly at a loss for how to frame and justify their investments since ‘carbon neutrality’ claims are by and large no longer allowed. Projects and purchases have also come under increased scrutiny by various stakeholders following a series of explosive articles over the past 18 months; while these rightly pointed out some shortcomings that need to be addressed, they unhelpfully frightened off investment from the credits market entirely instead of helping channel it into high-impact projects. 

At the same time, SBTi’s Board of Trustees recently announced that they will be exploring the use of “environmental attribute certificates” (which include carbon credits) to support companies’ Scope 3 emissions abatement. Leaving aside the governance of that revision, the substance of the announcement clarifies its current thinking and planned approach to considering any changes to its corporate net zero standard and how companies might utilize credits (or not) as part of their decarbonization journeys.   

Amid such uncertainty, the market for corporate purchasing of carbon credits has been volatile. For the first time since its inception, both 2022 and 2023 saw a contraction in the carbon market compared to 2021 levels. Many companies have been taking a wait-and-see approach, yet science tells us that we must invest immediately and at scale if we are to halt the twin climate and nature crisis. We cannot wait to invest in nature if we are to meet the goals of either the Paris Agreement or the Global Biodiversity Framework, and carbon credits stand as one of the readily available and scalable mechanisms to support both of these.

A host of frameworks, guidance documents, principles exist to help guide the purchase of high-quality carbon credits. Just a few of these include SBTi’s BVCM guidance, ICVCM Core Carbon Principles, VCM Claims Code, Tropical Forest Integrity Guide, and Oxford Principles. We can conclude two things from the diversity of guidelines: 1) there is overall agreement on what constitutes high-quality, such as the need for additionality and permanence, among other characteristics; but perhaps more importantly, 2) the nuances between the frameworks and lack of comprehensive and authoritative guidance leaves companies uncertain about how to engage with carbon credits with integrity for the long-term.

Given the convoluted market, BSR has developed an approach to support companies in carbon credit purchasing for the long term. We align standards and principles from existing frameworks to set a robust minimum standard. This is complemented by strategic visioning and alignment with your climate and sustainability strategies to ensure that purchasing works with internal goals and objectives. We codify the standards and criteria in a strategic framework, which we use to identify and vet potential providers that will enable companies to enact their purchasing strategy efficiently and with integrity. We also support companies in understanding how to communicate their efforts amid increased scrutiny.

High-quality carbon credits are critical for scaling finance quickly, and represent an impactful avenue for corporate investment in the short term. Credits can and should play a role in corporate climate and nature strategies, parallel to business transformation and overall decarbonization, especially in supporting companies’ beyond value chain commitments. Moving forward, BSR suggests businesses evaluate their current use of carbon credits.

Some key questions include:

1. What types of credits are you purchasing? What types of projects do the credits support? Does your current purchasing meet the (increasing) minimum standards for quality? Do your purchases support both climate and nature goals, or are they undermining them?
2. Why is your company investing in credits? If ‘carbon neutral’ claims are driving current purchasing, how might your company re-frame and rationalize credit purchasing? What role do credits play in mitigating your company’s impacts?
3. What claims are important for your company to make about credits? How might it need to update how it talks about its purchasing of carbon credits, such as via contribution claims (e.g., “we contributed to the restoration of 15,000 hectares of Brazilian rainforest”)?

The next 6 months are likely to see significant changes in the rules governing the use and application of credits. Members can get in touch to discuss how we can support your company in purchasing carbon credits with integrity in an uncertain environment, while also supporting internal goals and objectives.

Reports | Thursday June 20, 2024

Navigating the Rollbacks in Protection of Reproductive and LGBTQI+ Rights in the US

Preview

The US has been undergoing a systematic rollback of reproductive and LGBTQI+ rights. Two years after the decision to overturn Roe v. Wade, abortion is illegal in 14 states and healthcare providers and others who help patients face criminal penalties. At least 23 states limit or ban access to gender-affirming care, while hundreds of other anti-LGBTQI+ equality bills were introduced in state legislatures in 2023. 

Financial services companies and other businesses that process healthcare-related payments must grapple with the repercussions of this fragmented legal landscape. Healthcare bans and restrictions complicate the operating environments for business and raise material risks. They also have a chilling effect on companies concerned with operating responsibly. Financial institutions are now exposed to complex ethical dilemmas, such as how to comply with the law while respecting the reproductive and LGBTQI+ rights of their customers, users, and workforce.  

