The Role of New Technologies in Advancing ESG

Introduction

Timothy Wilkins, Global Partner for Client Sustainability at Freshfields Bruckhaus Deringer (Freshfields), conducted a comprehensive analysis of key Environmental, Social, and Governance (ESG) trends. This article focuses on three significant findings: human rights in the supply chain, sustainable financing, and climate change litigation. It analyses these trends alongside the role of new technologies in advancing ESG objectives, specifically from a legal perspective.

Human rights in the supply chain

The trend of human rights in the supply chain highlights the growing importance of ethical practices. New technologies play a crucial role in addressing this trend, particularly in ensuring transparency in the workplace. Deba Das, a fellow Freshfields Partner, has stressed that “regulatory and legislative standards have been developing in this space since the UN Guiding Principles were introduced a decade ago”. It has also been observed that NGOs are turning up the pressure on companies around the issue of human rights, highlighting cases of failings and threatening litigation. The development of new technologies in relation to human rights allows companies to demonstrate their commitment to ethical sourcing and fair labour practices. In cases of legal disputes, the transparent nature of blockchain data can serve as valuable evidence as it provides a verifiable record of transactions and supply chain activities. 

Sustainable Financing

The idea of sustainable financing foresees ESG integration into financial practices. New technologies facilitate sustainable financing by providing innovative tools and platforms. For example, digital platforms can connect investors with sustainable projects and ventures, promoting the flow of capital towards ESG related initiatives. From a legal perspective, these technologies enable the creation of robust frameworks for reporting, disclosure, and accountability. They also support compliance with evolving regulatory requirements by efficiently monitoring sustainability measures. Therefore, with the aid of technology, companies can attract sustainable investments while ensuring legal compliance and transparency in their financing activities. 

Climate Change Litigation

Finally, climate change litigation is a growing trend involving legal action against companies to address their environmental impact. New technologies are valuable assets for companies facing climate change litigation as they can support their risk mitigation strategies as well as aid their legal defence. For example, data analytics and AI-powered tools can analyze vast amounts of climate-related data, helping companies assess their carbon emissions and evaluate their impact on the climate. From a legal perspective, these technologies contribute to evidence-based arguments and enable companies to demonstrate a proactive approach to managing climate risks. Additionally, technologies such as blockchain can provide transparent and verifiable records of companies’ sustainability initiatives, bolstering their legal position and reputation during climate change litigation.

Conclusion

Leveraging technological advancements can be an opportunity for companies to demonstrate their commitment to ethical practices, transparency, and proactive measures in addressing ESG challenges. From a legal perspective, new technologies can have a significant role in advancing key ESG trends and objectives identified by Timothy Wilkins. Overall, the combination of legal expertise and technology is likely to enhance companies' legal defence.

By Januaria Gizzi