The climate crisis grabs the headlines. Well, no, actually it doesn't. I had to take my favourite newspaper for the task for featuring a failed politician on its front page while reporting on the latest IPCC report on page 4. “Fate of failed politician page one,” I wrote, “fate of humanity page 4. Get a grip!” Surprisingly, they didn't publish it or respond.
Yes, of course the climate crisis is a crisis, because if we let things continue as they are, the whole of our world, and our environment will be damaged irretrievably. But much of our environment is at risk from more than Climate Change. It is at risk from human activity damaging biodiversity, and in some cases driving parts of it to extinction. Who cares and who is responsible? Well increasingly governments care and shareholders care and those who lead major corporations may be at risk if they don't recognise their actions or the actions of their organisations are damaging biodiversity. That brings us to this week’s interview.
Biodiversity
Anthony Day: Today, we are talking about biodiversity and my guest is Jenni Ramos. She’s a lawyer specialising in corporate/finance and biodiversity at CCLI which is the Commonwealth Climate and Law Initiative. (https://commonwealthclimatelaw.org/) She’s co-author of a report which they’ve just produced. (https://commonwealthclimatelaw.org/biodiversity-risk-legal-implications-for-companies-and-their-directors/) So, welcome, Jenni. Thank you for coming to talk to The Sustainable Futures Report.
Jenni Ramos: Thank you for inviting me. It’s a pleasure.
Anthony Day: Perhaps you could start off by explaining a bit about CCLI; what it is and what it does.
CCLI
Jenni Ramos: Sure. So CCLI is a legal and environmental think-tank. We focus on how climate and biodiversity risks, impacts and opportunities influence the legal interpretation of directors’ duties and why do we focus on directors’ duties is the big question. So these are duties that are found in existing company laws around the world which set out directors’ responsibilities towards their company. For example, their duties of care and loyalty. And this ensures that people in the position of power have proper guidance on how to exercise that power and how to avoid conflicts with their own interests. And just to kind of explain why this is such a powerful concept which is the whole reason why CCLI focused on this, in many countries around the world, the interpretation of these directors’ duties is flexible. So they are viewed in context of the surrounding world and the standard that they’re held to can expand with time and adapt to the market, regulatory, legal and social circumstances. They’re not set in stone or rigid and they evolve. Therefore, as soon as any risk becomes sufficiently important to the potential success of a company, it becomes something that directors should be considering and this is where the environmental aspect comes in. So the CCLI looks at that intersection of company law and environment.
Personal Liability
The most important thing, really, is that these duties can create personal liability for directors who breach them which is a really powerful concept so that even directors who don’t care about particular environmental or societal phenomenon are more likely to pay attention to that because they know if they mismanage it, that that might mean that they could lose, for example, their house or their personal assets. So this is a really powerful narrative as behavioural change at corporate level is highly intensified if personal responsibility is involved.
COP15
Anthony Day: Right, okay, okay but for people to take action, they need to be aware there was a COP, COP15, which is a Conference of the Parties. This one was about biodiversity last December. Has that raised people’s awareness and are they more conscious of the risks which may affect them?
Risks
Jenni Ramos: Yes, I believe so. I mean, for the past couple of years, the issue is becoming increasingly popular to talk about. A lot of financial bodies have been talking about it already, since about 2020 but yes, the COP definitely made a lot more people suddenly sit up and say “what, another COP? Which COP is this?” and it’s suddenly entered the public consciousness a lot more and there was also a very powerful business lobby at COP actually supporting the role of business in thinking about biodiversity. So, yeah, I would definitely think it has really raised the profile and it’s definitely– we released our report during COP and I think it’s definitely captured people’s attention for that reason.
Anthony Day: Now you were saying that there are risks to organisations; reputational risks, risks also to directors personally and can you just enlarge on that? What sort of penalties? What sort of risks do they incur and what triggers it? Is it regulations or what?