BSR’s new report, Navigating Rollbacks in Reproductive and LGBTQI+ Rights in the US: A Guide for Financial Institutions, is a practical resource for financial institutions and anyone seeking to engage them on reproductive and LGBTQI+ rights in the US context. The guide includes insights on: 

• The rollbacks of legal protections for abortion and LGBTQI+ rights across the US;  
• How financial institutions may impact abortion and LGBTQI+ rights, specifically discussing data practices, handling of law enforcement requests, financial de-risking activities, lobbying efforts, and discriminatory or inequitable provision of financial services;  
• Material risks that result from failing to respect reproductive and LGBTQI+ rights; and 
• Practical recommendations and case studies for navigating compliance with the law while respecting human rights. 

Insights+ | Thursday June 20, 2024

The CSDDD: Compliance Meets Sustainability Ambitions

Preview

Blog | Tuesday June 18, 2024

Space ESG Executive Program: Toward High-Impact Collective Action

Preview

Space is changing: In 2023 a commercial rocket exploded over Texas, spreading debris over a natural preserve; in November 2023, a Michigan citizens' group helped defeat a proposal to build a spaceport site near Lake Superior; and new questions are arising about emissions of rockets in the upper atmosphere and the congestion of many satellites in earth orbit. The best opportunity to foster proven sustainability excellence in the space industry is now, to reduce cost, risk, and ensure the new space economy is as good as it can be.

The commercial space industry is undergoing rapid growth and change—forging an entirely new economy with unforgiving requirements. Consideration for the long-term impacts of the new space economy is fragmented and remains an emerging priority for the space sector.

Many industry experts haven’t prioritized sustainability practices due to a lack of demand from stakeholders, conflict with specific technology, and core mission objectives. The opportunity to build these practices into business plans is before us: we’re launching a rapid start program for space practitioners to upskill experts on the best ways to manage sustainability topics. 

The sector is developing at a rapid pace: already in 2024, there have been over one hundred successful orbital rocket launches. These launches are expanding satellite constellations to provide global broadband service, enabling future missions to Mars and the Moon, developing a working space tourism sector, and advancing supporting technologies for scientific exploration and industrial development. The industry also has the potential to create new impacts for people and the environment. 

For many legacy industries, managing the impacts of their activity on people and the environment has become standard practice. Investors, customers, and business partners have high expectations that externalities are well understood, and managed, and risks mitigated. The cost of failing to do so is too great: legal action from communities can delay production; reputations and contracts can be lost from sourcing conflict minerals; entire facilities can be shut down from climate-related events; and launch schedules can be delayed for years when communities are put at risk of launch failures. Strong governance of environmental, social, technical, regulatory, and other risk factors strengthen business plans and improve investment security.  

Yet, many actors in the commercial space industry remain behind traditional standards of sustainability governance. While some large, diversified companies have comprehensive sustainability programs, we believe there are a few fundamental reasons the sector is lagging overall: the operating environment is very different, and the sector is growing incredibly fast. Greenhouse gas emissions, for example, are a bedrock pillar of most company’s sustainability work, and an urgent global issue. For space operators, air emissions occur in traditional ways, as well as across all layers of the lower and upper atmosphere. Raw materials must be sourced from highly technical supply chains with geopolitical and human rights risks. They are also left to build up in the upper atmosphere upon re-entry. Meanwhile, investors are rushing to grab a piece of the $700B—some say $1T—industry as it outpaces global GDP growth. A rush of cash into a highly complex, technically challenging field under pressure to show positive value is a perfect storm for a lack of governance. 

Today, space companies are beginning to rise to meet the present and coming demand for integrated risk management. BSR’s research shows there is significant attention to the risks of orbital debris. The safety—of flight crews and communities on the ground—is widely acknowledged as a paramount concern. And like other industries, addressing climate risks, challenges in attracting and retaining talent, and managing risk in supply chains are affecting space business. Leaders we’ve spoken to are grappling with understanding how to manage these sustainability issues in the context of space. There are many urgent questions, and as any Chief Sustainability Officer might sympathize, not enough time and great complexity for which investments will generate the best return on reputation, risk, and performance. 

