Given the volume of change in environmental, social and governance considerations, the skills that general counsel bring to the table will be critical moving forward, says one BigLaw partner.
Global law firm Herbert Smith Freehills has published its Responsibility Incorporated: General Counsel and the Dawning ESG Revolution report, which saw the firm conduct 20 in-depth interviews with GCs at blue-chip organisations exploring the key trends in ESG from the perspective of GCs, gauging current practice and pain points.
The report draws “informed conclusions”, the firm said, 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.
ESG, the firm surmised, is “set to change the position of the chief legal officer as much as it will transform the businesses around them”.
Such environmental, social and governance issues are going beyond the boardroom, with GCs taking charge of the corporate efforts to address risk and maximise opportunities, which have been presented by what HSF called the “sustainability imperative”.
Some of the key findings from the interviews were that:
- ESG momentum will “further strengthen GCs’ clout” in listed firm governance, with such concerns allowing GCs to affirm their place at the C-suite table.
- Most firms believe that dominant ESG frameworks will emerge in this decade, with multinationals set to rely on agreed global standards for climate reporting and green investing.
- Reputational risk remains foremost for GCs, with “embarrassing disclosures” seen as potentially triggering fallout with investors, employees and consumers.
- Social factors are increasingly driving ESG agendas for “people businesses”, including but not limited to COVID-19 and Black Lives Matter.
- New reporting requirements will reshape corporate agendas through the decade and will continue to dominate GCs’ in-trays.
- Shifts in investor sentiment are serving to redraw the ESG map.
- A combination of human rights laws, anti-bribery and corruption compliance and climate commitments is rapidly pushing companies to get intimately acquainted with their suppliers.
Speaking about the findings, HSF partner and Australian lead for ESG, sustainability and responsible business Timothy Stutt (pictured) said: “Now more than ever, companies are needing to approach ESG as a contiguous set of risks and opportunities — in understanding, disclosing and addressing the impact of businesses internally and externally; siloes simply don’t work. GCs have the track record and skill set to bring together the stakeholders needed to tackle these problems and opportunities head-on.
“GCs are adept at playing a gatekeeper role, bringing together teams and packaging items for the board. Given the pace of change on ESG, and the volume of developments, these skill sets are key.
“The requirement under the Modern Slavery Act for Australian companies to disclose their exposure to causing, contributing to or being linked to modern slavery risks has driven a step-change in companies’ understanding of business and human rights. Supply chain practices are now getting attention at board level, and GCs are key for managing and disclosing these risk exposures.”