ESG: a challenge for all businesses

There’s no doubt that ESG is now front and centre for all businesses. Whether it is in the supply to the business, in the supply from the business, in the stakeholder and regulator expectations of the business, or in colleague expectations of their employer, it’s now all-pervasive.

Although getting ESG right is now at the heart of helping the business to get “it” right overall, not all businesses have an ESG plan or a strategy for implementing it. There is also uncertainty as to which business function should be leading on it.

So what are firms currently doing?

Together with Legal 500 publication, GC magazine, we recently published a joint report to examine some of these issues among the in-house lawyer community.

The ‘ESG Risk Research Survey Report: 2021’, which documents the thoughts and opinions of more than 190 organisations, found that nine out of ten companies have either implemented a formal ESG plan or are in the process of developing one.

When asked what their ESG plans included, the most popular response was that they contained a governance framework.

This was closely followed by most plans containing published policies and guidelines, identification of ESG related risks, a named senior management sponsor and KPI monitoring and reporting. Lower on the agenda was the identification of ESG related opportunities and setting SMART objectives.

The role of General Counsel

So why is the ESG agenda and the role of the GC so closely aligned? In my opinion, the in-house legal team’s role is to ‘help their business do “it” right’ – with the “it” being a sustainable, successful and compliant business.

I also think that key to ESG is the G – the governance. Contractual, regulatory, processes and policies allow you to document and deliver all the ES things your suppliers and customers want you to commit to.

Although there is currently no global standard for ESG reporting, there’s a huge range of legal reporting requirements for businesses. In the UK alone there’s a wide variety of existing and incoming legislation that involves important elements of ESG such as gender pay gap reporting and modern slavery statements.

In addition, some confusion has arisen around current ESG reporting obligations caused by a fragmented reporting framework that places obligations on companies depending on their size, whether they are listed and whether they are in the regulated financial services sector.

However, ESG is not just a challenge for GCs and in-house counsel. Ownership of ESG issues is dispersed among many stakeholders in most businesses, so it is imperative that all business leaders get to grips with plotting where their business currently stands on ESG, and mapping out the road ahead to ensure future resilience.

Irwin Mitchell’s report also reveals where GCs believe investment is needed most to improve oversight in the three areas of ESG; how GCs are currently involved in ESG activities; how businesses are integrating ESG criteria into investment decision-making; and the ESG risks which GCs perceive fall completely in their remit. Click here to download the report.