We have heard the call for collaboration to break down and prioritize actions, as well as a greater understanding of best practices and optimal implementation strategies. To catalyze sustainability proficiency for space industry leaders, we’re launching a Space ESG Executive Program.

This six-month program will bring together a group of practitioners to gain a common understanding of good governance, ESG regulation, demonstrate practices in ESG excellence, and develop a common statement for ESG practice in space. We believe this rapid, lightweight learning network will help bring clarity in decision-making, drive impact and lower the cost of action. We also believe it can spark the opportunity for long-term collaboration to create shared standards for ESG excellence in the space industry.

If you’re in the space sector, we’d love to talk. Reach out to us here.

Audio | Monday June 17, 2024

What the SBTi Battle Portends: The Decisive Decade Becomes the Dilemma Decade

Preview

Aron Cramer, BSR President and CEO, chats with David Stearns following his latest blog about the public battle over the direction of the Science Based Targets Initiative (SBTi), the fundamental question behind this debate, and the tradeoffs companies face at a time when rapid progress on climate action is really needed.

Blog | Monday June 17, 2024

A Coherent Approach to Sustainability Due Diligence and Reporting: Making Sense of CSDDD and CSRD

Preview

Voluntary frameworks for companies to assess, address, and report on their sustainability impacts on people and the planet have existed for decades. Nevertheless, mandatory EU requirements are bringing new attention to the governance and robustness of these processes and demanding companies harmonize their approaches across issues and teams.

CSRD and CSDDD requirements are aligned in spirit, with a clear overlap in their scopes and obligations. However, some differences exist. Implementation raises practical questions, and we recommend a pragmatic approach that capitalizes on efficiencies while acknowledging the unique requirements of each directive.

Key Similarities and Differences of CSRD and CSDDD

Five Questions for A Coherent Approach to Complying with CSRD and CSDDD 

As we work to help companies comply with these regulatory requirements, five considerations stand out:

1) How and when should companies identify actual and potential adverse impacts on people and the environment? 

The first step for companies in addressing and disclosing their impacts on people and the environment is identifying them. CSRD and associated guidance clarify that the materiality assessment of negative impacts is informed by the due diligence process defined in the UN Guiding Principles on Business and Human Rights (UNGPs) and the OECD Guidelines for Multinational Enterprises. Due diligence can help a company identify impacts and affected stakeholders, whose perspectives should inform the materiality assessment of impacts.

The OECD Guidelines and UNGPs, which also form the foundation of CSDDD, call for meaningfully assessing actual and potential impacts at various levels of the business, across operational contexts, and throughout the value chain on an ongoing basis (e.g. in supplier management systems). This iterative approach to assessment expects companies to progressively deepen their understanding of their most severe and likely impacts for management and disclosure and provides increasingly granular input for regularly updated double materiality assessments required by CSRD. 

In practice, efforts to identify impacts as part of due diligence and as part of materiality exercises can overlap. For example, nascent due diligence processes may start with a corporate-level scan of likely impacts based on industry, geography, and business model. This resembles the high-level view of likely impacts developed as part of a materiality assessment. These processes often include conversations with a similar set of internal and external stakeholders.

As a result, practical questions may arise as to how to integrate and sequence these high-level assessments, noting that human rights and environmental assessments generally go further than impact identification and evaluation, and include an assessment of the measures taken to address these impacts.  Teams can benefit from a consistent approach that reflects a unified understanding of the value chain and stakeholder landscape and ensures efficient use of the information gathered.

2) How should companies prioritize impacts for action and reporting? 

CSRD and CSDDD adopt the same criteria—severity and likelihood—for prioritizing impacts, though the aim of the prioritization exercise is different: determining topics for disclosure under CSRD versus sequencing actions to address impacts under CSDDD. Companies will need to determine how best to understand the severity and likelihood in service of both objectives across a diverse range of topics. While prior corporate efforts to align with the UNGPs and OECD Guidelines provide experience in applying these criteria to human rights impacts, this approach is new for environmental teams, and it is less clear how criteria should be applied to these topics. Companies also need to determine how to consistently understand inherent (gross) and residual (net) impacts, the former being the basis for prioritizing action and disclosure on adverse impacts under CSDDD and CSRD. The assessment criteria will need to be harmonized across the organization to prevent inconsistencies in communication and action. 

