How General Counsels Are Driving Corporate Governance and ESG Success

Emerging as pivotal leaders in driving corporate governance, General Counsels (GCs) are instrumental in planning and implementing organizational ESG commitments. The all-encompassing nature of Environmental, Social, and Governance (ESG) makes the role of General Counsels in ESG leadership critical to ensuring corporate social responsibility in legal operations and across the board.

Below, we explore the key challenges faced by General Counsels in pursuing compliance and sustainability initiatives and how GCs are leading corporate governance and ESG success for their organizations.

Key Roles of GCs in Sustainable Corporate Governance

Positioned at the intersection of governance, multijurisdictional compliance, legal, and strategic planning, GCs play a key role in incorporating ESG into a sustainable corporate governance strategy. As ESG initiatives expand across global organizations, General Counsels' role in governance becomes even more integral to aligning company objectives with legal and regulatory standards.

Identifying ESG Priorities

Today, Environmental, Social, and Governance (ESG) encompasses a diverse range of topics, including greenhouse gas emissions, diversity and inclusion, workplace health and safety, ownership transparency, and sustainable business operations.

With ESG being such a broad term, General Counsels need to align their company’s sustainability agenda with its critical business priorities. GCs leading corporate governance and ESG must make this agenda resonate with key stakeholders, coordinating it with the overall business strategy to drive compliance and corporate social responsibility.

Engaging the Board in ESG and Corporate Governance

In many organizations, General Counsels occupy the role of company secretaries. This unique position provides GCs with the optimal opportunity to foster board-level engagement in ESG and sustainable corporate governance initiatives. By liaising with key stakeholders, GCs can effectively lead the board in prioritizing ESG within the company’s mission and objectives, supporting long-term sustainability goals.

Assessing ESG Risks and Opportunities

In today’s business landscape, mismanaging ESG is fraught with far-reaching consequences beyond regulatory penalties for non-compliance.

With rising demands for sustainability and ethical business practices, overlooking critical aspects of ESG can lead to operational disruptions and reputational risks. Under these circumstances, GCs leading corporate governance and ESG success need to assess potential risks proactively and provide a clear roadmap to safeguard the company's reputation, maintaining stakeholders' trust and ensuring legal compliance in ESG efforts.

Converting ESG Into a Business Opportunity

Conversely, companies that can demonstrate adherence to ESG principles beyond mere compliance have a competitive advantage, positioning themselves as responsible global citizens. GCs' leadership in sustainable corporate governance and ESG compliance can help organizations attract more investments, retain talent, and achieve higher customer engagement through a positive brand reputation.

Overcoming Challenges in ESG Leadership

As ESG standards and practices evolve across industries and jurisdictions, General Counsels face several challenges. Regulatory diversity, divergent metrics, and the massive data required for ESG disclosures are only a few of the critical issues facing GCs in implementing strategic compliance and sustainability initiatives.

Addressing Regulatory Diversity

With regulators worldwide imposing ever-evolving regulations and standards for ESG, organizations must dedicate resources to monitor and implement new demands.

General Counsels need to develop a pre-emptive ESG strategy to stay ahead of regulatory trends and meet the expectations of stakeholders in a rapidly changing environment. An effective strategy enables GCs to lead compliance initiatives that position the organization for long-term ESG success.

Tackling Divergent Metrics

Unlike other disciplines, ESG is often viewed as qualitative, leading to divergent metrics and practices across industries. General Counsels must select an ESG framework relevant to their company and jurisdiction, defining applicable metrics that align with regulatory demands and industry best practices.

Managing Data Collection and Reporting

The scope of ESG disclosures in global organizations can be overwhelming, especially as data requirements increase. General Counsels need an effective reporting structure to ensure high-quality data, allowing legal and compliance teams to collect and analyze the necessary ESG metrics. Leveraging technology for data collection and reporting is essential for meeting ESG standards and achieving sustainable corporate governance.

Balancing Legal Compliance with Corporate Responsibility

While regulators are driving new ESG standards, other stakeholders, including investors, shareholders, customers, and employees, are voicing their own expectations. Balancing legal compliance with social responsibility becomes not only a challenge but also an opportunity to enhance relationships with stakeholders, gain a competitive advantage, and set an industry benchmark.

General Counsels aiming to position their companies as ESG leaders must look beyond compliance when planning their sustainability initiatives. When ESG efforts extend beyond minimum regulatory requirements, organizations can build a stronger consumer base, achieve a lower cost of capital, and compete more effectively by establishing a robust brand identity.

How Technology Can Help GCs Drive Governance and ESG Efforts

As the scope of ESG continues to evolve, General Counsels need technology to support governance and sustainability initiatives. With the right technology solutions for managing ESG metrics and compliance challenges, GCs can streamline governance practices, enhance transparency, and ensure accountability for ESG efforts.

When choosing technology to facilitate ESG implementation in corporate governance, General Counsels must ensure it provides infrastructure to track metrics across the organization, offer visibility, monitor legislation, and streamline reporting. At a minimum, an effective ESG platform for GCs should include the following capabilities:

• Central Database: A coordinated sustainability effort requires a solid data foundation encompassing operations across jurisdictions, entities, and stakeholders.
• Automated Document Analysis: Legal and compliance teams benefit from automation to assess relevance, extract key data, and implement tagging and classification of documents.
• Automated Reporting: Given the extensive nature of ESG disclosures, automation streamlines reporting, helping organizations stay current with regulatory requirements.
• Summarization and Search Capabilities: Compliance teams monitoring ESG expectations across stakeholders and regulators can leverage AI to summarize legislation and search public sustainability disclosures, enabling them to stay ahead of trends.

How Can Athennian Help GCs Lead Corporate Governance and ESG Efforts?

With Athennian’s entity management solutions, General Counsels can establish a Single Source of Truth (SSOT) for ESG-related corporate governance across all entities and stakeholders within their organization. Athennian's platform enables governance, compliance, and legal teams to access policies, metrics, and corporate data from anywhere, streamlining collaboration and automating reporting.

Empowered by Athennian's AI-based tools, such as Centralize and Initialize, compliance teams can process multiple documents simultaneously, extract key data, and generate summaries within seconds. For more information on how Athennian can assist GCs in leading corporate governance and ESG, please contact our team to request a free demo.