Existing Law
Jenni Ramos: Yes, so this is really interesting because it doesn’t require any new laws. That this is within existing company laws around the world and it varies. So the penalties, I can’t kind of comment because it depends on the jurisdiction to jurisdiction really, and it’s very different but the crucial thing is that within those company laws, there is the potential for shareholders to bring an action against the directors. So that would be how the risk would arise and so it’s the mismanaging their duties and there’s various case law. I don’t know whether you would like me to talk about the case law on biodiversity at the moment or come back to that later.
Anthony Day: Well, in broad terms, just explain.
Directors of Shell in the Dock
Jenni Ramos: So, for example, in terms of climate we’ve seen Shell, Shell’s directors, been having this kind of claim brought against them for mismanagement of climate risk so there’s a potential that could be– but to our knowledge, there haven’t been any biodiversity cases like that but it doesn’t mean to say there couldn’t be and it will very much depend on how that pans out in that case but there’s also been quite a lot of cases on biodiversity against companies around the world which indicates that it’s becoming a liability risk for directors. So would you like me to expand on some examples of those cases?
Anthony Day: Of course, yes.
Casino Supermarket
Jenni Ramos: Yes, so for example, a 2021 case in France against a supermarket chain called Casino. That claim alleged that Casino’s due diligence plans in accordance with the national due diligence laws failed to detail environmental and human rights harms caused by the supply of cattle from deforested areas in Brazil. So you can see this going down the supply chain - harms that are caused in Brazil are being litigated in France.
Anthony Day: It’s pretty tenuous, isn’t it? Yes.
Jenni Ramos: Well, yes but this is – the harms are arising because of the purchasing of companies in the jurisdictions so it’s kind of tracing that chain of causation, really.
Supply Chains
Anthony Day: Right, but you wouldn't immediately think that something had happened in Brazil would be litigated in France, would you? Unless you’re a lawyer of course.
Jenni Ramos: Well, these claims are increasing but also not just through supply chains but through subsidiaries so we’ve seen cases in the UK, the Netherlands, in Canada, where courts are starting to be prepared to hear claims against parent companies for the conduct of their foreign subsidiaries. For example, in locations like Zambia, Nigeria and again Brazil. So you are starting to see this kind of big global value chains. Courts are starting to open their minds to looking at these chains.
Total Personal Liability
Anthony Day: Now this can affect the organisations. It can affect their directors. You were saying that directors could even lose their houses. Are you saying they can be totally liable if they are actually found to be culpable?
Jenni Ramos: Yes. I mean, it depends. As I said before, it varies between jurisdictions but many company laws have this personal liability for directors, yes.
Anthony Day: So the big question is what should organisations and indeed directors be doing to manage their risks or in fact to minimise their risks?
Action
Jenni Ramos: So directors have these duties to oversee their company’s risk management and the success of their company. So in order to understand how biodiversity risk and opportunity relate to this, they need to understand what their company’s interface is with biodiversity. So they need to – so they oversee the company risk management so they need to embed these considerations into their risk management processes and they also need to be thinking whether as a board, they have the appropriate skills and information to actually assess how biodiversity issues could affect their company and if not, if they don't, they need to find out what chain of information they need to build their capacity. Not just their own capacity but their executive and management team capacity but then they also need to – at a granular level that the company itself needs to be looking at its impacts and dependencies on biodiversity so this is very technical language and it comes from the Taskforce on Nature-related Financial Disclosures, so the TNFD, and this is a whole framework explaining how companies should be disclosing on nature, and so companies need to understand what their impacts and dependencies are on biodiversity and not just directly but that supply chain link that I went into.
Legal Advice
Anthony Day: So corporations are going to need legal advice but they are probably going to need to strengthen their teams with sustainability professionals as well.
Jenni Ramos: Indeed, yes and particularly – there's so much data on biodiversity if you compare it to climate, which is just one measure of emissions. With biodiversity, it’s a whole range of different measurements and a lot of expertise is required there.
