Environmental, Social and Governance (ESG) is an issue facing every organization, industry sector and business model. Representatives from over 60 organizations from across 26 nationalities joined our recent roundtable to discuss developing their ESG legal strategy.
At Dentons we have developed a global ESG group to address the issue. In September, we organized a virtual roundtable with representatives from more than 60 organizations, from more than 26 countries, to discuss the development of their ESG legal strategy. With a panel moderated by Victoria White, partner at Dentons UK, the legal leaders of global companies from various fields participated. Learn about the main conclusions of that meeting below.
1. ESG is about the future viability of your business
Your organization must be sustainable to have a viable business model in 10-15 years' time. In this context, ESG is a Board-level issue. One of the most challenging questions the panel posed was the need to consider why ESG really matters to your specific organization, from both a strategic and operational perspective. How will your organization need to engage and relate to its stakeholders, the community it operates in and its own people in the future? While it is tempting to start by focusing on immediate regulatory compliance, this will not maximise long-term impact. Taking a big picture approach from the start will embed ESG in the short, medium and long-term strategy of your business.
2. Understanding your stakeholders is non-negotiable
We are seeing a rapid evolution of legal requirements, expectations and duties when it comes to ESG. Operating internationally, adds to this complexity. Both Katie and Lanesha spoke at length about the range financial and non-financial external reporting requirements that organizations must be prepared to report on. Fully understanding the landscape of societal expectations and current and foreseeable legislation is key for General Counsel and Heads of Legal. Organizations also need to consider industry expectations and objectives, standards and metrics relevant to the jurisdictions they operate in. A materiality assessment is critical to prioritising the ESG risk and opportunity areas that will deliver the biggest impact.
3. Engaging your business to deliver operational success
Building on your materiality assessment, getting early input from the right people across the business is key to ensuring you develop an ESG strategy and implementation plan focused on key business drivers and imperatives. Buy-in from key operational leaders is required to deliver success. Dijana shared her insight on the need to embed technical training and support where relevant. Lanesha and Katie outlined the governance structures they leverage to help deliver change across the business, from board and executive level steering committee right through to codes of conduct and policies.
4. Setting ambitious targets and KPIs (Key Performance Indicators)
What gets measured gets done! Dijana led the way in challenging our attendees to take a bold approach to setting targets and KPIs. Working with your leadership team to develop and set these targets is already a significant step forward. External stakeholders will be key to identifying critical targets and transparency requirements. External benchmarking metrics may also be a feature depending on organizational ambition. However once set, you must put a plan in place to meet these targets. KPIs are most effective when linked to key leadership/ management team incentivization and bonus plans.
5. Reporting confidence
Depending on the nature of your business, stakeholders and the regulatory environment, you are operating in; some disclosure requirements will be mandatory and externally audited. If this is not the case, one of the big messages was the need to have the confidence to internally audit and own your ESG program. If you already have a sustainability report and CSR programme in place, you may be positively surprised at the level of baseline information that exists. Taking responsibility for the governance, quality and accuracy of this reporting needs to be a priority for the legal team given the ever-evolving transparency requirements that ESG brings. As reporting confidence grows, differentiators will emerge.
Your ESG journey
During the session, we also asked attendees, what their key ESG focus was right now. During the session, we also asked attendees, what their key ESG focus was right now. The majority of attendees were in the early stages of their ESG journeys, focused on developing their ESG strategy and program.
The majority of attendees were in the early stages of their ESG journeys, focused on developing their ESG strategy and program. This finding mirrors the evolving legislative and regulatory landscape and critical need to ensure your ESG strategy is robustly developed and embedded in your core business strategy. Irrespective of the stage of maturity of your ESG journey, Dentons is available, globally, to discuss the specific risks and opportunities that ESG presents for your business. You can view the full recording of this session here.