Transparency, honesty and legal risk have been very much in the headlines this week.
But while the Government’s reputation has been poured over by the media and political observers to fill pages and screens, a new report covered by the CBI draws on insights from lawyers to outline ESG risk, transparency and honesty considerations for businesses. It depicts the role that legal advisers can take in ensuring that companies “do it right”, and in doing so points to parallels with the part that corporate communicators can play.
Published jointly by GC magazine (General Counsel, before cycling aficionados get overly sweaty) and law firm Irwin Mitchell, the report points out that despite the rapid growth in focus on ESG, there is still uncertainty around which business function should lead on it. The mantra that it should be led from the top is an easy one to declare, but how responsibility breaks down and which team does what remains blurry in some companies, according to the in-house lawyers questioned for the report.
“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,” read the article on the CBI’s web site.
Getting specific about what legal obligations companies have or may be landed with around reporting, it said: “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.”
And in the survey, in-house lawyers pointed to growing concern about the risks associated with social aspects of ESG, but outlined that governance was an even greater priority, and giving rise to new kinds of risk. While the conventional legal risks of falling foul of fraud, bribery and corruption laws were called out, just as many respondents said they wanted to see greater attention being paid to corporate transparency.
Which is where the need for legal and communications teams to work together on ESG-related risks - both to do with the law and to do with reputation - is perhaps clearest. But reading through the report, the more obvious it becomes across the ESG spectrum that both parties have much to gain, and doubtless much paid to avoid, through closer collaboration. Some already do, but we can expect that to move to a different level as reporting frameworks finally become standardised, and balances need to be struck between risk and opportunity.
An opinion article in the Financial Times this week pointed to a skills gap in businesses, with executives now broadly at the forefront of “responsible, purposeful and sustainable business” while business school curriculums lagged.
Meanwhile a Bloomberg story quoted the CEO of the world’s largest stock owner, Norges Bank Investment Management in Oslo, saying that life is about to get much harder for leaders of businesses that fail the ESG “tests” put to them by institutional investors. Nicolai Tangen, said the degree to which ESG dictates a company’s prospects was “starting to hit now.”
With the stakes increasing, skills uneven, collaboration needed and definitions still lacking, this piece in Forbes that outlines how to develop an ESG strategy in very simple language, with business-speak barred, is well-timed.
As lawyers and communicators, both known for their own buzzwords and phrases, begin to link arms more often on ESG matters, plain talking is surely important for them too.
The ESG News Review is written by Steve Earl, a Partner at BOLDT.
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