Welcomes you to
Sponsored by
CSR Reporting:CSR Reporting:
Requirements and RisksRequirements and Risks
Responsible Electronics 2013
Lauren Hopkins
lhop...
OverviewOverview
• Historical perspective
• Key drivers of CSR reporting
• Examples of mandatory CSR reporting
schemes
• O...
Historical PerspectiveHistorical Perspective
• 1960s and 1970s – early reporting on social issues
• 1980s – concept of “ne...
Key Drivers of CSR ReportingKey Drivers of CSR Reporting
5
Case Study: Slavery FootprintCase Study: Slavery Footprint
6
Case Study: Slavery FootprintCase Study: Slavery Footprint
7
Examples of Mandatory CSRExamples of Mandatory CSR
Reporting SchemesReporting Schemes
8
US Conflict Minerals ReportingUS Conflict Minerals Reporting
Dodd-Frank Act and SEC Conflict Minerals Rule
•Covered entiti...
California Transparency inCalifornia Transparency in
Supply Chains ActSupply Chains Act
Effective January 2012
•Covered en...
France: Grenelle II (Article 225)France: Grenelle II (Article 225)
Article 225 enacted in 2010 as part of Grenelle II envi...
On the Horizon?On the Horizon?
• Targeted Reporting
– United Kingdom proposal for “modern slavery”
bill that would incorpo...
Legal Risks of CSR ReportingLegal Risks of CSR Reporting
• Liability for false or misleading statements under
marketing / ...
Legal Risks of CSR ReportingLegal Risks of CSR Reporting
• Shareholder or investor lawsuits
– US Exchange Act Section 18 l...
Parting ThoughtsParting Thoughts
• Shift from voluntary to mandatory CSR reporting requirements
• Increasingly tied to par...
Welcomes you to
Sponsored by
Regulating Corporate Social
Responsibility
European Union and China
Trends in mandatory and voluntary
sustainability reporting
Source:
https://www.globalreporting.org/resourcelibrary/Car
rot...
Key Trends
• KPMG, UNEP, GRI and the Centre for Corporate Governance in Africa1
examined
sustainability reporting trends w...
What are the main trends?
Source:
https://www.globalreporting.org/resourcelibrary/Car
rots-and-Sticks.pdf
European Union
- Regulatory framework
 Sustainability reporting has grown, but is not yet mainstream as
many companies st...
European Union
• Mandatory requirements
– EU Modernization Directive 2003
– The European Pollutant Release and Transfer Re...
European Union
Renewable Energy
• Substantial growth in renewable energy deployments
• The EU’s policy of meeting 20% of i...
The KPMG Green Tax Index: Quartiles
Quartile 1 US, Japan, UK, France, South Korea,
China
■ Highest use of green tax
■ Shee...
The KPMG Green Tax Index
ENERGY EFFICIENCY
Netherlands 1
Germany
2
Singapore
China, Russia, South Africa,
US
4
RENEWABLE E...
The KPMG Green Tax Index
GREEN BUILDINGS
US 1
Germany
2
Netherlands
Belgium
3China
France
GREEN VEHICLES
Japan 1
France
2
...
China – the new generation
 90.7% think that the sustainability movement is on the
upswing
 65% said that if more people...
China
- Emerging regulatory framework
 SASAC required all State Owned Enterprises to establish a
Corporate Social Respons...
China – Mandatory and voluntary
initiatives
• Mandatory requirements
– Environmental Information Disclosure Act, 2008
– Gr...
Emissions Trading Schemes
 Key mandatory Emissions Trading Schemes (ETS) planned or
in operation: EU, South Korea, Califo...
EU ETS sector emissions (million metric tons CO2),
emissions caps, and EU GDP, 1990–2015
Environmental Defense Fund (2012)...
Contact Details
Katherine Blue
T: +1 404 312 4511
E: kblue@kpmg.com
ITI Member Companies
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Sponsored by
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Responsible Electronics 2013: Know the Law: Who Is Regulating CSR Practices, and Where?

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Presentations from the EICC conference Responsible Electronics 2013, Oct 1-3 in California.

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  • Of the estimated 180 national reporting policies and initiatives worldwide, two thirds are mandatory (Carrots and Sticks, 2013)
  • Responsible Electronics 2013: Know the Law: Who Is Regulating CSR Practices, and Where?

