{"id":43125,"date":"2023-06-06T13:09:45","date_gmt":"2023-06-06T13:09:45","guid":{"rendered":"https:\/\/www.taylorroot.com\/?p=43125"},"modified":"2025-06-02T06:16:10","modified_gmt":"2025-06-02T06:16:10","slug":"client-interview-how-general-counsel-can-impact-esg","status":"publish","type":"post","link":"https:\/\/www.taylorroot.com\/de\/market-insight\/general-counsel\/client-interview-how-general-counsel-can-impact-esg\/","title":{"rendered":"How General Counsel can impact ESG"},"content":{"rendered":"\n
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In recent years ESG has become integral to most businesses strategies. As a result, more and more General Counsel<\/a> are finding the need to understand this area in order to properly support their companies. Taylor Root Partner, Sarah Ingwersen<\/a>, recently caught up with Herbert Smith Freehills Partner, Rebecca Perlman to learn more about how General Counsel can influence and support ESG strategies.<\/p>\n\n\n\n

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What do General Counsels need to know about ESG?<\/h2>\n<\/blockquote>\n\n\n\n

A lot of businesses are still grappling with why ESG is important, what it means for them and what it is that they need to be doing. GCs have a critical role in helping their organisations to engage with this changing landscape and meet fast-developing stakeholder expectations, not least because the ESG agenda is fundamentally underpinned by legal requirements.  <\/p>\n\n\n\n

Businesses operating in, or with links to, developed economies have been regulated in areas such as anti-bribery and corruption, anti-money laundering, health & safety and environment, and employment matters for many years. However, these obligations are now accompanied by disclosure and reporting requirements that are aimed at driving greater transparency regarding ESG factors. With greater levels of disclosure comes increased levels of activism and litigation risk, as it becomes easier to scrutinise corporate behaviour.  <\/p>\n\n\n\n

In this context, GCs are required to not only manage the legal risks relating to the ESG agenda, but they must also navigate potential ethical and reputational risks regarding the company\u2019s ESG commitments and performance. Many of the large ESG failings globally over the past few years have not involved breaches of law, but rather a failure to meet community expectations or manage reputational risk exposures.  It’s a skill to be able to explain these risks, bottom line implications and the changes needed to business teams, while also having an eye to the opportunities that ESG can bring.<\/p>\n\n\n\n

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Where should responsibility for ESG strategy and implementation sit within a company? What role can a General Counsel play as a convener of ESG?<\/h2>\n<\/blockquote>\n\n\n\n

In light of the prevalence of ESG risks facing various industries, as well as new and pending disclosure requirements in the EU and more broadly, many companies are considering the appropriateness of current governance structures for dealing with emerging ESG issues. One area of focus is the concept of establishing a dedicated ESG Committee, which has emerged as a tool to ensure boards have clear oversight of ESG issues affecting the company.<\/p>\n\n\n\n

ESG is a broad area of governance that spans various sub-areas in a business. The establishment of an ESG Committee can be beneficial in sharpening a board\u2019s attention on important ESG matters and directing appropriate attention to governance, environmental and social topics impacting the company. However, a dedicated ESG committee will not be the right governance model for every company and boards take different approaches to the oversight of ESG matters.  A key part of developing a strong ESG framework and strategy is understanding whether a dedicated ESG Committee would assist the company with its governance, or whether ESG issues, risks and opportunities are better dealt with by integration with existing governance structures.<\/p>\n\n\n\n

The task of designing a fit-for-purpose, best practice ESG framework is challenging in a context where there is no uniform definition of \u2018ESG\u2019 and where the regulatory landscape is continually evolving. It is therefore not surprising that there is no uniformity in relation to ESG governance across organisations, particularly in respect of board oversight of ESG issues.<\/p>\n\n\n\n

What is clear, however, is that GCs are often natural conveners given their position at the nexus of law, policy, investor relations, risk management, and business operations. This is particularly the case for the risk management and regulatory compliance aspects of ESG but also more broadly.<\/p>\n\n\n\n

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If a company doesn’t have an ESG strategy and framework in place, how can a General Counsel influence the business to implement one?<\/h2>\n<\/blockquote>\n\n\n\n

For listed companies, the common practice of GCs holding company secretarial briefs and positions on ExCos gives them considerable influence as members of senior leadership teams, including on strategic planning. Co-sec roles also provide GCs with material exposure to the investors increasingly pressing C-suites on their ESG commitments. GCs are also often called upon to bring together the disparate strands of ESG policy for boards and educate senior leadership on fast-moving regulatory requirements.<\/p>\n\n\n\n

One of the key challenges of the area is to turn a huge range of issues, opportunities and risks into a coherent strategy. The traditional compliance and risk aspects of their roles, combined with the huge scope for GCs to roam across departments and tap external stakeholders and peer networks, ensures they are well placed to take on this challenge. After all, many of the metrics and mechanisms needed to develop and implement an ESG strategy likely already form part of the GC’s risk and compliance toolkit.<\/p>\n\n\n\n

It’s important though to focus on the opportunities, as well as the risks. This includes the potential to realise commercial upside by driving operational efficiencies or developing\/ supplementing existing products and services, as well as the role that strong ESG performance plays in terms of supporting the recruitment and retention of top talent and increasing customer engagement.<\/p>\n\n\n\n

Fundamentally, GCs need to be able to have a conversation and convince their businesses that an ESG strategy is critical to the business’s own long term success. Perhaps the answer is to convincingly present a model of gains from the strategy, while highlighting the risks that may arise without the strategy. The risk of reputational loss with customers and investors tends to be an intuitive motivator for most. We also see businesses who sit up and think about their ESG strategies when a competitor or fellow industry player suffers some loss for their performance on ESG markers \u2013 if the GC has that strategy mapped out, that’s another possible moment or avenue for discussion, even if a little belated.<\/p>\n\n\n\n

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