Environmental, social and governance (ESG) are non-financial factors that are important for companies to establish as they act as proxy measures of sustainability performance. ESG compliance has been the trend towards more sustainable ways of doing business and is unlikely to reverse.
ESG goals are an opportunity for businesses and their in-house legal advisers to respond and balance short-term performance with long-term sustainability and put themselves in a position of strength. In-house legal counsels are paramount in establishing their organisation’s ESG strategy and guiding its business conduct, procedures and processes to abide with developing ESG laws and regulations.
Nevertheless, ESG legal and regulatory frameworks are asymmetric across jurisdictions, there is fragmentation between guidelines and codes of conduct and varies depending on business sectors and locations. To address this complexity and be successful, there are four considerations to keep in mind that we discuss in this blogpost.
The shift towards more sustainable business echoes digital transformation in its incremental changes and need for investment. Taking lessons from digital transformation can be key in being effective in creating a clear goal, planning and effective coordination and using meaningful data.
The ESG transformation is an opportunity to boost the knowledge, abilities and exposure of in-house team members. With increasing regulation and focus on risks such as human rights and green washing, the scope is so diverse that keeping up with the regulations may even need sub-teams within the ESG team.
Creating a dedicated ESG team will enable continuous monitoring of federal and state requirements for changes or updates to existing laws and practices.
Traditionally ESG was treated as a stand-alone branch. However, the substantial threats and opportunities within ESG require a multi-disciplinary approach. Not only due to the risks and opportunities but also the increasingly complex demands and changes which will be difficult for individuals and singular teams to navigate. Building a team and joining forces with multi-disciplinary skills will leverage an offering for comprehensive ESG advice that meets sophisticated and dynamic needs.
Within the in-house team it is critical to not only focus on what is legal but also what requires engagement and broadened perspectives. This means to be proactive and connected; aligned with the corporate vision, purpose and strategy; well-versed in all aspects of business strategy; embedded, but independent and willing to go beyond compliance for positive change. These together are key traits in keeping with best practices and being successful.
Given the complexity and increasing developments of ESG transformation, it is nearly impossible for in-house lawyers to navigate this landscape without utilising technology. There are a wide range of tools available to assist companies with various aspects of the ESG journey that include ESG screening, ESG regulatory tracking, ESG risk management and ESG dashboards for data management. Manually keeping an overview may quickly become burdensome. With the right tool, all the required data for ESG reports can be gathered and clear overviews can be created. Using an ESG tool can also provide an overview of shortcomings and actions to be taken.
The ESG transformation is an amazing opportunity to define the best legal practice and standards, albeit increasingly technical and multi-jurisdictional. Today it is important that legal counsels work multi-disciplinarily and no longer merely react to ESG issues but proactively become involved in integrating ESG opportunities into their organisation.
In-house counsel is central to ensuring companies report on their sustainability progress in a transparent manner but also that ESG risks are managed appropriately. Technologies are available to streamline this process and support teams in their ESG endeavours, management and actions.
Feel free to contact us if you’d like to talk about the specific challenges you face and how we might help you overcome them.
Manager, Business Development Tax and Legal, PwC Switzerland
Tel: +41 58 792 47 89