    1. 1. Welcomes you to Sponsored by
    2. 2. CSR Reporting:CSR Reporting: Requirements and RisksRequirements and Risks Responsible Electronics 2013 Lauren Hopkins lhopkins@bdlaw.com The purpose of this presentation is to provide general information for discussion. It is not intended as, nor is it a substitute for, legal advice. 2
    3. 3. OverviewOverview • Historical perspective • Key drivers of CSR reporting • Examples of mandatory CSR reporting schemes • Other initiatives on the horizon • Legal risks 3
    4. 4. Historical PerspectiveHistorical Perspective • 1960s and 1970s – early reporting on social issues • 1980s – concept of “negative screening” introduced as investment strategy • 1990s – emergence of comprehensive social and environmental reporting – Sustainable development and “triple bottom line” – GRI reporting guidelines • 2000 – 2013 – Proliferation of reporting frameworks and tools – Significant increase in voluntary corporate reporting – Emergence of mandatory CSR reporting requirements 4
    5. 5. Key Drivers of CSR ReportingKey Drivers of CSR Reporting 5
    6. 6. Case Study: Slavery FootprintCase Study: Slavery Footprint 6
    7. 7. Case Study: Slavery FootprintCase Study: Slavery Footprint 7
    8. 8. Examples of Mandatory CSRExamples of Mandatory CSR Reporting SchemesReporting Schemes 8
    9. 9. US Conflict Minerals ReportingUS Conflict Minerals Reporting Dodd-Frank Act and SEC Conflict Minerals Rule •Covered entities: – Companies that file reports with the SEC under the Exchange Act; and – Minerals are “necessary to the functionality or production” of a product manufactured or contracted to be manufactured by the company •Key requirements: – Conduct Reasonable Country of Origin Inquiry (RCOI) of conflict minerals in supply chain – File Form SD (specialized disclosure form) with the SEC – In certain cases, exercise due diligence on supply chain and file an audited Conflict Minerals Report •Penalties / enforcement: – Potential liability under Exchange Act Section 18(a) (private cause of action) for false or misleading statement or omission in filed reports 9
    10. 10. California Transparency inCalifornia Transparency in Supply Chains ActSupply Chains Act Effective January 2012 •Covered entities: – Any retailer or manufacturer “doing business in California” with annual worldwide gross receipts > 100 million •Key requirements: – Disclose company efforts to eradicate slavery and human trafficking in their supply chain – Place “conspicuous and easily understood” link to disclosure on website home page •Penalties / enforcement: – Injunctive relief – List of companies subject to the Act was generated and sent to CA Attorney General in late 2012 – No indication of enforcement yet 10
    11. 11. France: Grenelle II (Article 225)France: Grenelle II (Article 225) Article 225 enacted in 2010 as part of Grenelle II environmental legislation •Covered entities: – All companies listed on the French stock exchanges – Unlisted companies (including subsidiaries of foreign companies) that meet certain revenue and headcount thresholds •Key requirements: – Include in annual financial report environmental, social, and governance information (~ 40 topics) – “Comply or explain” – justify exclusion of omitted information – Independent third-party verification •Penalties / enforcement: – No regulatory sanctions, but shareholders may take legal action 11
    12. 12. On the Horizon?On the Horizon? • Targeted Reporting – United Kingdom proposal for “modern slavery” bill that would incorporate language modeled after the California TISCA legislation – EU and Canada considering conflict minerals reporting initiatives • Integrated Reporting – European Commission considering options for reporting of non-financial information 12
    13. 13. Legal Risks of CSR ReportingLegal Risks of CSR Reporting • Liability for false or misleading statements under marketing / advertising laws – State consumer protection laws • E.g., Kasky v. Nike (2003) – US FTC Green Guides • However, FTC declined to issue guidance on “sustainable” claims; reluctant to target corporate image advertising – United Kingdom environmental marketing guidance • Specifically includes corporate sustainability statements in definition of “claim” • Requires firm basis for claims about future environmental goals or commitments 13
    14. 14. Legal Risks of CSR ReportingLegal Risks of CSR Reporting • Shareholder or investor lawsuits – US Exchange Act Section 18 liability • Cause of action for individuals who purchase or sell a security in reliance on materially false or misleading statement filed with SEC – Derivative lawsuits under state corporation laws • Brought by shareholders on behalf of the company to enforce officer / director duties of loyalty and care • Liability for conduct abroad – Alien Tort Claims Act – Torture Victims Protection Act – Foreign Corrupt Practices Act 14
