Across sectors, ESG has gone beyond the boardroom as legal chiefs are rapidly being appointed to lead the corporate charge on tackling the risks - and maximising the opportunities - presented by the sustainability imperative. As such, ESG is set to change the position of the chief legal officer as much as it will transform the businesses around them.
Operating at the nexus of regulation, policy, risk management and investor relations, the wide-ranging remits of senior legal professionals enable them to help their businesses tackle this most pressing topic on the boardroom agenda.
Based on 20 in-depth interviews with general counsel (GCs) at blue-chip organisations (mainly listed companies, including over half from FTSE 100), a new report published by international law firm Herbert Smith Freehills explores the key trends in ESG from the perspective of GCs, gauging current practice and pain points. The report draws informed conclusions on the direction of travel for GCs, in the face of mounting demands from investors, consumers, employees, regulators and voters, to place ESG at the heart of corporate strategy.
Key themes, trends and forecasts at a glance:
- ESG momentum will further strengthen GCs’ clout in listed firm governance. After 20 years of climbing the corporate hierarchy, ESG is set to complete the journey of legal heads as core members of the C-suite.
- Proliferating ESG standards remain a huge concern, however most firms expect dominant frameworks to emerge through the 2020s. Multinational firms are banking on agreed global standards for climate reporting and green investing to emerge – but once they materialise, the pressure to perform will only grow.
- Above all ESG-related fears, reputational risk dominates for legal heads, with embarrassing disclosures seen as potentially triggering fallout with investors, employees and consumers.
- For people businesses, social factors are increasingly driving ESG agendas: from Covid-19 and Black Lives Matter, to radically changing staff expectations, new imperatives are pushing corporates to take their societal contributions to a whole new level, with a particular focus on issues such as mental health, wellbeing and diversity.
- New reporting requirements will reshape corporate agendas through the decade and will continue to dominate GCs’ in-trays. The huge challenge of meeting fast-expanding non-financial reporting rules – not to mention hitting blue-chips’ own net zero commitments – is proving the tip of the ESG spear.
- Relationships with investors and suppliers:
- Shifts in investor sentiment are serving to redraw the ESG map; and the process has barely begun. With ESG investing moving from niche to mainstream in the last three years, listed firms are facing intense pressure – and activism – from shareholders to put their houses in order.
- ESG factors are making supply chain interventions business-as-usual. A combination of human rights laws, anti-bribery and corruption compliance and climate commitments are rapidly pushing companies to get intimately acquainted with their suppliers.
Click here to read the full report "Responsibility Incorporated: General Counsel and the dawning ESG revolution".