General Counsel: How to drive change and deliver value through ESG engagement
Paul stated that it takes real courage and integrity for GCs and in-house lawyers to face up to CEOs, Chairmen and Board directors who often do not wish to hear legal advice, particularly within the new and unpredictable world of ESG. He referenced how the Deepwater Horizon fiasco was an avoidable accident for BP caused by a series of blunders, cost cutting and failures. At the time the fine was the largest in the US’s legal history, BP’s share price fell by over 50% in forty days and it also impacted on global pension funds.
Given the importance of ESG to recruitment and retention, Paul continues to be surprised by the persistence of gender inequality, diversity and inclusion in law firms. Despite the fact that more than 50% of law students and legal associates are women, in most firms over 70% of equity partners are men.
Key take-aways were:
- Covid-19 and climate change has forced ESG issues centre stage and there’s no sign of it leaving the spotlight.
- One of the key drivers behind the ESG movement is shifting shareholder perception. As investors (both individual and institutional) look to re-examine their portfolios, businesses face increasing pressure, with management boards held under huge scrutiny as people want to “build back better” in a greener and more sustainable way. Make the wrong move or fail to adapt, and businesses risk losing investors and generating negative media coverage. With the new age of accountability via social media platforms this has never been more pressing. Now not only do businesses have to be operationally successful, they have to have the right moral compass and company ethos in everything they do.
- Litigation and lobbying are costing companies billions globally, distracting from running the business and losing the support of shareholders.
- ESG and CSR are like siblings, they share the same genes but are very different in their appearance, outlook and personality. CSR was a necessary first step and started law firms and companies on the path of focusing on their impacts; whereas ESG is changing the DNA of businesses and issues such reporting, disclosure supply chains and value chains bring new challenges.
- GCs also need to be able to advise on soft law around supply chain integrity, data collection, sustainable finance, biodiversity impacts, governance standards and best practice.
- A particular bugbear of Paul’s is corporate ‘greenwashing’. We know the businesses and large law firms that do it, they are the ones that are reluctant to provide statistics on gender diversity. There is also a massive discrepancy between those who claim to be experts in ESG and those who are genuine specialists well known as long-time practitioners.
- Through his work with Lawyers for Net Zero, GCs and in-house lawyers are now in a unique position to influence and protect companies and their reputation. The legal department is no longer the “department of no”; GCs and in-house lawyers are recognised as vital to the success of their business and hugely important to the culture, reputation, and profitability of their companies. GCs have a real opportunity to be a strategic adviser on ESG to their businesses.
Watch the full recording of the In conversation here.