The Lawyer In-House Counsel as Business Partner: Mapping ESG risks and deciding priorities

As 2022 draws to a close, ESG remains a key driver of transition and a business-critical issue, demanding an engagement from companies that will only increase as we near the net zero deadline. For business, sustainability is now part of the mainstream and operating under a sustainability-informed strategy lets organisations map ESG priorities to wider business objectives. However, navigating this area is increasingly difficult in the face of geopolitical, market and regulatory challenges, as well as growing scrutiny from internal and external stakeholders.

At a summit of general counsel and in-house legal teams hosted by The Lawyer, ESG was predictably front of mind. Ambitions of achieving sustainable operations were founded in wariness, as companies struggled to identify what to prioritise – and how to do so without vulnerability to risk.

Timothy Wilkins, Global Partner for Client Sustainability at Freshfields, moderated a panel discussion on the vital role of the legal team in integrating sustainability into business operations, and why early collaboration is key to a successful strategy.

Three trends were identified across the board as the biggest drivers moving ESG up the business agenda:

• Greater integration of sustainability within governing policy and legislation
• Growing appetite from investors to integrate ESG considerations into investments
• Demand for greater transparency and standardisation within disclosures

Although ESG has been the buzz word of the past few years, many of the issues are not new. Considerations such as consumer preference, demand, and ensuring your business is future proofed have always informed the way in which companies evolve, but now these issues must be considered in light of their sustainability credentials. From financing to procurement, supply chain, producer responsibility, and even the marketing of products, ESG now takes centre stage in the form of sustainability-linked financial products, net zero strategies and greenwashing accusations.

Priorities and pain points differed across organisations and sectors, however a common ‘strategy for success’ noted the importance of collaboration between GCs and wider business groups. The view that ESG is a standalone speciality is no longer compatible with successful operations, and whilst the composition of legal teams reported by attendees differed significantly, only a minority of organisations had access to a dedicated ESG lawyer. This consequently necessitates collaboration between business specialists and the in-house legal team, and timing is everything. Early involvement enables legal teams to work proactively with the wider business, identifying potential pitfalls and opportunities in advance - rather than being forced to retrofit a solution to mitigate risk. Adoption of this way of working is vital in order to upskill functional representatives that apply an ESG lens to all activity.

Whilst the range of issues that fall under the umbrella of sustainability is wide, and growing, priority focus areas for organisations should be derived from and aligned to wider company priorities, to ensure an ESG agenda that not only ticks the boxes but is embedded across throughout the business for a truly sustainable transformation.

Thank you to panelists Sapna Dutta, Senior Vice President & General Counsel at Reckitt, Belinda Ellington, MD and General Counsel ESG for Global Markets at Citi, Sharon Kahanov, General Counsel GB&I at Siemens Group and Jonathan Lipman, Group General Counsel at Mercedes-Benz UK.

Click here to watch an interview with Tim from the day.