Beyond ESG Compliance: Legal Counsel as an ESG Champion

November 02, 2022
By Elisabeth Hershman
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Calls to integrate environmental, social, and governance (ESG) initiatives into corporate strategy are forging a new era for the private sector. Remote work, a long-awaited commitment to diversity, equity, and inclusion, demands for corporate activism on social issues, and the resurgence of unionism are all broadening the boundaries of traditionally defined corporate roles and functions from human resources to marketing.

The traditional, reactive compliance mindset is no longer adequate because regulatory enactment comes long after the forces of public concern driving change have already had significant impacts on a company. Reputational risk looms large and reputational damage can be swift and irreversible.

Lawyers can help their clients and corporations avoid risk by giving them timely counsel that anticipates the trends likely to drive regulation in the ESG aspects of business. Lawyers must get ahead of regulatory imperatives to address ESG issues in real time rather than wait for the regulatory framework to catch up. The strategic advantage is in staying one step ahead of the societal trends. In so doing, legal counsel can better navigate a minefield of risk, and serve as ESG champions and conveners within the organization.

 

“Lawyers can help their clients and corporations avoid risk by giving them timely counsel that anticipates the trends likely to drive regulation in the ESG aspects of business.”

 

Legal Is the Common Thread

A legal perspective underpins the ESG mandates and issues relevant to all the traditionally defined corporate roles. Lawyers can therefore play a key role in the cross functional approach that is necessary to meet both the daily ESG demands that bubble up and the overarching compliance obligations.

Legal counsel has a vital role to play as ESG aspirations and mandates catalyze change across functions daily. Human resources departments implement new diversity, equity and inclusion initiatives that impact hiring and workplace policies and navigate new compensation structures that are tied to ESG performance. CFOs must balance investor demands with an ESG framework’s material impact on company finances.

The communications team ensures that the CEO’s stated ESG mission and vision mirror corporate actions and align with public disclosures related to regulatory requirements. The chief sustainability officer endeavors to bring sustainability issues to the fore across strategic priorities within the context of reporting requirements.

The chief operations officer and team are charged with lending credence to the practical side of ESG daily within the organization. They strive to implement processes that reflect the purported mission and vision. The compliance team will reconcile standards and compliance with proactive initiatives that impact various stakeholders including employees, community, customers and shareholders.

Lawyers are involved in all these efforts, as they also educate the board on stewardship beyond profits and help to frame the corporate strategy discussion in such a way that it incorporates ESG. They must ensure that initiatives are addressing compliance and reputational risks related to ESG. Importantly, counsel can act as a champion to propel the company forward, gaining a broad understanding of an organization’s ESG status, and being able to leverage the board and C-suite as ESG champions internally and externally.

ESG has ushered in an era of change for corporate America. This dynamic new corporate climate demands a fresh compliance mindset. Legal counsel, touching virtually all ESG-related initiatives within an organization, is poised to drive corporate evolution by anticipating, understanding, and acting on the various risks that will continue to gain momentum.

 

Click here to access the original article. Reprinted with permission from the October 25, 2022 Corporate Counsel © 2022 ALM Global Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or reprints@alm.com.