    15. 15. Parting ThoughtsParting Thoughts • Shift from voluntary to mandatory CSR reporting requirements • Increasingly tied to participation in stock exchanges • Schemes / frameworks that could give rise to liability for statements in CSR reports are in place but not heavily utilized so far • Careful review of statements in CSR reports to ensure accuracy and substantiation can help mitigate risks • Watch for: – Adoption of CSR reporting requirements in new jurisdictions – Opportunities to advocate for consistent reporting formats and reference to recognized sustainability indicators in emerging mandatory schemes – Creative uses of reported information by NGOs, competitors, public 15
    16. 16. Welcomes you to Sponsored by
    17. 17. Regulating Corporate Social Responsibility European Union and China
    18. 18. Trends in mandatory and voluntary sustainability reporting Source: https://www.globalreporting.org/resourcelibrary/Car rots-and-Sticks.pdf
    19. 19. Key Trends • KPMG, UNEP, GRI and the Centre for Corporate Governance in Africa1 examined sustainability reporting trends worldwide in a May 2013 publication, “Carrots and Sticks” Key trends identified were: • Continued and growing interest in regulation, including corporate governance and disclosure requirements • Increase in the number of countries becoming involved in the sustainability reporting policy arena, including developing countries • Increasing number of policies inspired by or based on a “report or explain” approach • Growing reference to existing sustainability and reporting frameworks and the continuing emergence of new frameworks. • A consistent focus on large and state-owned companies yet voluntary reporting by SMEs is increasing • Sustainability reporting has become a listing requirement on several stock exchange in non-OECD countries
    20. 20. What are the main trends? Source: https://www.globalreporting.org/resourcelibrary/Car rots-and-Sticks.pdf
    21. 21. European Union - Regulatory framework  Sustainability reporting has grown, but is not yet mainstream as many companies still do not disclose non financial information  European companies continue to lead the pack on CSR reporting, but the U.S. is quickly catching up  April 2013 amendment to the Accounting Directives and the Transparency Directive requiring the disclosure of payments to governments on a country and project basis  Impacts listed and large non-listed companies with activities in the extractive industry (oil, gas and mining) and loggers of primary forests  Proposed amendment to the existing accounting legislation aimed at requiring large companies in Europe to disclose policies, risks and results with respect to environmental matters, social and employee related aspects, respect for human rights, anti-corruption and bribery issues and diversity on the boards of directors An estimated 71% companies in the EU report on CSR Disclosure of payments to governments Report or explain approach to environmental and social matters Source: https://www.globalreporting.org/resourcelibrary/Carrots-and- Sticks.pdf KPMG (2011) http://www.kpmg.com/PT/pt/IssuesAndInsights/Documents/corporate- responsibility2011.pdf
    22. 22. European Union • Mandatory requirements – EU Modernization Directive 2003 – The European Pollutant Release and Transfer Register (PRTR), 2006 – Integrated Pollution Prevention and Control Directive (IPPC), 1996 • Voluntary guidance – The EU Eco-Management and Audit Scheme (EMAS), 1995 – EC Recommendation on recognition, measurement and disclosure of environmental issues in the annual accounts and reports of EU companies, 2001 – Renewed EU 2011-14 Strategy for Corporate Social Responsibility 2011 Source: https://www.globalreporting.org/resourcelibrary/Car rots-and-Sticks.pdf
    23. 23. European Union Renewable Energy • Substantial growth in renewable energy deployments • The EU’s policy of meeting 20% of its final energy use from renewable energy by 2020 is on track (10% for transport) • In 2012, the EU limited global land conversion for biofuels production (use of food-based biofuels to meet the 10% renewable energy target of the Renewable Energy Directive will be limited to 5%)
