All So Buzzy: From "Purpose-Driven" to "ESG Values"

 It's the buzzy phrase: the purpose-driven corporation. Recently, Forbes connected the dots on that and Environmental Social Governance (ESG) values. It indicated that leading with purpose is the key to ESG.

AMBIGUITY ABOUT PURPOSE OF CORPORATION, ESG VALUES

Unfortunately, there is no consensus about (1) what is the purpose of the corporation and (2) what is the right thing to think and to implement as behavior. ESG has fragmented into myriad mandates about corporate values and conduct.

IN-HOUSE LEGAL

Meanwhile, in-house legal has to guide the corporation and its individual departments through everything from daily decisions to governance. Simultaneously, as Wall Street law firm Paul Weiss hammered last January in Corporate Counsel, ESG itself has changed how in-house lawyers should approach and do law. 

THE 4-POINT GUIDE

How to do that? In that Cororate Counsel article, Paul Weiss Chairperson Brad Karp and the law firm's Chief Sustainability-ESG Officer David Curran provided a 4-point guide:

Reinvent Playbooks. The conventional ways are no longer adequate. That is primarily because ESG issues spill over to multiple corporate departments and lines of business. 

They recommend:

"Legal teams must be involved with HR, investor relations, finance, and business units to encounter ESG issues. Lawyers are in an ideal position to coordinate disparate parts of an organization and fill important gaps."

Ensure Department Membres Understand the Unique Aspects of ESG. Because there are so many gray areas in ESG, traditional methods of conducting legal business have become anachronistic. Those old approaches, of course, are: researching precedent and applying law. What is needed is the ability to have an interdisciplinary mindset and experience leveraging that. Among other competences in-house lawyers need, hammer Karp and Curran are to:

" ... make sure public disclosures align with ESG goals, structure board committees to oversee ESG risks and opportunities, and develop systems for monitoring and measuring ESG progress."

Validate ESG Data. So much depends on that, ranging from conformance to ESG metrics to the criteria required for Sustainable Investments. The growth of that investment niche depends on how that data is configured.

 Karp and Curran posit: "Lawyers can pressure test their data using many of the same models and compliance frameworks developed to ensure that companies are in compliance with anti-corruption laws."

Be Aware of ESG Risks in Mergers and Acquisitions and IPOs. Much of ESG is still new to lawyers. Therefore, it is all too easy for them to "not look" where the risks can be to corporations in this new era of ESG values. They could miss what might not have been a red flag in pre-ESG times. Essentially, so much has changed. 

They warn:

"All it takes is one weak link in a supply-chain agreement or a board member's past bad behavior - to break the chain and put the company's reputation at risk."

SHIFTING OUT OF ABSOLUTES

Obviously, just about everything associated with ESG is a work-in-progress. Absolutes have no place in that. Those range from the rhetoric to the scope of the in-house legal department.

Over the years Jane Genova has covered major corporations. Now and then she does freelance communications assignments for Paul Weiss and a number of other law firms, both defense and plaintiff. Connect with Jane at janegenova374@gmail.com.

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