A practical approach to addressing ESG challenges

1st September 2021

Tackling the imperative to get their business’ ESG (environmental, social, governance) approach right – ensuring legal and regulatory compliance and embedding sustainability and responsibility in the ethos, operations and reputation of the business – is one of the biggest challenges facing board members and in-house counsel today.  However, there are practical steps businesses can take to ensure they are able to thrive in a business world where ESG performance is an existential challenge. Gwendoline Davies, Nick McQueen and Ben Sheppard explain.

Multi-faceted, ever-changing, expensive, essential

Regulation, investors, employees, other stakeholders and society as a whole are driving the need for all businesses to address their ESG agenda. Recent years have seen an unmistakeable cultural shift towards a global community with an increasing social and environmental conscience.  National and international laws, regulations, policies, politics and wide-ranging commercial pressures all impose both tangible and intangible requirements on businesses to get their ESG approach right.

Political and societal ESG ambitions have been accelerated in recent years by prominent social justice campaigns, climate change and Net Zero targets, high profile data breaches, tax avoidance scandals, and by changes to attitudes and working practices brought about by the Coronavirus pandemic.

Recent high profile and strategic litigation relating to climate and human rights [1] suggests that businesses might owe duties of care in much wider circumstances than anticipated before – for example, in respect of [international] subsidiaries, throughout supply chains, in relation to obligations implied by ‘soft’ laws (such as non-legally binding guidance, policies, charters, etc.).  Currently there are no uniform national or international metrics for assessing ESG factors in the context of such litigation.

There is little doubt that the ESG agenda is fundamental to any business’ survival and growth.  A recent survey carried out in the US [2] found that 78% of consumers were more likely to buy a product if it had ‘green’ credentials [3]; that 75% of millennials would pay more for a green product and that 76% of people would even switch from a preferred brand for sustainability.  An effective ESG strategy is therefore essential for profitability.  However, it is also a significant, potentially overwhelming, task for those directors, partners, senior managers, in-house lawyers and other colleagues who have to make their business’ ESG goals a reality.

In addition, an enhanced focus on ESG reporting and disclosures, the commercial imperative of demonstrating ESG credentials, and the ever-expanding legal, regulatory and cultural environment mean that litigation, enforcement and public relations risks are on the rise.

Below we provide a framework of practical steps that businesses can take to deliver strong ESG performance, and we explain how Walker Morris can help.

Making the unmanageable, manageable

Step 1 – Understand and articulate the challenge

A business needs to know what ESG covers and specifically which aspects are most relevant to its operations. For example:

The business can then define and articulate its ESG strategy and commitments against these criteria.

Step 2: Outline an approach

A successful, practical approach to addressing ESG requires leadership from the top down, including the right cultural messaging, and provision of dedicated resource and guidance, combined with business-wide data, operational and contract reviews, training and ongoing monitoring.  For example:

Step 3: Implement

Specific assignments can then be undertaken in relation to each aspect of the ESG agenda, such as:

How we can help

Walker Morris is a multi-disciplinary commercial law firm, with specialist lawyers experienced in all aspects of the ESG agenda. We can work with businesses at every step of their journey to create, implement and deliver an effective ESG strategy.

Contact

Please do not hesitate to contact Gwendoline, Nick or Ben for further information or advice.

[1] See our recent briefings on the Lungowe v Vedanta Resources and Okpabi & Ors v Royal Dutch Shell plc & Ors cases here; and see our briefing on the May 2021 Royal Dutch Shell case here 

[2] GreenPrint survey, February 2021

[3] See our recent briefing here on how can businesses ensure that their ‘green’ claims comply with consumer protection legislation for further information and advice in this area

[4] See The Chancery Lane Project‘s model clauses, for example