    24. 24. The KPMG Green Tax Index: Quartiles Quartile 1 US, Japan, UK, France, South Korea, China ■ Highest use of green tax ■ Sheer number of incentives and penalties places in Quartile 1 ■ USA and South Korea weighted towards incentives ■ France weighted towards penalties ■ Japan, UK and China balanced between incentives and penalties Quartile 2 Ireland, Netherlands, Belgium, India, Canada, Spain ■ Medium to high use of green tax ■ Wealth of wind, solar and water resources can help to encourage investment in green technology Quartile 3 Australia, South Africa, Germany, Finland, Singapore ■ Moderate use of green tax ■ Strong use of non-tax funding eg. significant grant programs in Australia (ARENA), Finland (Tekes) and Singapore (GREET) Quartile 4 Brazil, Argentina, Mexico, Russia ■ Relatively low use of use tax as a green policy tool ■ Only 1 of the 4 has a green tax penalty (Russia’s water tax). ■ Other funding programs may be used eg. Argentina’s feed-in tariffs Program, Brazil’s FUNTEC R&D grants
    25. 25. The KPMG Green Tax Index ENERGY EFFICIENCY Netherlands 1 Germany 2 Singapore China, Russia, South Africa, US 4 RENEWABLE ENERGY & FUELS US 1 Japan 2 Canada 3 India 4 Ireland WATER EFFICIENCY South Korea 1 China 2 South Africa 3 UK Belgium 5Russia Singapore CARBON & CLIMATE CHANGE UK 1 Australia, Finland, Korea 2 China 5 GREEN INNOVATION South Korea 1 Canada 2 Brazil 3 Argentina, Belgium, France, US 4
    26. 26. The KPMG Green Tax Index GREEN BUILDINGS US 1 Germany 2 Netherlands Belgium 3China France GREEN VEHICLES Japan 1 France 2 UK US 4 Belgium, China, Ireland, Spain 5 MATERIAL RESOURCE EFFICIENCY/WASTE MANAGEMENT France 1 China 2 Belgium 3South Korea UK POLLUTION CONTROL & ECOSYSTEM PROTECTION Singapore 1 Spain 2 France, Mexico, 3 South Africa, UK, US
    27. 27. China – the new generation  90.7% think that the sustainability movement is on the upswing  65% said that if more people in their community were active in being green, they would be too  80% would like to get recognition from their peers for their positive green behaviors  78% of the respondent said that they would rather be provided guidelines on how to live a sustainable life and do it themselves rather than have it legislated Source: Closing the Sustainability Gap, Ogilvy Mather (Study focused on China)
    28. 28. China - Emerging regulatory framework  SASAC required all State Owned Enterprises to establish a Corporate Social Responsibility (CSR) department and produce a report by 2012.  Shanghai Stock Exchange issued disclosure rules affecting 300+ companies  CBRC, PBOC, and MEP cooperated to issue Green Credit Policy  Chinese Banking Association issued CSR guidelines for members and other associations have followed  Ministry of Finance guidance on internal controls includes a requirement for controls on CSR  Law on Circular Economy Nearly 700 companies in China report All banks affected Compliance systems need to include Corporate Social Reporting
    29. 29. China – Mandatory and voluntary initiatives • Mandatory requirements – Environmental Information Disclosure Act, 2008 – Green Securities Law, 2008 – Guidelines on Environmental Information Disclosure by Companies listed on the Shanghai Stock Exchange, 2008 – Guidelines to the State-Owned Enterprises Directly under the Central Government on Fulfilling Corporate Social Responsibilities, 2008 – Shenzhen Stock Exchange Social Responsibility Guidelines for Listed Companies, 2006 – Consultation Conclusions on Environmental, Social and Governance Reporting Guide 2012 • Voluntary requirements – Guidelines on Corporate Social Responsibility for Banking Financial Institutions in China, 2009 – Shanghai Municipal Local Standards on Corporate Social Responsibility, 2008 – Guidelines on Social Responsibility for Industrial Corporations and Federations, 2011 Source: https://www.globalreporting.org/resourcelibrary/Car rots-and-Sticks.pdf
    30. 30. Emissions Trading Schemes  Key mandatory Emissions Trading Schemes (ETS) planned or in operation: EU, South Korea, California, Quebec and Australia  China is proposing a network of seven pilot schemes to begin operation in 2013  EU ETS is the longest standing scheme (since 2005) and entered its third phase in 2013 and has a commitment to reduce GHG emissions by 20% on 1990 levels by 2020  EU ETS covers 12,000 installations, responsible for over 40% of all EU GHG emissions Parliament of Australia, Department of Parliamentary Services (June 6, 2013) Background note: Emissions trading schemes around the world
    31. 31. EU ETS sector emissions (million metric tons CO2), emissions caps, and EU GDP, 1990–2015 Environmental Defense Fund (2012) The EU Emissions Trading System: Results and Lessons
    32. 32. Contact Details Katherine Blue T: +1 404 312 4511 E: kblue@kpmg.com
    33. 33. ITI Member Companies
    34. 34. Welcomes you to Sponsored by

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