Does Labour have an ESG agenda?
By Helen Dodd, Head of Reinventing Responsibility
For anyone navigating what an incoming Labour Government could look like, there have been few clues as to what Labour’s ESG agenda will be. Headline announcements on the environment have been tempered by the harsh realities of the UK’s fiscal and energy security situation. Oil and gas production, Keir Starmer said, will continue in the North Sea “for decades to come”. In the midst of the cost-of-living crisis is Labour distancing itself from a more progressive environmental and social agenda?
At first glance it’s not easy to see where Labour could differentiate itself from the Conservatives when it comes to ESG. The UK has quietly been carving out a role as one of the leading adopters of reporting frameworks, becoming the first country in the world to mandate Climate-Related Financial Disclosures (TCFD) across the economy; adopting gender pay reporting requirements and supply chain due diligence rules, and taking into account social value and Carbon Reduction Plans when awarding government contracts. New economy-wide Sustainably Disclosure Requirements will see businesses reporting on how they impact and are impacted by climate and the environment. The UK is also leading the development of reporting on nature-based risks such as biodiversity loss for large and economically significant businesses, and exploring the prospect of mandatory Climate Transition Plans.
Whilst Labour’s approach won’t wildly veer from this trajectory, we can expect some differences, particularly when it comes to using the ‘carrot’ of public procurement contract design to deliver greater social and environmental benefits. The Labour Business Group has championed this approach arguing that a future Labour Government should implement a more robust Social Value Act. Speaking at the Social Value Conference recently, Shadow Cabinet Office Minister Florence Eshalomi confirmed that government buying power would be leveraged to deliver social benefits like local employment, partnerships and training and that “poor performers” would face claw backs. Suppliers that utilise tax havens in their company structures may also be excluded from government procurement processes.
We may also see further strengthening of reporting standards for ESG, as outlined by Shadow Business Secretary Jonathan Reynolds in a 2022 speech to the Investment Association. Reynolds – the de facto lead on ESG for Labour – highlighted the need for good quality disclosure and reporting standards so that customers can compare like with like. With potential reform of the Companies Act being mooted as a way to improve reporting on ESG issues, there will likely be a consultation about upgrading the corporate governance and reporting legal framework. A simpler fix would be for Labour to take best practice from the social sector and apply it to the corporate sector in the form of Public Benefit Statements – a simple declaration of how the organisation has served society in the past reporting period.
Supply chains are also likely to come into the spotlight with a draft Labour pledge to examine the best way to prevent environmental harms and human rights abuses in supply chains. This could build on existing due diligence obligations backed by fines for companies trading in “forest risk commodities” such as palm oil, soy and beef under the Environment Act, or follow the model of the Modern Slavery Act which requires all large businesses to produce an annual statement setting out the steps they have taken to prevent modern slavery in their business and supply chains. There are likely to be exemptions for smaller companies.
Another clue on where Labour may go, is to look to the European parties of the centre left which have greater policy development resource and have been progressing their thinking while Labour has been in detox. This could mean following their agenda on gender representation in board rooms, and further non-financial transparency with corporate liability requirements backed by new directors’ obligations to address sustainability and long-term interests beyond those of shareholder value. Keir Starmer is on board with this approach, taking the view that Labour needs to move to a position where business has obligations beyond solely shareholder value.
Navigating Labour in the coming months, businesses have an opportunity to engage in the formulation of policy and share their expertise. Here are a few take-aways:
- With no explicit Labour ESG lead, Jonathan Reynolds, Rachel Reeves, Florence Eshalomi and Ed Miliband will all be key players pending any reshuffle. The Party has been open to engaging with business on key issues and environmental and social issues will be no exception.
- With big fish to fry on issues such as growth, the NHS, crime and immigration, it’s likely that much of the policy thinking on ESG will be done behind closed doors. In the absence of any big ESG announcements or speeches, now is the time for nuanced evidence-led conversations with the key players about the appropriate level of regulation.
- Labour will be using the coming months to engage on its core policy ideas and test messaging. This is an opportunity to show that business can be a key part of the solution to environmental and social challenges. Engaging in constructive conversations now will pay dividends later.
For more information on how our Navigating Labour offer can help your organisation to engage with Labour on the issues that affect you, please contact Kelly Edwards, Managing Partner at Kelly.email@example.com