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Mar 03, 2023

Governance Matters podcast: Addressing social risks through governance

Investors have thrown a spotlight for companies on social issues such as slavery. This episode looks at the challenges posed by an emerging legal framework around forced labor and how companies can address social risks

‘[Around] 40 mn to 50 mn people in the world are subject to modern slavery,’ says Yousuf Aftab, director of A2, a law firm that helps companies manage social risk across the globe. He emphasizes the scale of the problem amid growing scrutiny from investors and lawmakers around the world on human rights issues such as forced labor within companies’ supply chains.

One of the difficulties for companies is that facets of emerging regulation and legislation in different countries conflict with each other in areas such as reporting when forced labor is uncovered at a supplier’s operation. A response that might get a company credit in one jurisdiction could simultaneously land it in trouble elsewhere.

‘Right now, a challenge for every global company we work with is: how can you put in place best-in-class due diligence without creating risk for boards and for the company?’ Aftab says.
In this episode of the Governance Matters podcast, Aftab talks to host Jeff Cossette about the growing focus on social issues and how companies can manage the risks they present and the governance they need.

Slavery is one of many social issues that have gained the attention of investors in recent years. Aftab says investors’ interest in the S in ESG includes wanting to hear from companies about their policies on human rights issues and what their plans are for identifying and responding to problems if they arise.

He says management, including general counsel offices, are becoming much more aware of ESG issues and are giving them some thought. ‘There’s no Fortune 500 company – it doesn’t matter [which] sector – that says, Oh! We don’t need to think about sustainability. We don’t need to think about having due diligence around where there might be issues in our supply chain that we need to address,’ he says.

Although the focus in investor engagement has been on environmental issues, Aftab says that’s starting to shift in a limited number of cases. ‘The more sophisticated companies realize… that you need to treat the S with the same kind of rigor as you treat the G,’ he notes. ‘The expectations have evolved … [I]t’s very similar to what happened with corruption risk in the early 2000s.’

The Governance Matters podcast provides listeners with insight into cutting-edge issues of the day for corporate secretaries, general counsel and other governance professionals.

The series looks at how the role of the corporate secretary and the board has evolved over time, as well as how the governance landscape continues to change. From ESG to entity management, shareholder engagement to technology, hear from award-winning governance professionals and leading advisers about the latest public company governance matters.

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Ben Maiden

Ben Maiden is the editor-at-large of Governance Intelligence, an IR Media publication, having joined the company in December 2016. He is based in New York. Ben was previously managing editor of Compliance Reporter, covering regulatory and compliance...