Corporate Counsel magazine and international law firm Morrison Foerster collaborated on a recent survey of 79 companies examining the role of legal departments in ESG. The results shed light on how legal departments are leading companies’ ESG efforts and where their ESG priorities lie.
Key takeaways from the survey include:
- 90% of legal departments surveyed oversee their company’s ESG programs. ESG management and leadership are continuing to take root in legal departments across many industry sectors. This makes sense for compliance purposes, but companies should be cautious about overwhelming their legal departments.
- Environmental issues have been taking a back seat to social and governance concerns. The survey revealed that of the E, S, and G, environmental issues got the least attention from legal departments. However, the survey’s data gathering period ended before the SEC published its Proposal on Climate-Related Disclosures so this will likely change soon.
- Data and consistency pose the greatest challenges; regulations are not as great a challenge yet. As a matter of fact, legal risk mitigation ranked 8th in motivating factors for adopting environmental goals. This means the main struggles and motivators at this time are not legal matters.
- Almost half of the companies surveyed altered their environmental focus in the last 12 months. The most common factors driving these alterations were brand image and reputation.
- 51% of the companies surveyed have set carbon-neutral goals. The survey did not dig into whether the respondents had adopted formal transition plans, or if these goals are just aspirational statements. The majority of respondents having set carbon-neutral goals indicates that while it may not be the top priority, environmental concerns are still on companies’ radar.
- The top three priorities reported by legal departments were, in order, DEI, Climate Change, and Board oversight of environmental issues.
- 86% of companies surveyed reported making some ESG disclosures either voluntarily or by mandate.
What This Means
As more companies adopt carbon-neutral plans, report ESG progress, and engage with investors, legal departments are front and center in ESG management. However, they are already busy and could become overloaded, especially since ESG covers such a range of topics – many outside of traditional legal boundaries. Being the shiny new object, ESG is under heightened scrutiny from all sides – not just legal and regulatory perspectives. Legal absolutely plays a critical role in ESG programs, but companies may do well to consider both the context of ESG in their own situation(s) and the existing workload faced by their legal departments when evaluating where the program should sit.
