Today, a couple gems from Liz on TheCorporateCounsel.net. First, details from a Fenwick memo discussing what Silicon Valley’s largest tech companies (SV 150) are doing on voluntary ESG disclosures. Some of the key takeaways include:
- The number of SV 150 companies disclosing ESG information and the comprehensiveness of such disclosures increased in 2022.
- Areas most frequently disclosed include: environmental issues, human capital resources, diversity, supply chains, customers and products, community impact and governance.
- 76% of SV 150 companies disclosed board or committee oversight of ESG. In particular, 85% of the companies providing such disclosure stated that the nominating and corporate governance committee (or its equivalent) had primary responsibility for ESG oversight (with other committees overseeing particular aspects of ESG, at many companies).
- The quality of ESG disclosure varied by size of company, with the larger SV 150 companies generally providing more comprehensive disclosure, including quantitative metrics.
These findings also build on data from earlier this year that said that nearly all S&P 500 companies now detail ESG-related issues in their Form 10-K risk factors.
Keep in mind that although many of us have been suffering from a case of “ESG fatigue” that feels like it’s been lingering for years, we are still at the front end of this. Reporting standards – at the SEC and elsewhere – will continue to evolve. Fenwick notes that approximately half of the SV 150 companies reported using a third-party standard or framework to guide their disclosure. Here’s more detail on which standards currently are getting the most traction:
- The most prominent frameworks and standards included Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), Task Force on Climate-related Financial Disclosure (TCFD) and the United Nations Sustainable Development Goals (UNSDG).
- SV 150 companies cited SASB most often as the standard to which they adhered, with 91% of the companies disclosing standards citing SASB compared to 87% in 2021. GRI was the second-most popular standard, with 63% of reporting companies favoring it. Finally, approximately 43% of companies that reported to a standard or framework (22% of all SV 150 companies) indicated that they used the TCFD framework.
Next – probably not welcome news. The growth of DEI disclosures in response to public and investor demands is helping plaintiffs:
… this recent report from David Hood at Bloomberg Law says that in the past three years, nearly 40 companies have faced lawsuits over allegedly misleading statements about diversity and equity commitments. According to David, the plaintiffs’ allegations tend to fall into two main buckets:
- Failing to live up to stated DEI aspirations caused shares to lose value; and
- Disclosed DEI actions were outside the company’s mission to return value to shareholders
The fact that these allegations could in some cases be at odds with each other shows just how carefully you need to handle DEI initiatives and disclosures. The Bloomberg article also notes that this is an active area for employment litigation, with “reverse discrimination” lawsuits getting more attention – which is a topic we discussed last fall at our 1st Annual Practical ESG Conference.
Here are a few “risk reduction” takeaways from the article and from Ngozi’s PracticalESG.com blog on “pitfalls to avoid” in DEI training:
1. Consider aspirational policies & statements, rather than strict quotas
2. Encourage DEI trainings – but make them voluntary, frequent, linked to the corporate strategy, expertly facilitated, and digestable
3. Implement initiatives with an eye towards your specific company’s needs. The goal should be to help your employees feel included and empowered to accomplish the company’s mission, not to solve all the problems in the world.
4. Recognize programs and efforts will continue to evolve.