From one of the largest oil and gas multinationals pledging to reach “net zero” to the world’s biggest asset manager “placing sustainability at the centre of our investment approach'”, responsible business is becoming a keystone of the corporate strategy of businesses of all types and across all sectors.
It should also be at the heart of a business’s approach to regulatory compliance. Governments and regulators are responding to calls from sections of society to compel businesses to operate and trade sustainably, ethically, and in a way that is socially responsible. In this edition of the Regulatory Outlook, we look at how concepts of business responsibility are shaping the regulatory landscape across 14 areas of business regulation. From this, some common themes emerge:
- A broad church: business responsibility is multifaceted and different considerations come to the fore in different regimes, even within the same sector. Within financial services, for example, the focus for investment funds is on ESG (environmental, social and governance) investment, often focussing on sustainability. But when it comes to consumer finance, social responsibility – the protection of vulnerable customers – is the government and regulators’ priority. In other areas, such as regulated procurement, businesses are encouraged to consider a range of factors including sustainability and labour practices in supply chains and the impact delivering public sector contracts has on the local community.
- Regulatory levers: the nature of responsible business does not lend itself naturally to regulation under a rules-based approach. Alternative regulatory tools include principles-based regulation (as in the case of financial regulation), corporate reporting (including the new Streamlined Energy and Carbon Reporting regime), industry initiatives (such as those promoting ESG investment) or government purchasing power (in the case of regulated procurement).
- A team effort: at one time, sustainability and social responsibility may have been the domain of corporate social responsibility teams. Now, an effective responsible business strategy needs to be a combined effort, involving compliance, procurement, legal, finance and other teams, with buy in from the most senior stakeholders. Business also need to listen to the demands on these issues being made by clients, customers, consumers.
- Part of a bigger picture: with climate change having been described as “the greatest threat facing humanity'”, it is no surprise that many of the responsible business initiatives are driven by international consensus, including through organisations such as the OECD, the UN and the G20. But whether it is modern slavery, socially responsible advertising or wellbeing in the workplace, the UK is often in the vanguard in regulating responsible business.
As governments and regulators work together, businesses should also be thinking globally when it comes to their operations and their compliance risks. A dynamic system with a proactive culture is at the core of good compliance. But compliance is never achieved through systems alone. It requires a willingness by everyone in the business to want to comply. Our regulatory and global compliance teams can help you to understand the regulatory risks to your business now and coming down the track; spot the gaps and areas for improvement; and implement long-lasting improvements to your compliance programmes and culture.
To discuss how we can help you to understand and manage your regulatory risks, please contact one of the experts listed in relation to the relevant area, or your usual Osborne Clarke contact.