An update on all things Environmental, Social and Governance (ESG)

UK duty – failure to prevent fraud

The Home Office has published new guidance, explaining how businesses can comply with the Economic Crime and Corporate Transparency Act 2023 and build an anti‑fraud culture.

Businesses can be found guilty where fraud is committed by an ‘associated person’, regardless of whether the directors or senior managers ordered or knew about the fraud. The onus remains on the business, where it seeks to rely on the defence, to prove that it had reasonable prevention procedures in place.

Those co‑operatives falling within the definition of a ‘large organisation’ will have a duty to proactively combat fraud within their eco-systems; whilst small and medium sized co‑operatives will find themselves subject to greater scrutiny as their corporate customers seek to build robust anti‑fraud systems.

Key actors within the supply chain may find themselves asked to complete due diligence exercises, engaging with technical screening tools and providing information about staff welfare and wellbeing in order to identify whether there are any high-risk factors which mean fraud is more likely to arise. 

At the same time, co‑operatives may be asked to prepare and provide a copy of their fraud prevention plan, confirming the procedures they have in place to tackle fraud risks, considering the nature, scale and complexity of their organisation.

UK duty – greenwashing (in the retail and energy sectors)

The UK’s Competition and Markets Authority has published a guide to help businesses in the fashion retail sector comply with their obligations regarding greenwashing. Relevant to all co‑operatives with a reputation for championing the green economy, the guidance serves as a reminder to avoid unclear terms like 'sustainable' or 'eco-friendly', or to use icons and imagery in a misleading way. 

Any environmental claims need to be clear, accurate and to avoid hiding important information. For example, brands should make clear if the claim is based on only specific parts of a product’s life cycle.

The Competition and Markets Authority has also published advice for those businesses marketing green heating and insulation products. It sets out compliance principles around how best to present price information and communicate product claims, supported by practical illustrations of compliant versus non-compliant practices. 

The guidance explains that particular care should be taken when referring to access to government funding, as this could significantly influence the consumer’s assessment of affordability.

EU duty – eco design and sustainable packaging

Packaging and Packaging Waste Regulations 

The European Parliament is shortly expected to approve changes to two sets of regulations which will influence packaging, waste and ecodesign.

The Packaging and Packaging Waste Regulations are due to come into force in late 2024 and will start to apply only 18 months afterwards. Where co‑operatives operate within or sell to the EU market, they will need to be aware of changes designed to make all packaging on the EU market recyclable in an economically viable way by 2030. Under the new rules:

• Certain single use plastic packaging types will be banned from 1 January 2030.
• All packaging (except for lightweight wood, cork, textile, rubber, ceramic, porcelain and wax) will have to be recyclable by fulfilling strict criteria.
• It must be possible to sort packaging into specific waste streams without affecting the recyclability of other waste streams and all packaging must be capable of being recycled at scale.

Ecodesign Regulations 

Similarly, the Ecodesign Regulations 2024/1781 came into force in July 2024 and aim to permanently reduce the EU’s carbon and environmental footprint by improving the recyclability and energy efficiency of all physical goods placed on the market or put into service within the Union – including components and intermediate products.

The ecodesign requirements cover the products’ entire life cycle – from manufacture, transport and operation to disposal or recycling. Specifically, the Ecodesign Regulations introduce important new requirements, such as product durability, reusability, upgradability and reparability. 

There are also rules on the presence of substances that inhibit circularity, energy and resource efficiency, recycled content, remanufacturing and recycling, carbon and environmental footprints, and information requirements, including a digital product passport.

For example, businesses will need to reduce the need to destroy unsold consumer products and disclose annually the number of unsold consumer products discarded, reused or recycled – and the measures taken to prevent destruction.

Some products are excluded from the Ecodesign Regulations, such as food, medicinal products, living plants and vehicles, this is primarily because such products are already covered by sustainability requirements in existing legislation.

Consequently, co‑operatives that sell to the EU market or deliver components to co-ops operating in the EU market will need to:

• Update their contracts to ensure manufacturers support and do not compromise a co‑operative’s ESG objectives.
• Carry out a conformity assessment before placing a product for sale in the EU market.
• Ensure they have access to key information regarding the production process and produce a digital identity card for relevant products, components and materials.
• Update packaging so that energy-related products (not just energy-using products), include clear labelling, detailing their energy efficiency.

To support with these activities, co‑operatives may find it helpful to consider the new BSI PAS 7770:2024 which gives comprehensive guidance on how to assess the environmental performance of an energy related consumer product. 

The guide has considerations for all stages of the product life cycle, including raw material extraction and processing, design, production, packaging, transportation, use and end of life.