GC priorities in this area include:
Corporate purpose – intense public scrutiny of corporate governance is challenging long-accepted legal concepts which GCs must ensure remain ‘fit for purpose’.
Board expertise – commentators have criticised some boards’ lack of ESG sophistication. KPMG’s view is for GCs to partner with ESG experts to upskill and guide the board.
ESG risks – GCs have a unique view of their organisation, enabling them to identify where risks might be better mitigated. While managing legal risks has always been a function of GCs, ESG requires GCs to extend their focus to reputational risks, especially in relation to accusations of greenwashing, climate change litigation, and shareholder activism (which has become personal with derivative actions against Directors).
Horizon scanning – GCs lead the challenge to keep apprised of laws impacting business activities in all jurisdictions in which their businesses operate. Continually evolving ESG laws, including ‘soft law’, makes horizon scanning more difficult especially as individual elements of ESG can result in overarching ‘false friends’ and cross-border conflicts.
Data – GCs can save their C-suite from drowning in a potential ESG data lake. The GC role again extends beyond legal compliance here to balancing the need to disclose quality data required to inform investor decisions, while ensuring that data disclosure is controlled and does not lead to competitive advantage or incurs risk from ESG activists.
ESG policies – GCs are taking responsibility for ESG policies and initiatives aligning financial and societal performance, and ensuring accountability, effective decision making, and compliance by integrating the organisation’s ESG commitments into the wider corporate framework. This includes its supply-chain, contractual precedents, and recruitment, retention, payments and promotion practices.