The lack of data on a particular topic does not mean that an impact does not exist or is not severe, particularly if the means to collect the data are lacking. Where impacts are unclear, a risk-based methodology—that seeks to assess the likelihood and severity of impacts using proxy data and/or expert judgment—should be used to inform the company’s approach. 

3) Why and how should companies engage affected stakeholders?

CSRD and CSDDD stress the need to consider the perspectives of affected stakeholders (e.g., people impacted by the business, environmental defenders) and to communicate to them how impacts relevant to them are managed. While CSRD does not require stakeholder engagement, CSDDD requires—and provides criteria for—meaningful engagement. This includes providing stakeholders with relevant and comprehensive information, ensuring ongoing consultation, considering barriers to engagement, and ensuring stakeholders are free from retaliation and retribution.

Engagement can range from formal channels (e.g., consultations, interviews, surveys, and grievance mechanisms) to informal day-to-day interactions (e.g., regular meetings with customers, town halls, or community roundtables). Companies should also engage stakeholders through their legitimate representatives (e.g., trade unions or civil society organizations) and ensure engagements are tailored for specific groups. For instance, where Indigenous Peoples may be impacted, engagement may involve good faith processes of free, prior, and informed consent. 

An effective stakeholder engagement approach should build trust and avoid the need for duplicative information gathering. Engagement with affected stakeholders should be integrated at each step of due diligence (as required by CSDDD), and insights from engagements should inform a company’s reporting (under CSRD), closing the due diligence lifecycle by accounting for its impact management to stakeholders.

4) How should companies address impacts? 

While CSRD does not require companies to act on material impacts, it does require them to report on how they manage impacts in some detail. CSDDD requires companies to act on impacts and provides a clear operational framework to help them understand what appropriate action looks like based on the company’s involvement in harm, such as ceasing this activity and providing remedy. It points to governance and management systems that should be deployed to prevent, mitigate, and remediate adverse impacts (e.g., policies, effective grievance mechanisms) as well as ways they should use leverage (e.g., supplier contracts, industry and multi-stakeholder initiatives). Recognizing the vast differences between companies, industries, operating contexts, and issues, CSDDD leaves flexibility for companies to tailor their actions to address impacts.

5) Who should be responsible for oversight and execution of sustainability due diligence, including reporting? 

Through CSRD and CSDDD, sustainability due diligence has become a legal responsibility for management and for board oversight with penalties for companies who fail to comply. Ensuring an effective response calls for clear governance structures, cross-organizational collaboration, and access to expertise. Boards may need to add members with relevant subject matter expertise or establish advisory bodies. Senior management should have formalized responsibilities and likewise draw on internal and external sustainability expertise to deepen their understanding of the company’s sustainability impacts and what good compliance looks like.

We hear from companies that new compliance pressure has the potential to become an overwhelming distraction. While this is understandable, our experience helping companies implement each step of due diligence and impact-based materiality reporting gives us hope that the regulatory baseline can become a springboard for ambitious yet pragmatic action on corporate impacts on people and the environment.

BSR’s multidisciplinary team takes a holistic approach to CSRD and CSDDD compliance strategies, helping companies to develop approaches that are aligned and integrated across the value chain. If you’d like further information, please don’t hesitate to reach out.

People

Katharina Doets

Preview

Katharina works with the RISE partnership team to support and expand the network of RISE members and stakeholders.

She supports RISE members – brands, buyers, suppliers, and vendors in the apparel, footwear, and home textile industries– to promote gender equality and empower women workers throughout global supply chains.

Prior to BSR, Katharina managed strategic partnerships for the Center for International Media Assistance as assistant program officer at the National Endowment for Democracy in Washington D.C., focusing on the role of independent media in the creation and development of sustainable democracies.

Katharina holds an MA in Human Rights from University College London, as well as a BA in International Education and Development from the University of Sussex.

Katharina is a fluent English and Dutch speaker.

People

Saad Khan

Preview

Saad Khan is an Associate on BSR's Financial Services and Climate Change teams.

He lives in New York and grew up in India. He was previously an Associate Director on the Investments team at the College Board, where he deployed the internal impact-venture fund focused on education and workforce development, in addition to performing M&A and portfolio management for the endowment. Before that, he was an Investment Analyst at Rida Capital, where he focused on financial inclusion and FinTech in India.

He holds a BS in Finance from Mercy College.