More Regulation
Anthony Day: Right. Do you see governments tightening up or expanding legislation and regulations relating to biodiversity? Is this going to make the landscape even more treacherous for organisations and directors?
Jenni Ramos: It’s definitely on the cards. So if we go back to COP15, and just to explain, I am not sure how familiar your listeners will be to actually what COP15 was but it was a conference to the parties on the Convention of Biological Diversity and so they agreed to this non-legally binding global biodiversity framework and that had targets. So those targets, although they are not legally binding, the governments of all these countries that signed up to it have agreed to implement the targets through their national policies and regulations and there was one particular target that was really quite interesting and exciting in terms of the fact that a multilateral agreement addressed companies for the first time and this target which is called Target 15 actually requires governments to make legislation, really, that large and transnational companies and financial institutions must assess and disclose their risks, dependencies and impacts on biodiversity and not only in their operations but in the supply and value chains and for financial institutions, their portfolios. So, this is quite groundbreaking and although it is not legally binding, countries have made a commitment that they will put in place those requirements and not only that but they would take measures to encourage and enable all businesses to make such disclosures. So not just those large companies but all businesses. So the question, the big question there, is how soon will that happen? How soon will countries implement it? But I think we can see on the horizon, that that is going to happen and that will strongly be linked to the development of the Taskforce for Nature-related Financial Disclosures, the TNFD, which I mentioned before and also, the International Sustainability Standards Board or ISSB is that these two frameworks will be likely to be adopted by governments. We’ve already seen the UK saying that they will adopt the ISSB recommendations. So, these frameworks are likely to be what the governments link their regulations to, if that makes sense, and they are not final yet. So maybe in 2024 we might start to see governments making sounds about putting in place regulations.
Anthony Day: Well, let’s hope we do. Let’s hope we do because sadly, on the other side, COP27 and the earlier Paris Agreement, governments have all signed up to it and all paid lip service to it but not an awful lot is being done. So let’s hope they will at least do a bit more towards biodiversity.
Due Diligence
Jenni Ramos: The other thing – Sorry, the other thing just worth mentioning there is due diligence legislation. So around the world, there are various different regulations coming in. Notably, the EU on due diligence and the EU has proposed some legislation on value chain due diligence. So this is quite interesting and the fact that it could catch companies globally and not just those in the EU or operating in the EU, not because they will be directly affected, but because there will be a cascade of information requests through the value chain and so companies might be required contractually to report – to do due diligence on biodiversity impacts. So that might be another way that it kind of captures companies and brings in obligations.
Spread the Message
Anthony Day: Well, that’s very interesting. In fact, the whole thing is very interesting and although you say that COP15 raised the profile, I’m sure there are many people out there who are not aware that they are liable or may have liabilities for biodiversity issues so I hope we can work together and I am sure you are working to spread the message.
Jenni Ramos: Yeah, yeah, and just to be clear on that, some of the risk will depend, depending on the sector the company is in and it may not crystallise yet, it may already have crystallised and it depends, really just depends on their exposure to the high risk sectors. So for example, construction and agricultural sectors are the really high risk ones but they have huge value chains and that's where these hidden connections to biodiversity are. So, just to clarify, I am not saying necessarily that every company has that risk there yet but it's something that they really need to be considering and they need to understand their interface with biodiversity to even know whether they have it or not.
Anthony Day: Well, Jenni, thank you very much for giving a heads up to the listeners of the Sustainable Futures Report. I'm sure people will find this very interesting.
Jenni Ramos: Thank you.
Another aspect to sustainability. Thanks to Jenni Ramos for talking to the Sustainable Futures Report.
Next week is Easter and next week there will be another sustainable futures report. I'm not making any promises at this stage as to what it will be about. Have a good week until then.
I’m Anthony Day.
That was the Sustainable Futures Report.
Until next time.
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